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How to Start a Wood Chip Manufacturing Business

Do you want to start a wood chip manufacturing company? If YES, here is a 17-step guide on how to start a wood chip manufacturing business with no money or experience.

Wood chip varieties include forest chips, wood residue chips and such, while the process of making wood chip is called wood chipping. The wood chipper is the machine that cuts wood into smaller sizes. There are basically three types of wood chippers which are, the Screw, the Drum and the Disk.

Those who do forest work provide the raw materials needed to produce wood chips. These raw materials can be pulp wood, residue wood, saw mill and so on.

During cooking, wood chips are used to infuse a certain type of flavor into meals in order to give them that barbecue taste. Children like to pay rough sometimes, so in order to make the playground safer for playful children, wood chips are used to cushion fall on playground surface.

They are also used to reduce nitrate pollution by farmers without necessarily changing their practices when it comes to land management.

They can also be used by energy plants to generate electric power and as solid fuels for space heating. Landscaping is also one of the fields in which wood chip is used, they can be used as mulch for water conservation, to support certain types of seed germination, prevent soil erosion and so on.

Steps to Starting a Wood Chip Manufacturing Business

1. Understand the Industry

Due to the restrictions given by federal policies on harvesting federal lands in the North West, constraints are put on supply in certain regions.

Today almost 65% of wood chip mills remain in the south, some of the main market drivers are the demand from the Japanese for these hard wood chips, however the Japanese have since turned to Australia, Indonesia and New Zealand for hard wood chips.

The demand for hardwood pulp decreased in the south as advancements in technology caused a decrease in the production of paper, however chip mills have been known to generate more than 800,000 tons annually, showing us that wood chips are still in demand in spite various supply constraints.

More than 10 million metric tons of wood pallets were made globally in 2014. More than 3.5 million metric tons of wood pallets were exported from the United States to the rest of the world, however a lot of these were supplied to Europe mostly for the generation of power.

From 2000 to 2014 forest inventory supply in the United States have increased by more than 1,198 million tons, this increase occurred in saw timber inventory, and even pine wood inventory has increased. The only noticeable decrease in inventory occurred with hard wood pulp wood, this was as a result in the decrease in demand for hardwood saw timber.

Of course as competitive as the market appears to be, supply and demand for residual chips and pulpwood naturally increased. The demand for pine pulp wood from pallet produces have increased from zero to more than 3 million tons as at 2014.

In comparison, demand for pin pulpwood from non-pellet mills increased by a total of more than 3.8 million tons within the same period.

Since 2010, the total demand for hardwood pulpwood has risen to more than 2.3 million tons in the Atlantic Region. In comparison, demand from non-pallet mills decreased by 2.5 million tons, and in 2014 pellet exports from the US South to Europe were more than 3.5 million metric tons.

These changes mostly occurred due to the demand in pellet mills, the housing market crash, the change in land ownership, the change in saw mill ownership and the great recession.

As the years continue to go by, we will continue to see an increase in the demand for wood chip and other similar produce as its uses continue to become diversified not just by the market in the United States but also by consumers around the world.

2. Conduct Market Research and Feasibility Studies

  • Demographics and Psychographics

Some of the most viable industries to require wood chips are those that use it to generate biofuel. As regular oil becomes more and more scarce, many industries are turning to alternative means of generating energy. These companies will need a large amount of wood chip in order to achieve this.

Wood chips are also used to generate heat for hospitals and other facilities like these. So they too would need the constant supply of this material.

Landscaping companies would also require this material to develop mulch for their various landed designs. Mulch is used to maintain the temperature of the soil, ensuring that plants get to survive for long even during the dry seasons. They are also used by these landscaping companies to prevent soil erosion and also enhance the secure growth of certain crops.

Companies that manufacture barbecuing equipment would also need wood chip from very specific plants for barbecuing, the fragrance from the smoked wood chip is absorbed by the food to further enhance the taste. And those who build commercial playgrounds can also use the wood chip as some type of cushion, to protect those who play within the environment from injury.

These make up some of the various companies or industries that may require wood chips, soon there would be domestic devices that will be able to burn wood chips and enable individuals to use them for the generation heat at home.

3. Decide What Niche to Concentrate On

There’s no real niche in this particular type of industry except if one decides to manufacture and distribute only to a particular aspect or a particular sector that may need this. For example, one could focus on making wood chips available for those in looking to use it for biofuel. The wood chip manufacturing company can be the go to brand for those who need it certain other functions.

When a business identifies its niche, then the ability to fine tune and specify its approach to the market is more defined. So when going into a business such as this, it would be very important to identify what area you would want to create your own level of specialization.

The Level of Competition in the Industry

Looking at the fact that most of this produce are shipped abroad for the use of bio fuel, the amount of tons produced and exported every year gives reason for many timber companies to further invest in wood chip production. The level of competition is high in this type of business due to the increase in demand for wood chip; not just in the US but also in other parts of the world, so many countries are looking to this form of produce to generate energy.

It is virtually impossible to find any kind of business that does not have competition, one of the major things to do when looking to invest in any business is to look at the other companies that have been selling the same product or making the same service available to the public.

When you identify these other game players, then it would be very important to find out what their strengths or weaknesses are.

The truth of the matter is that once you are able to find your own personal advantage as you go along dealing with competition, you can begin your journey in carving your own piece of the market from the general demographic that demands what you produce.

4. Know the Major Competitors in the Industry

In every industry there are brands that stand out, brands that perform at the height of excellence. Below is a list of just a few that have made a name for themselves in the United States of America;

  • MechArch Engineering Services
  • Enviro S.r.l.
  • St. Boniface Ballet
  • Tarm Biomass
  • Imperative Energy Ltd (IEL)
Economic Analysis

If you want to go into the wood chip manufacturing business you would need to do an effective cost analysis. Keep in mind that this is the type of business that undergoes much politics within the various agencies. Usually, those in this business, especially the ones that regulate how things are done, prefer to work with familiar brands.

These familiar brands have already generated some type of rapport with these officials. So apart from looking into the cost of purchasing equipment, you may also want to look at how you intend to build friendly relationships with the regulatory agencies.

Take out to time to do a proper business plan as investing wrongly in this type of business may be a disaster for one who is not really caught out for this work. Usually your business plan will give you most of the information you will need in order to decide if this is the business you should be investing your money into.

5. Decide Whether to Buy a Franchise or Start from Scratch

The best way to get into this type of business is by purchasing a franchise. Once again your network determines a lot in this type of business. When you purchase a franchise, you are buying into their own level of expertise, their experience and of course all the very friendly relationships they have built with regulatory agencies.

Not to mention the kind of assistance that comes with spending quite some time in this industry. The franchise you intend to buy will have mentors and people who would help put you through on what you need to do to make the business a success.

Coming into this business as a newbie with no experience or background in forestry, can make you vulnerable to harsh conditions that can make you to close your company.

So when it comes to this business, buying a franchise is the best, but if you choose to start from scratch, then it would be better if you had some type of previous experience in forestry. So you will understand exactly how the industry works, this kind of understanding is what spells the difference between building a successful business and wallowing in failure.

6. Know the Possible Threats and Challenges You Will Face

One of the major threats to the wood chip manufacturing business is the rise in Non-governmental organizations that focus on preserving the beauty of the environment. This may cause a rise in petitions to stop cutting down trees for this purpose.

Some may site the negative effects tree felling may have on endangered species and the environment as whole. Some of these organizations go as far as getting court orders and various other legal instruments to use in stopping these companies from cutting down trees.

Economic downturn is also another threat to a business like this, if there is some type of economic recession, then exporting this produce to consumers outside the country may become even more challenging as currency changes will make major game players loose in the entire venture.

Federal and State laws that speak about where and when to take lumber could also be a threat to this kind of business. No business lacks threats like these, this is why a business plan is necessary, so that intending business people can look at all of the pros and cons of getting into this business. Knowing the very present threats will help the investor or entrepreneur know exactly what to do and how to go about it.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

The legal entity you choose for this type of business depends on how big you want the business to be. If you simply want to run a local operation then a sole proprietorship is okay for a neighborhood wood chip manufacturing business.

However if you are looking to go bigger, to do business on a more national level then a limited liability company would be best, so that if anything goes wrong the damages would not extend into your own personal possessions.

8. Choose a Catchy Business Name from the ideas Below

If you are therefore considering what names to use when starting your own Wood Chip Manufacturing Business, here are some names you should try;

  • Cheap Chippers, LLC
  • Wood Chippers, INC
  • Cheap Chippers, INC
  • Chip and Sons, LLC

9. Discuss With an Agent to Know the Best Insurance Policies for You

There is basically no business in the US that does not require some type of insurance to get thing off the ground and moving. These insurance policy help protect the owners from various losses that may be experienced from certain unexpected circumstances.

So before going into a business like this, it would be smart to know the various insurance policies that are relevant for a wood chipping manufacturing company. Some of insurance policies for this type of business are;

  • General insurance
  • Payment protection Insurance
  • Overhead expense disability Insurance
  • Liability Insurance
  • Health insurance
  • Workers Compensation
  • Business owner’s policy group insurance

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

It is not really required for a business such as this to get intellectual property protection except they would want to secure their official logo. To protect the logo is to protect the use of that design to engage any kind of transaction or activity that is not authorized by the owners, thus legal prosecution is permitted if the logo is used inappropriately.

11. Get the Necessary Professional Certification

In order to start a business like this, you do not need professional certificate. All you need may be some type of knowledge of how the industry works. Or maybe you could hire those who have been in this type of business to work for you.

That way, even if you do not have a strong knowledge of the industry, you may actually be in safe hands as your workers already know how things are supposed to be done

12. Get the Necessary Legal Documents You Need to Operate

Some of the basic legal documents that you should have in place if you intend running your own wood chip business in USA include;

  • Certificate of Incorporation
  • Operating Agreements
  • Business License and Certification/Micro Finance Banking License
  • Business Plan
  • Insurance Policy
  • Employment Agreement
  • Non-disclosure Agreement
  • Operating Agreement for LLCs
  • Employer Identification Number (EIN)
  • Company Bylaws
  • Memorandum of Understanding

13. Raise the Needed Startup Capital

Financing is a very important part of any business. One of the ways you could use in financing this type of business is actually getting a load from the bank. This seems to be an obvious choice as it is the go to decision for most people when they intend to start any business.

You could also choose to sell some of the shares of your company to investors or raise money by selling personal properties and stocks you may be privy to owning. You could also get angel donors or even family and friend to lend you the money you need.

14. Choose a Suitable Location for your Business

Depending on how big you may want to run this business, you may actually decide to have a place where the wood chip is manufactured separate from your administrative office, or have both in one location. But note that having both in one location may be challenging as real estate costs may be one of the factors to look into.

Your administrative office should be at a place where it is accessible to those who may be interested in your business. Some type of business district will do, a place where quite a number of people have access to and where security is good.

Your manufacturing plant could be in a remote area, where the daily grind of the manufacturing process will not disturb the normal day to day activity of the city. However it should not be so far from the city that it is not accessible by those who may want to come collect the wood chips that have been processed.

15. Hire Employees for your Technical and Manpower Needs

The amount of technical support and manpower you will need for this type of business depends on how big you want to be with this venture. If you are simply looking to operate some type of local neighborhood wood chipping business then you may simply need to get a wood chipper, a truck and plastic bags to collect the chipped wood.

If you are looking into doing more industrial work with your business then there are more equipment to purchase and you will definitely need to hire more hands to assist you with the operation. You will need a manager, secretary, accountant and so on, as you intend to be more professional in your approach to this type of business.

The Service Delivery Process of the Business

Once the wood is received from the lumber workers, they are quickly checked for any unwanted elements like barks and the likes. Then they are put into the wood chipper, and the wood chips are collected in some types of plastic bags and then transporter either by trucks or by any other means to clients that require them.

16. Write a Marketing Plan Packed With ideas & Strategies

It is very important to advertise whatever business one is venturing into and this type of business is no different. Marketing is the only way to get people in the know about what you are doing and that you actually exists in the industry. Below are a few ideas on how to go about marketing your wood chip manufacturing business.

  • Advertise your business in relevant financial magazines, radio and Tv Stations
  • List your business in the yellow pages.
  • Engage the services of marketing executives and business developers to carry out direct marketing
  • Utilize the internet to promote your business
  • Create different packages for different categories of clients.

17. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

There are various ways to further emphasize the existence of your brand to those who may potentially use your services. This type of activity makes your brand desirable to your prospective clients. They get to hear about you and when they need your services you are the first person they call to provide this service.

Boosting your brand awareness may be one of the best ways to invest your money in making your business stand out. Some of the ways to generate brand awareness are listed below.

  • Ensure that you position your banners and billboards in strategic positions in your city
  • Brand all your official cars
  • Advertise your business on your website; develop strategies that will pull traffic your way.
  • Share Fliers and handbills around the target areas where you have deduced that your business will do well.
  • Maximize the advertising potentials of the internet.