Question about board feet pricing vs. by the hour

[Sawmill Woman]

We are fairly new to the samill business (since May of this year) and we've been charging by the hour so far.  We are thinking about switching to pricing by the board foot for the cutting.  Which way do you charge and why?  If you charge by the board foot, how do you find out what the going rate is for your area?  Do board foot prices stay the same or change from time to time?

[Foxtrapper]

IMHO, you should know about what you can saw in an hour, and then you'll have a better idea about whether to switch.  In my area, it's about .25 a bd'.  Also the other thing to consider is if you have to stage logs, haul logs or move the mill, you won't be sawing, so you won't be paid for that time, unless you include in the contract an hourly wage for those activities..

[Sawmill Woman]

The reason we were thinking of switching is because, as we've gotten better at sawing, we've gotten to where we can cut pretty fast with very little waste.   What took us 2 hours to cut in the beginning now takes us about 1 hour.  It depends too on what type of wood you're cutting as to how fast you can go.  We do charge a set up fee when we have to move the mill. And also $20 for each blade ruined because we hit nails or fencing (thats happened a few times).

[beenthere]

SW
What has your board foot output been running per hour of sawing?
If you are considering charging that way, then you likely have those numbers to work from.

[5quarter]

Sawmill woman...If I get a job with uniform logs and a straightforward cut list, I will charge by the BF. If a job comes in where I cannot reliably predict my time, I charge by the hour. nearly all my jobs are the latter. :

[red oaks lumber]

we charge both ways, qtr sawing is by the hour, unique cuts are by the hour,everything else is the b.f.
pros for by the hour... no need to push the limits,don't have to tally at the end of the job.
cons for by the hour... there is always some one that thinks you should work faster

[Tom the Sawyer]

Sawmill Woman,

I would recommend that you keep pretty accurate records as to how long it takes you to mill a log and how many board feet it produces.  You'll also need to know your operating costs for blades, mill payments if you have them, fuel, maintenance, insurance, support equipment, rent, wages, etc., etc., etc..  In my opinion, it is a mistake to make decisions about rates and methods without knowing what your actual costs are.  If your operating costs are .32/bf and the guy down the road charges .30/bf, then you have a decision to make... match his price and go broke slowly; or cut his price and go broke more quickly.  Or you could charge more than he does and compete on quality and service.

I don't feel that hourly or by the foot works well in all situations.  I work with a variety of clients and some challenging milling requests so I use both methods, depending on the situation.  My fees cover my expenses and provide a decent return on my time.  What the competition charges (if I had any competition) doesn't enter into what it costs to operate my business.

Some members explain how they charge, and their rates, on their websites.  Check out the www. links under their avatars.  This is a very frequent topic and if you search for "hourly vs. board foot" or something like that you'll get hours of reading on the subject.

[WV Sawmiller]

I'm newer than you guys but am set up to charge by the hour or BF based on circumstances. Good straight normal sized logs straight sawn I plan to charge by BF. Small diameter, short, dirty, poor quality logs, thin cuts, quartersawn, beams or other specialty cuts I plan on hourly rate. I figure this is fair to both of us. I don't plan to get rich or lose money (unless I choose to donate to a particular customer or cause).

I also have discount rate if customer provides labor. I'd rather he did but if not I expect to be compensated for my extra time or help I have to hire.

For pricing I read everything on the FF, visited member and other websites to compare rates and locations for regional differences. I called local mills and talked with them. I have a neighbor half mile away who is cheaper than me but he is very slow to return your order and he doesn't travel. I figure I'm competing for a different niche. I will see how it works out. Good luck to you.

[logboy]

There is no reason you cant have the best of both worlds. Charge X number of dollars per hour, or Y cents per board foot, whichever is greater. That way if you have to spend a lot of time pulling nails, debarking muddy logs, etc, you dont get hosed for hours of work.

[mikeb1079]

based on what i've read here and my (limited) experience it seems like it would be easier just to always charge by the hour.  just a straight fee, no fuss no muss.  what am i missing?

[millwright]

It can be hard to completely go one way or another, for example are you running an lt10 or an lt70 it makes a huge difference for you and the customer .

[Dave Shepard]

based on what i've read here and my (limited) experience it seems like it would be easier just to always charge by the hour.  just a straight fee, no fuss no muss.  what am i missing?

On a good job, with a higher production mill, you might make more by the foot than you would by the hour, even if you had a low board foot price. I don't see a lot of jobs around here where you would have a large quantity of good logs with proper material handling for that to happen very often in a portable situation.

I charge by the hour, at my mill yard. I mostly do specialty sawing, so material flow isn't always that fast. If someone wanted me to saw 5-10mbf of well manufactured logs, then I would talk board footage rates. Well manufactured being the key word.

[terrifictimbersllc]

based on what i've read here and my (limited) experience it seems like it would be easier just to always charge by the hour.  just a straight fee, no fuss no muss.  what am i missing?

You might be missing high productivity situations where the charge ought to be greater.  Sometimes the customer will have things set up so well that hourly charging gives too much of a bargain. (this is a matter of opinion of course. I'm trying to focus on the sawyer's opinion).  In an hourly charge situation, should you leave the customer with wood for 17 cents a bf with hourly charging?  Or would that customer be just as happy if you had a minimum charge of 28 cents a bf. to go along with your hourly rate?   I don't know the answer but I like what Logboy suggested above too).

Sawmill Woman, it sounds like you're working as a team.  This offers an opportunity to take some control of the material handling situation to your benefit.  Productivity often depends on how well the customer sets up and also helps during the sawing day.  If I took along a helper I would sure try to have volume charging for some of the jobs and optimize the teamwork aspect with my partner, to make more money and get more done during the day.   High hourly rates I think will scare off more customers than having a b.f. charge that doesn't sound so scary.

[stumpy]

This question has been discussed many many times on the forum.  Problem is, it's usually like asking what's better, Chevy or Ford.  The best advise I can give you is... Before you decide on a method, make sure you know all of your costs.  If you do that, the original question will be easier to answer for You and will allow you to best analyze going forward.

[Tom the Sawyer]

Consider it from the client's point of view.  If he has 500 board feet of logs and he takes it to a mill that charges $60 per hour... how much should it cost?  If he has 500 board feet of logs and the mill charges .40 per board foot... how much should it cost?

Of course, 500 board feet might be 2 logs, or 10 - that's why different mills have different methods or rates.   smiley_dizzy

[Brucer]

I know how many BF I can produce per hour from common sizes and species of log. I also know how many BF I can get from a log that meets those criteria. So when a customer wants me to saw those types of logs, I quote a price per BF and a price per hour, whichever is less.

This is good for the customer -- he/she starts with a maximum cost (expected yield x price per BF) but can lower the cost by helping to increase production. It works for me because I'm pretty certain that even charging by the BF I'll make a comfortable hourly rate.

For logs that fall outside my comfort zone, I charge strictly by the hour. All my hourly charges are based on the sawmill meter reading.

My method also has some marketing value. I always give the customer a bill with both calculations on it, and the lowest amount circled. That always makes the customer feel good.

[drobertson]

I charge both ways depending on the job as well.  I mostly charge by the bd/ft, and prefer this  mainly because I like to work at my pace not the clocks ;D and even when moving slow which seems to be getting to be more normal, the totals at the end are good for both parties.   The pain in the rear jobs I really try to avoid, but at times can't be, this is when I begin to scratch my head and try to make it work.  Knowing comes from doing, in time I feel you will know when and where to apply the charge needed to keep (almost) everyone satisfied.

[Magicman]

My pricing depends upon the job.  ERC is almost always sawed hourly rate.  I say almost because I have a couple of ERC customers that always have good logs and a good setup.  Junky logs also fall into the hourly rate category.

There will be times when you might leave "money on the table" but that is no problem.  Point it out to the customer as Brucer indicated out above and you have gained a friend and repeat customer.

Since customers often refer other potential customers be very careful with being consistent with your billing.  There is an (old saying);  Be honest every day and you will not have to remember what you said yesterday.

[hunz]

This may have already been said in a round about way, but how do you determine a job with say 700bd/ft of white oak? Say my bf rate for hardwood is $375/mbf, and my hourly rate is $65/hr. It is estimated that it will take 2.5 hours to saw the logs grossing $162.50 hourly vs $262.50 by the bd/ft.

Do you guys base how the job will be charged, by how you make out better, or how the customer will fare? My point is this: do customers get upset when "you" use the charging method that ends up making you the sawyer more money. Has anyone ever had the customer say, "well if you had charged the hourly rate I would have came out better?" I know this may have been talked about in a past thread, just figured it would be fitting. I am going to pick up a used lt-40 super on Tuesday, and after the upgrade from an lt-35, this bd/ft rate has been on my mind. The last job I did, the customer came out almost $500 ahead by having me saw his logs by the hour($55) vs going to the cheapest local circle mill at $0.375 bd/ft.

[terrifictimbersllc]

The last job I did, the customer came out almost $500 ahead by having me saw his logs by the hour($55) vs going to the cheapest local circle mill at $0.375 bd/ft.

He was ahead even more than $500 if he figured in his cost to take the logs to the circle mill and bring back the wood.

[landscraper]

It's important to offer good value to your customers, as long as it doesn't come at your expense.  If you are making money and he is saving money that sounds like a win-win. 

Amen x2 to pointing that value out to your customer.  Many of them either don't know, don't recognize, or don't even think about that until you tell them.  They can't appreciate your good will or added value if they don't know about it.
Learning how to fairly price your service and operate your business so that you are competitive to the segment of the market that you desire to serve AND generate the income that you need/desire has been the subject of entire books.  I had a CPA help me learn how years ago and it was an eye opener to say the least.

[hunz]

The last job I did, the customer came out almost $500 ahead by having me saw his logs by the hour($55) vs going to the cheapest local circle mill at $0.375 bd/ft.

He was ahead even more than $500 if he figured in his cost to take the logs to the circle mill and bring back the wood.

I thought the same thing as well, it makes my loss even worse. It would cost a couple hundred $ just to have done that.

He was aware of the 2 local circle mill's price on custom cut, so I know he will come back to me in the future. It seems like a gray area on what to do in that instance. Because of the fact that I'm offering a better value than the competition, while also producing more usable lumber from each log because of kerf, I still wonder at what cost do I leave money on the table? Who knows...

[scsmith42]

It's important to offer good value to your customers, as long as it doesn't come at your expense.  If you are making money and he is saving money that sounds like a win-win. 

Amen x2 to pointing that value out to your customer.  Many of them either don't know, don't recognize, or don't even think about that until you tell them.  They can't appreciate your good will or added value if they don't know about it.
Learning how to fairly price your service and operate your business so that you are competitive to the segment of the market that you desire to serve AND generate the income that you need/desire has been the subject of entire books.  I had a CPA help me learn how years ago and it was an eye opener to say the least.

X2.

From what I've seen, the most common mistake that most millers make it not charging enough for their services.  Unless you are running a "non-profit" mill whose goal is to help everybody else, as a business owner your primary objective should be to provide a quality service, at a fair price, and at a reasonable profit for the business.  If you don't charge enough, unless you are independently wealthy or have other means of income in time your business will fail.  What is the saddest thing about this is if you have employees.  In essence your employees lose their job because you did not charge enough for your services.

When determining pricing, you need to take into account costs such as depreciation, insurance, both scheduled and unscheduled maintenance. 

You should consider setting aside money for equipment replacement or upgrade.  Many millers used their "day job" to earn enough money to purchase their first mill.  Once you buy the mill and are in business are you making enough money with it to set aside funds to pay for it's replacement in three years without having to dig into your own pocket? If you're in business, you should be....

After your business pays all of it's costs, sets aside money for equipment replacement, pays you and the rest of your employees, there should still be a "business profit" left over in the bank account.

There are exceptions to this, primarily due to things beyond your control such as illness and standard economic swings that result in recessions and downturns every decade or so.  You need to earn enough during the good times to carry you through the lean times.

Personally I charge by the board foot if the job is routine, and by the hour if it is not (or if there is risk of extended time investment required).    If I beat my hourly charge by producing most economically by the Bd ft, then I'm rewarded for working smarter and harder.  That's what owning a small business is all about - not to mention being an avenue for "regular folks like us" to share in the American Dream and gain financial independence through our hard work and efforts to increase our productivity. 

If I want to give the customer the opportunity to save money, then I'll offer them the chance to reduce my labor costs by off-bearing from  the sawmill, stacking and stickering their own lumber so I don't have to myself (or pay someone to do it), offbear from the jointer/planer, etc.  Then I can assign my helper a different task that generates income (such as running a different sawmill while I operate the first one with the customer offbearing), so everybody wins.  My income rate stays the same and my customer saves money if they want to enough to invest some of their own labor.

Sawmill Woman - it sounds as if you and your husband are in business to make money and provide a quality product.  If that is the situation, then I would advise you to charge by the board foot if you can make more that was as opposed to hourly. 

Profit is not a bad thing - it is a necessary thing if you wish to be independent and successful.

[drobertson]

Here's a kick in the teeth for you, got a call late friday evening asking what I would charge for 2x6's 16 feet long.  Well then knowing it was from a logger who went out of his way to help me out with some much needed saw logs I shot the price, turns out it was for a friend of his, no issue there for me, same price, being it was he that called,  then he mentioned an Amish might do it, I asked what they the Amish were charging, (floored!)  .12 cents a foot, not sure what will come of this but not going to happen here, can't hardly do it for that, at this price I would have to do the forum through the USPS ;D  and this is getting higher too

[Peter Drouin]

If the job looks like this , I went by the BF


  

  

 
see how all the logs are up on something and lined up and big , I tell the customer 12" up to 30" for log size to 16' long.


Now if they're longer than 16' smaller than 12" or bigger than 30" and look like this all by the HR


  

  

 
see the hole the logs are in and not on something there old and the bark slipping off.


 
I had to cut the limbs off so they would roll.
What a mess. :D :D :D