The study surveyed eight small-scale operations designed to produce wood pellets and microchips, the latter intended as a low-price pellet surrogate. Surveyed operations were equally spread between the two product types, and they all targeted residential users. They were all run by forest owners or forest contractors, driven to the new business by the need to increase the value of low quality wood and to fill the gap created by a dwindling firewood demand. Production cost averaged 228 (sic) t(-1) for pellets (9% water mass fraction) and 134 (sic) t(-1) for microchips (water mass fraction between 11 and 18%). For each process type, three entrepreneurs out of four accrued meaningful profits, estimated at 10% and 6% for pellets and microchips, respectively. However, profitability differences between the two production chains were deprived of statistical significance. Raw material cost accounted for 28% and 50% of total cost respectively for pellets and microchips, and it was significantly lower for forest owners. Product drying was always obtained with renewable energy sources, such as wood or solar radiation. The most important success factor reported by all entrepreneurs was direct sale to final users, without intermediation. Additional success factors were: self-construction, use of unutilized resources at marginal cost, control of raw material supply and capture of opportunity wood. Entrepreneurs who ceased operation attributed their decision to the lower cost of imports, the absence of a receptive market and the higher profitability of alternative products.