Small business

codyleviere · February 10, 2016, 05:43:33 PM

Hey guys! I'm new to the forum and was looking for a little help. I've been thinking about starting a small portable sawmill business. I've worked in the lumber industry before and enjoyed it, but hated working for a big company that doesn't pay for honest hard work. My family owns about 120 acres here in pa (where i am from)that i could get a start cutting cherry, oak, hemlock etc. I'm also a certified hardwood lumber inspector. Any tips on financing, how to get into niches, and business plans and set ups? Any help would be fantastic. Thanks

customsawyer · February 10, 2016, 06:57:10 PM

Welcome to the forum.
What kind of income are you looking for?

codyleviere · February 10, 2016, 07:04:21 PM

Well for right now i wont need much to get by. I'm dating a nurse and she backs me 100 percent and our relationship is long term. i have a part time job right now and im making ends meet. Should i try for a sba microloan? finance through a sawmill company? Eventually i would like to just run a mill and kiln and sell professionally graded lumber!!! I know its rough but gotta dream ya know?

customsawyer · February 10, 2016, 07:11:02 PM

In your original post you asked about portable milling, now you are asking about selling dried and graded lumber. Two different businesses. Which one are you wanting to pursue.

codyleviere · February 10, 2016, 07:13:21 PM

well like i said i have 100 + acres and i know im not gonna be constantly busy on the portable side so i want to be able to cut and sell my own lumber also. sorry for the confusion!

Verticaltrx · February 10, 2016, 07:14:10 PM

I've been a business owner since I was 17 (farmer, contractor and now sawyer), so right or wrong here's my take on it...

Start small with little or no debt. If that means starting with only a small manual mill then that's where I'd start. Upgrade when you can with cash. Focus on maximizing income and minimizing expenses. The further you can take a product the more you'll get for it, on the farming side we call that value added products, but it's the same for any product really. For example, I use my mill mainly to supply lumber for my construction business. Mostly I'm cutting Eastern White Pine an Poplar for framing lumber and siding (for barns, sheds, etc). Around here I'd be lucky to get 50 cents a board foot for green rough sawn lumber like that, but when I apply it to my own uses I make a minimum of $1/bf, and far more once that lumber has been built into a barn. Same could be said for nice hardwoods. You could sell it for $1-4/bf, maybe more in the rough sawn state. Dry it an it adds a little more value, turn it into a nice piece of furniture or finished and installed flooring and suddenly your profit per BF is through the roof. Maximizing income per BF is especially important if you are harvesting off your own land, while the trees may be "free", they are a limited resource in a sense. Lastly, using every part of the tree, either for your own use or for sale will put a little extra money in your pocket. Slab wood and limbs can be cut for firewood or chipped for mulch, sawdust can be used for animal bedding or sold.

On the expense side, keep your equipment needs vs wants in check. If you are starting with a small volume of high value wood a $5-10K manual mill will put you in the black pretty quick. My LT15 with the power feed was about $8500, and I can easily saw 200-250bf/hr by myself. Times that by a profit of $1 per BF or more and you can see how quickly it paid for itself (about a week of full time sawing). If you need some support equipment there is lots of good used equipment for sale. Don't let the shiny new paint and 'low' interest loans get you.

Marketing is also very very important. Word of mouth is fine once you get well established, but good advertising is very important to growing a business. Everything you do as far as advertising should look very professional. They shouldn't be able to tell if you are a one man show vs a million dollar company by looking at your ads, business cards, website etc. Handwritten/misspelled ads, cheap flimsy business cards with poor content, or a website that looks like it was made by a 5 year old are probably worse than no advertising at all. In addition to a good website, business cards, ads/flyers/pamphlets, networking is also important. Getting to know potential customers and suppliers is definitely worth your time.

Good luck with your endeavors.

codyleviere · February 10, 2016, 07:20:02 PM

Thanks Verticaltrx! Im completely fine with buying used equipment and understand the need of low overhead. But at the same time i would like the mill it self to be suitable for larger jobs. would it be out of the question to spend 20,000 on a hydraulic mill? i plan to eventually work the wood right down to flooring and ready to be made furniture lumber.

Verticaltrx · February 10, 2016, 07:45:31 PM

Quote from: codyleviere on February 10, 2016, 07:20:02 PM
Thanks Verticaltrx! Im completely fine with buying used equipment and understand the need of low overhead. But at the same time i would like the mill it self to be suitable for larger jobs. would it be out of the question to spend 20,000 on a hydraulic mill? i plan to eventually work the wood right down to flooring and ready to be made furniture lumber.

What is suitable is somewhat a matter of perspective. I personally think my LT15 is fine for sawing out several thousand BF of lumber for a large barn, but then again I have good support equipment and a well laid out system that makes it go pretty easy. Others would cringe at the thought of even sawing 500bf on a manual mill. At $200/hr profit when the mill is running, I rather enjoy the work. ;D

If you can swing $20K on a mill and have it be profitable then go for it, I personally would rather put in more labor for a quicker and larger return on my investment. A hydraulic mill may not always be faster than a manual mill, but it will be easier. You can decide how hard you want to work and what your labor is worth.

WV Sawmiller · February 10, 2016, 08:24:56 PM

Cody,

I do very much what you are suggesting. I bought my mill new a year ago. Instead of dipping into savings I used an LOC loan which had the best interest rate.

I have been thinning a few poplars and salvaging ash, spruce and an occasional walnut or cherry off my place and sell them locally. Usually I get the order before I cut the tree or log. I did build a pole barn off poles (locust), lumber off my place, and used roofing tin to store extra lumber until I use or sell it.

I advertise cheaply and locally and do portable sawing for folks in the area. Have traveled as far as 45 miles and biggest job was around 52 bf. Have discussed this in earlier threads.

Is the rest of your family okay with you cutting the timber off the land? What kind of support equipment do you have cut the lumber off the family farm? I only have an ATV, my pick up and a logging arch until I can find a cheap (Yeah!!!) used tractor and this limits a lot of what I can do.

Most of what I make is reinvested into the business and not to pay the household bills since I am retired with a base income already earned. Does not sound like you will have that liberty but you will have more time to work on the business. Do you want to start full time or can you start part time then direct more of your time to the business?

You can pm me or call me (Contact info on my website linked to my profile) if you have specific questions. It is a great business and sounds like you already know way more about the wood industry than I did or still do. It is a great job and I hope it works out for you.

Magicman · February 10, 2016, 08:30:18 PM

Welcome to the Forestry Forum, codyleviere.

Chuck White · February 10, 2016, 08:40:20 PM

Welcome to the Forestry Forum, Codyleviere!

ncsawyer · February 10, 2016, 11:39:18 PM

Cody,

I totally agree with Vertical...start small with no debt if possible until you get established. I loan millions of dollars to people every year...there's a reason its called leverage!

I will pass along some good advice that was shared with me by a very successful farmer that I finance. "You better be able to work it out on paper in the shade before you try to work it out in the field in the sun"

Also keep these three words in mind IN THIS ORDER. Environment, strategy, structure. The idea is that you should look at your environment (market, competition, regulations, etc.) first. Then develop a strategy to be successful in that environment (not everybody operates in the same environment). That strategy could be all mobile sawing, getting a lumber contract, harvesting your own timber and adding value through sawing, drying, and manufacturing other products, or anything you can devise. Then finally structure your business in a way that allows you to best implement your strategy. Will you need to incorporate, find a partner? What kind of equipment, employees, or other assets will be needed?

The bottom line is Plan, Plan, Plan.

WV Sawmiller · February 11, 2016, 06:24:43 AM

Quote from: WV Sawmiller on February 10, 2016, 08:24:56 PM
I advertise cheaply and locally and do portable sawing for folks in the area. Have traveled as far as 45 miles and biggest job was around 52 bf. Have discussed this in earlier threads.

Ooops - should have said 5200 bf. Most of my local jobs are around 1,500-2,000 bf and 10-15 miles from home so far. One was only around 600 bf and customer was billed my minimum rate as if 1,000 bf. He knew that up front and sold his load off his truck that afternoon for a profit so we were both happy.

Seavee · February 11, 2016, 07:40:49 AM

Welcome to the forum good luck with you venture. I am retired also and order a mill recently. All the above posts have great information.

Cedarman · February 11, 2016, 08:16:08 AM

Most everything said is part of a full blown business plan. Balancing raw material supply, processing, and sales and marketing, are the 3 parts of our business that I work on constantly as far as management goes.
With business plans you can try many different scenerios and see how they work out on paper.
You can make a plan with a small mill, one with a hydraulic mill, one with a mill with all the bells and whistles.
When we started our mulch business in OK, we spent almost a year researching equipment, markets and even going so far as hiring a small plane to fly us over parts of the state to look for cedar trees.
Doing lots of planning on paper is very important. Have others look at your plan.
Borrowing money is not the problem, not being able to pay it back is the problem.
Money is a tool same as a sawmill is a tool, using both wisely is important.

terrifictimbersllc · February 11, 2016, 08:32:40 AM

Welcome to FF. My sawmill business is in its 9th year. Portable sawing only. Be happy to answer questions.

It takes a while to get going. I'd shy away from borrowing $20K for a mill right off, you're going to need other equipment too so the real initial startup cost will be greater. I'd say don't borrow, save up if you have to, and only buy what you absolutely need to fill orders that you know you will have. Borrowing money (if you can) and buying new equipment is easy and exciting. However, once you're in business for a while, you'll look at used equipment and holding back on expenses, quite differently. At the beginning it's all about I'm in business and how cool is it to have all these toys! In business a while, it's how cool is it to net more income after expenses and taxes.

One of the negatives about big purchases at the outset of a business is that you will need to take deductions for the purchase cost of equipment, together with all the other expenses you will have. Either the entire cost (expense), or regular portion-wise amounts (depreciation) of equipment. These are subtracted from your revenue in a given tax year, to get your taxable income. If the result is negative (net loss), this is fine, but if you don't have much other income, there's no benefit to you to having a loss. You lose it. So with big equipment purchases (like a brand new sawmill) at the start of a business where there is little revenue, your net cost of the equipment is higher than later when your business revenue is greater. So at the beginning, from this tax standpoint, you may be better off keeping your expenses low which also goes along with buying modest, used equipment.

codyleviere · February 11, 2016, 03:02:59 PM

WOW!!! Thanks for all the input guys. Its nice to see people willing to help me out. Big confidence booster! I don't have much time now, but I will either pm some of you or just respond on the forum. Thanks a ton!!

beenthere · February 11, 2016, 03:16:50 PM

You will be the biggest help to all if you post on the forum. That is what makes the forestry forum great...

Those who responded didn't do it through a PM... just sayin.. ;D

Deese · February 11, 2016, 04:55:02 PM

Welcome to the forum.

codyleviere · February 12, 2016, 12:04:46 PM

Thanks again guys! How about some info on insurance? Any idea for pricing on a year? Im trying to get all the cost in row so i know what i will needed monthly to keep my business going.

WV Sawmiller · February 12, 2016, 01:15:52 PM

Sponsor on the left sells sawmill insurance. If you want property insurance for your mill and equipment ask your broker for an "Inland Marine Policy".

I have liability insurance from a local agent. I pay around $650/year for it. I can afford to self-insure for my property but won't chance it for the liability side. If you saw for some clients and on some sites (Schools, State Fairs, etc) liability insurance may be a contractual requirement.

I'd bet many folks do not buy insurance so having it may be an advertising/selling point for you. Its only prudent. Good luck.

terrifictimbersllc · February 12, 2016, 03:23:20 PM

Ditto exactly what WV says above. Consider whether to buy inland marine (property) ins. based on cost and whether you can afford to replace what is lost.. Probably biggest deal would be if your mill is wrecked on the road or stolen if you leave it overnight somewhere.

But absolutely get a commercial liability policy. My cost similar to WV's . Some customers like architectural firms who are hiring work for their clients and other companies or municipal/govt won't give you a choice, you have to give them your insurance certificate either to get the work or to get paid. The foreman or whoever hires you often isn't in any position to negotiate on this, he's just doing his job.

If your auto policy is like mine it will cover liability caused by vehicle and whatever it is towing, but not loss to the towed vehicle unless you negotiated that in advance. But be sure to clarify that your auto policy does cover you if you have an accident when you are on business travel.

codyleviere · February 15, 2016, 03:30:53 PM

That seems decently priced for a year!! Would i be able to have that addded on to my truck insurance or is it a seperate policy?

Seavee · February 15, 2016, 06:06:51 PM

It a separate policy. I was quoted a little over $800 for an lt50

codyleviere · February 16, 2016, 02:48:27 PM

Thats still not too bad. I've made some progress in the last few days.. Called several pallet and cabinet companies with a lot of luck! Seems like everyone around here is accepting wood. Im guessing it's important to document so i have. But if i did look for a small start up loan what kind of info do i need for the bank or sba?