How to Start a Pallet Manufacturing Business

Consider these crucial factors when launching your pallet manufacturing business:

1. Location — Choose a suitable location for your manufacturing facility. Consider factors such as proximity to raw materials, transportation access, and facility size.
2. Facilities — Set up a facility with dedicated areas for raw material storage, production, assembly, and finished goods storage. Ensure your facility is equipped with the necessary utilities, such as electricity and water.
3. Licenses and permits — Ensure compliance with industry standards and regulations, such as ISPM 15 for heat-treated pallets used in international shipping.
4. Equipment — Invest in high-quality manufacturing equipment, such as saws, nailers, pallet jacks, forklifts, and heat treatment equipment if required. Ensure you have the necessary tools for both wooden and plastic pallet production if you plan to offer both.
5. Materials — Source high-quality raw materials, such as lumber, nails, and plastic resins. Establish relationships with reliable suppliers to ensure a steady supply of materials.
6. Products — Decide on the range of pallets you will offer, such as standard pallets, custom-sized pallets, heat-treated pallets, and plastic pallets. Consider offering specialized services like pallet recycling, repair, and refurbishment to attract a wider range of clients.
7. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or choose one of the top services available.
8. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
9. Eco-Friendly Options — Consider offering eco-friendly pallets made from recycled materials or sustainable wood sources to appeal to environmentally conscious customers.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a pallet manufacturing business has pros and cons to consider before deciding if it’s right for you.

Pallet manufacturing industry trends

Industry size and growth

• Industry size and past growth – The US wood pallets and skids production industry is worth $11.9 billion in 2022 after expanding by nearly 50% since 2012.((https://www.ibisworld.com/industry-statistics/market-size/wood-pallets-skids-production-united-states/)) 
• Growth forecast – The US wood pallets and skids production industry is projected to grow less than 1% in 2022. 
• Number of businesses –  In 2021, 2813 wood pallets and skids production businesses were operating in the US.((https://www.ibisworld.com/united-states/market-research-reports/wood-pallets-skids-production-industry/)) 
• Number of people employed –  In 2021, the US wood pallets and skids production industry employed 62,441 people. 

Trends and challenges

Trends in the pallet manufacturing industry include:

• Plastic pallets are a growing segment of the industry because they are more durable and resistant to contamination. They are more expensive, but they can be used for a much longer period of time. This is an opportunity for an entrepreneur to get in on an emerging market by choosing to manufacture plastic pallets, although it would require an investment in more sophisticated equipment.
• Many retailers are moving to smaller format stores which require moving smaller product loads, leading to increased demand for smaller, narrower pallets. 

Challenges in the pallet manufacturing industry include:

• Growing demand plus labor shortages and supply-chain issues have slowed pallet production, leading to a shortage and sharply increased pallet prices. 
• Wood prices have risen drastically, cutting into the profit margins of pallet manufacturers. 

How much does it cost to start a pallet manufacturing business?

If you start a recycled pallet manufacturing business, you’ll spend around $28,000. Costs include the deposit and rent on a manufacturing space, tools to repair pallets, a down payment on a truck, and an initial operating budget. You should be able to gather a steady supply of old and unwanted pallets for free from businesses that want them hauled away. 

To start a new pallet manufacturing business, you’ll spend $1.3 million or more. The largest expense will be the assembly line machinery necessary to manufacture new pallets. 

You can take online courses about how to build pallets on the National Wood Pallets and Containers website by signing up for an account. There is no cost and you can complete all the courses within a few days. 

You’ll need a handful of items to successfully launch your pallet manufacturing business, including: 

• Pry bars
• Air compressor
• Nailing equipment
• Pallet repair workstations
• Saws
• Heat treating equipment

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100 - $300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
Rent for a pallet recycling facility or the purchase of a factory space	$6,000 - $100,000	$53,000
Tools for repairing pallets or assembly line manufacturing equipment	$5,000 - $1,000,000	$502,500
Raw Materials	$0 - $100,000	$50,000
Down payment on truck to transport discarded pallets to the facility	$0 - $5,000	$2,500
Initial budget for employee wages	$5,000 - $50,000	$27,500
Initial budget for operating costs	$10,000 - $50,000	$30,000
Total	$27,550 - $1,309,100	$668,325

How much can you earn from a pallet manufacturing business?

These calculations will assume that you’re starting a recycled pallet manufacturing business. You should be able to sell recycled pallets for about $30 each. Your profit margin after rent, overhead, and labor should be about 20%. 

In your first year or two, you could sell 200 pallets a week bringing in $312,000 in annual revenue. This would mean nearly $63,000 in profit, assuming that 20% margin. As your business gains traction, you could scale up and sales could climb to 800 pallets per week. With annual revenue of $1,250,000, you’d make a cool quarter-million dollars.

What barriers to entry are there?

There are a few barriers to entry for a pallet manufacturing business. Your biggest challenges will be:

• The startup costs and obtaining funding
• The competition from big pallet manufacturers
• Finding and renting an adequate space and hiring employees

Step 2: Hone Your Idea

Now that you know what’s involved in starting a pallet manufacturing business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research pallet manufacturing businesses in your area to examine their products, price points, and what sells best. You’re looking for a market gap to fill. For instance, maybe the local market is missing a wood pallet recycling business or a plastic pallet business.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products

You’ll want to offer various sizes of pallets for different purposes. You could also make custom pallets to a customer’s size specifications. 

How much should you charge for pallets?

You should be able to sell recycled pallets for about $30 each. Your expenses will be for rent, overhead, and labor. You should aim for a profit margin of about 20%. 

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be any business that uses pallets. This includes production and manufacturing facilities and big box stores like Home Depot. You can find business owners and managers on LinkedIn, or search for relevant businesses on Google and Yelp and give them a call. 

Where? Choose your business premises

You’ll need to rent a space for a manufacturing facility. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Business Name

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “plastic pallets” or “recycled pallets”, boosts SEO
• Name should allow for expansion, for ex: “PalletNation” over “BoxBoard Pallets”
• A location-based name can help establish a strong connection with your local community and help with the SEO but might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool below. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Here are the key components of a business plan:

• Executive Summary: A brief summary of the pallet manufacturing business plan, highlighting its key points and objectives.
• Business Overview: An overview of the pallet manufacturing business, including its history, mission, and vision.
• Product and Services: A description of the pallets and related services offered by the business, including their features and benefits.
• Market Analysis: An analysis of the target market, including size, demographics, and trends in the pallet industry.
• Competitive Analysis: Examination of competitors in the pallet manufacturing industry, identifying strengths and weaknesses.
• Sales and Marketing: Strategies for selling and promoting pallets, detailing sales channels, pricing, and marketing plans.
• Management Team: Profiles of key team members and their roles in the business.
• Operations Plan: An outline of the day-to-day operations and processes for manufacturing and delivering pallets.
• Financial Plan: Financial projections, including revenue, expenses, and funding requirements.
• Appendix: Supplementary materials, such as charts, graphs, and additional documentation supporting the business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to pallet manufacturing businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your pallet manufacturing business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a pallet manufacturing business. You might also try crowdfunding if you have an innovative concept. As your business gets larger, and you’re poised for high growth, you may be able to attract angel investors or venture capital. 

Step 8: Apply for Business Licenses and Permits

Starting a pallet manufacturing business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your pallet manufacturing business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as Fishbowl, Katana, or MRPeasy, to manage your processes, inventory, invoicing, and payments. 

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Here are some powerful marketing strategies for your future business:

• Target Local Industries: Identify and approach local businesses in industries such as logistics, manufacturing, and agriculture, where pallets are a critical component. Establish partnerships and offer tailored solutions to meet their specific pallet needs.
• Local SEO — Regularly update your Google My Business and Yelp profiles to strengthen your local search presence.
• Quality Assurance and Certifications: Emphasize the quality of your pallets and obtain industry-standard certifications. Assurance of durable and compliant pallets will not only attract customers but also build a reputation for reliability.
• Customization for Niche Markets: Explore niche markets by offering specialized pallets tailored to unique industry requirements. Highlighting your ability to provide customized solutions can set you apart from competitors.
• Green Initiatives: Promote eco-friendly practices by using sustainable materials and efficient production processes. Many businesses are increasingly prioritizing environmentally conscious suppliers, providing a competitive edge.
• Educational Content: Create informative content about the importance of pallets in supply chain management, emphasizing cost-efficiency and logistics optimization. This can position your business as an industry expert and attract potential clients.
• Participate in Trade Shows: Attend industry trade shows and exhibitions to showcase your products. This provides an opportunity to connect with potential clients, network with other businesses, and stay updated on industry trends.
• Customer Referral Programs: Implement a customer referral program to encourage existing clients to recommend your services to others. Word-of-mouth referrals can be a powerful and cost-effective way to expand your customer base.
• Strategic Alliances: Form partnerships with complementary businesses in the supply chain, such as packaging companies or transportation services. Collaborative efforts can result in mutual benefits and increased exposure.
• Online Presence Beyond a Website: Utilize social media platforms and online marketplaces to showcase your products. Engage with the community through regular posts, sharing industry insights, and participating in relevant discussions.
• Efficient Logistics and Delivery: Streamline your logistics and delivery processes to ensure timely and reliable service. Offering efficient distribution of your pallets can enhance customer satisfaction and build long-term relationships.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your pallet manufacturing business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your pallet manufacturing business could be: 

• Save the planet by using our heat-treated recycled pallets
• Custom pallets built to your specifications
• Durable plastic pallets that last a lifetime

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a pallet manufacturing business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in pallets for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in pallets. You’ll probably generate new customers or find companies with which you could establish a partnership.

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a pallet manufacturing business include:

• Manufacturing Workers – build or repair pallets for resale
• Salespeople – make sales to local businesses
• General Manager – staff management, inventory management, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Start Making Money!

Pallets are widely used by all types of businesses, which is why the US pallet market is growing fast. Starting a pallet production business is extremely expensive, but you can focus on recycling pallets for far less. You can expand your facilities in the future and grow into a major company. Even with a small business, you can make good money. 

Now that you understand the entrepreneurial processes, you’re ready to get your successful pallet manufacturing company off the ground!

Frequently Asked Topics

Is pallet manufacturing profitable?

Yes, pallet manufacturing can be very profitable. The key is to develop relationships with companies that use pallets to get a steady stream of repeat business. 

How much can I charge for recycled wooden pallets?

The average price for a recycled pallet is about $30. Prices will depend on the size. You should also check local market prices to make sure that you’re competitive.

What pallets pay the most?

The pallets that pay the most vary depending on factors such as the type of industry, the condition of the pallets, and market demand. Generally, pallets made of higher-quality materials like hardwood tend to have a higher value than those made of softwood or plastic.

Who are the largest users of pallets?

The largest users of pallets are typically industries involved in logistics, warehousing, manufacturing, and retail. This includes sectors such as food and beverage, consumer goods, automotive, pharmaceuticals, and e-commerce.

What is standard pallet size in the US?

The standard pallet size in the US is typically 48 inches by 40 inches. This size is widely used in various industries for efficient handling, transportation, and storage purposes. However, there are other pallet sizes used for specific applications or industries.

What is the best type of pallet?

The best type of pallet depends on specific needs and requirements. Different industries and supply chains have different demands. Common types of pallets include wood pallets (hardwood or softwood), plastic pallets, and metal pallets.

What is the largest pallet company in the US?

CHEP (Commonwealth Handling Equipment Pool) is one of the largest pallet companies in the US. They are a global leader in pallet and container pooling services, providing reusable pallets and containers to various industries worldwide.