The pallet industry is a lot more complex than most people realize. That is one of the quick lessons that James and Crystal Scherer have learned since buying Austin Pallet in late 2018. About one year into the industry, these pallet newbies have learned a ton and are quick to share their insights.
James and Crystal Scherer have been in many different industries. These include: family entertainment centers for birthday parties and kiddie play areas, 3D-medical imaging centers, an antifreeze company, and a kickboxing gym.
Crystal explained, “We have owned four other businesses in the past. They have been much smaller and in totally different industries. But we weren’t able to find something big enough to allow James to leave his day job until we bought into the pallet sector.”
Previously, James worked in sales for an automation company. He also ran the business development and sales side for a dry chemistry lab. The couple bought Austin Pallet in Texas in late 2018. Today, they have owned the company for over a year and are making some changes for the better.
James recalled, “Initially we said no to the pallet company opportunity without really looking into it. Pallets weren’t sexy enough to grab our attention. But as we dug into the business and started talking to other people in the industry, the first thing that caught my attention was how many multigenerational companies existed. Many pallet companies have had multiple decades of ownership under the same families. We just didn’t see that in many other industries.”
Considering the rigorous travel schedule of his previous jobs, James knew he needed some business more conducive to a strong family life. He approached a business broker looking for a new opportunity when the pallet industry was the furthest thing from his mind.
A Truly Family Business
Business has been at the center of James and Crystal’s relationship since the beginning. Crystal commented, “When we first got married, it was coin laundromats and dry cleaners and a carpet cleaning business. We have always wanted to control our own destiny by working for ourselves.”
Crystal added, “So, we have a 12-year-old (Kaden) and 14-year-old (J.D.). Honestly, all they have ever known is their parents being small business owners. We opened our first business the same week that I gave birth to our second child. We bring our kids into our business lives. We have used it as a way to teach them about money, dealing with people, and getting things done.”
During the summer, the Scherer kids work in the business. When others are playing video games, they have learned about cash flow and small business economics.
James explained, “We try to integrate our kids into every aspect of our business lives. They have seen our successes and our failures. We don’t try to put too much stress on them. But having a young family and a family business means our kids have a unique opportunity to get an education that most of their friends will never receive.”
The Scherer family also prioritizes play and being together. James said, “From vacations to camping trips, we also purposefully plan time away from our business with the kids so that they know we prioritize them.” Having time for family is one of the big reasons why the Scherer family bought Austin Pallet.
When it comes to managing work and family life, both James and Crystal share duties, and who is doing what depends on the season. Crystal stated, “A few months ago, most of the business issues were handled by James while the children were my focus. But this has changed recently where I am going into the office more and James is caring for the children. It really depends what our family and the business needs at any one time.”
What We Wish We Had Known
Whenever you buy into a business, there are always unknowns. There are things that will surprise you. James admitted, “Most people don’t realize how dynamic the pallet industry truly is. People think a pallet is a pallet, a bunch of wood and nails. But this product requires a lot of customer education and conversation. Custom design is critical to getting the right pallet. Sure, we have the GMA pallet for many functions. However, small adjustments can make a big difference when it comes to reducing damage and improving materials handling efficiency. The industry is more dynamic than we probably even gave it credit for a year ago.”
James added, “I wish I would have had a masterclass in lumber. We do both the new and reclaimed side of the business. My assumption was a guy that’s been running this company for 20 plus years had his component costs figured out. But in reality, the former owner didn’t. So, it’s been a learning on the fly situation for us. It all kind of worked out to our benefit because his mistakes were priced into what we paid for the business. So, for us it’s kind of been a windfall, but it’s been a painful one to learn as we go.”
For example, the former owner was buying higher grade material than was required and was buying everything cut to length. But the new owners are better utilizing recycled lumber and have optimized sawing operations to efficiently cut what customers need.
Another major discovery has been the huge differences between pallet recycling and pallet manufacturing operations. Even though the company does both, they are significant differences. Crystal explained, “What stands out to me is that the new pallet and recycling sectors are truly different business models. And we’re constantly battling between the two.”
James commented, “There are a lot more market dynamics to cover in the pallet sector than other businesses we have run. From balancing raw material supplies and inventory to finding new core accounts to custom designed pallets and crates to machinery issues and employee training and regulatory compliance, there is a lot more management in this business than any other business we’ve been associated with in the past.”
Seeking Continual Improvement
Becoming complacent leads to business ruin. James and Crystal are committed to employees and customers to make their business as best as it can be. They have an ongoing list of areas that need improvement. Crystal said, “We create action plans, give them to our teams and try to help them achieve our goals. This year we have been in 20 plus pallet facilities looking to learn how we can improve. These visits have helped us identify inefficiencies in our operations.”
One thing that attracted the Scherer family to the industry is the people. James said, “The friendliness of the industry is part of what attracted us to pallets. People in other states and as close as Houston opened their doors to help us out. We learned so much from them.”
They also learned a lot from Pallet Enterprise and Pallet Profile. James recalled, “I really appreciate all the effort you guys put into this industry. It was kind of cool coming in to have the Pallet Enterprise to lean on for information. We inherited seven years of the print publications, and I have read them all. The magazine is one of the sources I used to meet people in the industry and make critical connections.”
A key discovery has been the need to improve the company’s recycling processes. James pointed out how in the recycling department, they used to dismantle a ton of material that was never being used. Now, the company is much more intentional in dismantling pallets to prep lumber for specific customers. The company is also rejecting loads with too much junk or odd-sized pallets that they cannot reasonably use. They are also charging customers to haul off loads that are unusable in the market.
James explained, “Now everything comes in with a purpose if it is dismantled. We are targeting to cut for specific orders and sizes for our inventory.”
Austin Pallet has simplified some aspects of the operation. The Austin Pallet team has segmented the pallet yard to sizes so that workers can easily see what is plentiful and what is needed. James said that for new lumber processing through the saw room, his team developed new KPIs to measure and boost production.
The company has some unique challenges based on the local market conditions. James explained, “In the early 90s, all of our large manufacturers moved away. As a result, Austin has become a technology hub. So, we are doing a lot of customized pallets and containers for less than truckload quantities. Another big challenge is that most of the DCs have moved 60-70 miles to the south. That means we have to truck pallets further than some competitors. Also, the traffic around Austin is becoming much more congested as the city is one of the fastest growing areas in the country.”
Communication Is Key
Working together as a couple is not easy. It requires commitment and sacrifice. James recounted, “Crystal and I met in the navy. We have always valued teamwork and creating an atmosphere where we communicate and work together well.”
Crystal did agree that running a true family business isn’t always easy. She said, “We overstep boundaries from time to time. Those challenges are natural. But when you respect the other person, whether it’s your spouse or a fellow employee, you value their feelings and work to develop a give and take outcome.”
The Scherer family do establish boundaries to limit how much of the business spills over into family time. Unless the kids ask about it, James and Crystal try to focus on family at home. There are some exceptions, such as purposeful conversations designed to teach their boys about the business world or how economics work.
Another big part of their family are the co-workers who make everything happen. They identified the operations manager, Beto, as critical to their success since he has 20 years of industry experience. They also highlighted the pallet builders, repairers, forklift drivers and truck drivers who work hard to meet customer expectations. James commented, “We are fortunate that we have a pretty healthy core group of employees, and they have helped give our business stability.”
At the end of the day, it is all about family. James put it all in perspective when he said, “One of the things when we looked at this business, we wanted something that gave us the opportunity to create special moments with our kids. We have six or so years left with our children before they’re adults and out in the world.”
