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Author Topic: My New Sawmill Partnership  (Read 1866 times)

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Offline SawyerTed

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My New Sawmill Partnership
« on: May 25, 2018, 11:36:33 AM »
A friend's son just graduated from the local community college so I went to the graduation party.  At the party, a gentleman struck up a conversation with me about my sawmill business.  Not sure how he knew about it but he was well informed.  

This gentleman operates a firewood business and supplies several businesses that sell the firewood.  He buys his logs by the truck load.  He has many logs above his preferred diameter. He asked me to come take a look to see if I could use those logs.  He has ash, oak, sycamore, pine, poplar, beech, cherry and walnut logs 24" and larger available. 

Besides a very large firewood processor and all the support equipment for that, there was a Timber king bandsaw and edger.  

Bottom line is he can't operate both sides of the business - firewood and sawmill.  The sawmill and edger have been sitting for 5 years.  He wants me to operate the sawmill/lumber side of the operation under my company.  I can use either his mill or my mill and his edger as well as needed support equipment-rubber tire loader, tractors, two ton truck etc. The only pieces lacking a kiln (but I've got that to contribute) and a planer/molder.

Without too many details, we are working on the written agreement, consulting insurance and other due diligence etc just to cover our bases.

It is an great opportunity to expand capacity without spending a lot of money.  His operation and equipment are under utilized.  The sheds are already built.  My contribution will be sweat equity.

We are giving it a week or so of though on both sides before we proceed.
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Offline mad murdock

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Re: My New Sawmill Partnership
« Reply #1 on: May 25, 2018, 11:53:19 AM »
 Congratulations on the prospect. Looks like the synergy of you and he getting together will really work well. Good luck moving forward 8)
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Offline WV Sawmiller

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Re: My New Sawmill Partnership
« Reply #2 on: May 25, 2018, 01:14:22 PM »
   Good luck. Sounds like a good deal for both of you and I trust it will work out well for both of you. You both bring significant assets to the table.

 Just me but I would not go into this as a partnership in the legal sense of the term. I would be afraid to lose control of my time and equipment. Also in many partnerships a sense that one or the other is doing more or less than the other and hard feelings develop. I had an old boss one time whose most accurate observation was "Nothing in life is 50/50." If you think it is you will be very disappointed whether in business or your marriage.

I would do as a contract with him where he provides the logs, the working space and use of any of the other equipment you would find useful then I would either:
1). Charge him a sawing fee or
2). I would buy the logs from him at a pre-determined rate.
3.) I would saw for a share of the lumber or (If you do this be very careful to define how the shares will be determined - I'd do either of the other 2 first if possible.

 I would think that would reduce my liability and give me more flexibility. If he wanted to market the lumber he could just pay you to saw the logs. If you wanted to market the lumber you could buy the logs or saw on shares if he wanted some. You would have to work out the storage of the lumber and access by customers to his site if the lumber stays on his site. You might work out a commission fee to him if he sells some of your lumber while you are gone if you want to do something like that. Lumber customers on his site increases his liability but also provides advertising and potential sales for firewood.

 That leaves you free to continue your sawing business with others if/when you find that is more profitable or during slack periods when he may not have enough logs to keep you busy. If he has too few logs to keep you busy you take on other work. If he has more than you can saw then he can hire someone else to saw them or you can subcontract that to another sawyer.

 There is a ton of potential here as you have described the situation and it looks like a definite win/win for both of you if you handle it right. Be sure to leave room for both you and the customer to change as new situations occur.
Howard Green
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Offline SawyerTed

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Re: My New Sawmill Partnership
« Reply #3 on: May 26, 2018, 10:18:22 AM »
I appreciate the advice and insights.  Theres alot to consider thats why we are giving a week before we get back together.  Weve discussed the three arrangements you outlined and the possibility of trading sawing for firewood. Im leaning toward buying logs for lumber I would sell or use and sawing on shares for lumber he wants. This makes the partnership or affiliation less intertwined.
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Offline Crossroads

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Re: My New Sawmill Partnership
« Reply #4 on: May 26, 2018, 10:48:57 AM »
This sounds exciting, I wish you the best.....
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Offline Magicman

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Re: My New Sawmill Partnership
« Reply #5 on: May 26, 2018, 11:58:20 AM »
I would think that the more separated and individualized each "business" is the less chance of any conflict.  The value of each product and added value of that product must be accounted for.
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Offline Southside logger

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Re: My New Sawmill Partnership
« Reply #6 on: May 26, 2018, 12:30:18 PM »
It sounds good, but like the others said find a way to keep your businesses separate. What is he going to say when you sell a single walnut mantle for the same money as he sells a cord of wood? 
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Offline SawyerTed

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Re: My New Sawmill Partnership
« Reply #7 on: May 26, 2018, 03:42:28 PM »
Yes I agree with the partnership being more of relationship between two businesses rather than either being subordinate or a contractural relationship.  You know a lot of our sawing is based on a handshake agreement anyway. Isnt it?  Maybe Im assuming so.

How many of you have a written sawing agreement for your mobile sawing?
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Offline WV Sawmiller

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Re: My New Sawmill Partnership
« Reply #8 on: May 26, 2018, 04:01:01 PM »
   I have a written contract but so far have never used it. All handshake agreements. Never been stiffed on my pay yet.
Howard Green
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Offline TimGA

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Re: My New Sawmill Partnership
« Reply #9 on: May 26, 2018, 08:20:42 PM »
Sounds great,  I am with others keep it separate keep it simple.  If you use his equip pay for it same for him. If someone feels taken advantage of it will never work. Good luck.
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Offline Southside logger

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Re: My New Sawmill Partnership
« Reply #10 on: May 26, 2018, 08:27:22 PM »
Small stuff, day job portable work is on a handshake, but my larger orders all come with a PO. This way everyone is clear about the expectations and should something happen along the way to one party or the material it's not a he said she said scenario.
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Offline StimW

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Re: My New Sawmill Partnership
« Reply #11 on: May 27, 2018, 09:05:26 AM »
I look at this as the degree of difficulty of each business.
Firewood- probably about a "2" not a lot of skill needed to cut/split/stack.
Sawmilling- about a "6" to produce quality boards from selected logs.
If milling was easier his equipment would not be idle.
I see problems in the future.
  
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Offline SawyerTed

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Re: My New Sawmill Partnership
« Reply #12 on: May 27, 2018, 11:18:00 AM »
The sawmill and edger went idle when he added the firewood processor.  Hes a one man operation and the firewood business grew quickly. His processor will produce 5-6 cords per hour. But thats using logs 8 to 18 inches in diameter. Logs over 18 require more time to process so they become lower priority.  Hes been paying a man to cut and split the larger logs using a chainsaw and splitter. 
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Offline Randy88

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Re: My New Sawmill Partnership
« Reply #13 on: June 06, 2018, 04:15:43 AM »
Never enter into any kind of partnership ever, seen far too many go bad after a short time.    Keep your own stuff separate at all times, I'd not look at it as his equipment being under utilized, I'd concentrate more on what and where you want to be in say five or ten years from now and focus on that.      

Right now his excess is his problem, don't make it yours as well, expansion is nice, but can shortly become a burden in a very big hurry and trying to get out can be very costly and time consuming.     

I don't know your situation at all, but I'd tell you to stay focused on what your doing now and where you'd like to be in the future, and if say for example, if something would happen to you and you'd need to to change careers or hobbies and ask yourself, what would it take to get out if you wanted or needed to.       

Partnerships are a huge mistake, and you don't need a week to think this over, you need months at a minimum and maybe longer to think this over.       Try a rental agreement on his equipment or rent to own type agreement and also rent his buildings for a portion of the lumber sawn type deal, much more flexible.

Remember, those doing the work together hardly ever have a problem, its usually a spouse, or kids that cause the issue.     Also you've never stated his financial situation, is everything paid for on his end, is he making payments and what would happen if he got sick or injured, would someone show up and take stuff away due to no payments being made or would your costs sky rocket overnight.     

I'd highly recommend you get legal help from someone you trust in your area and work with them on this deal, its usually far cheaper and less complicated to get good legal help before the fact than during or after the fact, lay everything out to them and have them help you with the suggestions and details that work best for you, both now and long term.      Best of luck.

Offline longtime lurker

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Re: My New Sawmill Partnership
« Reply #14 on: June 06, 2018, 05:22:51 AM »
yano there's two things I've learnt over the years that would apply here

1. you ALWAYS want a written contract if its not just a one off kind of thing. This is going to be ongoing for years and the quickest way to solve any dispute is to have a formal written agreement to fall back on. That doesn't mean you cant change it as you go to suit you both - but a handshake isn't worth beans in court, and if the guy is serious he wont fight you on getting one. If he does fight you.... not i dont see the point but okay but an outright no - then run and keep on running.

2. the only partner you want to have is a bank manager, because all he ever wants is interest. I've had to buy out a couple of partners over the years and got to do it again soon and when you've done 90% of the work having to give up more then 10% of the value increase hurts. its yet another reason you want a formal contract if this is going to be ongoing.

Thats about a  million dollars worth of advice right there. don't my mistakes unless you can help it.
The quickest way to make a million dollars with a sawmill is to start with two million.

Offline PA_Walnut

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Re: My New Sawmill Partnership
« Reply #15 on: June 06, 2018, 07:42:54 AM »
2. the only partner you want to have is a bank manager, because all he ever wants is interest. I've had to buy out a couple of partners over the years and got to do it again soon and when you've done 90% of the work having to give up more then 10% of the value increase hurts. its yet another reason you want a formal contract if this is going to be ongoing.


Yoda-like words there! Another one, "Partnerships are different at first, but always the same in the end. :-\
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Offline petefrom bearswamp

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Re: My New Sawmill Partnership
« Reply #16 on: June 06, 2018, 08:12:21 AM »
seems like one partner always works harder that the other for the same results.
My BIL had a dairy partnership go sour after several years and lost his shirt, now works 2 jobs to make ends meet.
BTW he was the harder worker the other guy liked to play golf.
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Offline SawyerTed

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Re: My New Sawmill Partnership
« Reply #17 on: June 06, 2018, 08:34:42 AM »
I appreciate the wisdom and experience shared.

Partnership was a poor choice of words and by the strictest definition misleading in this context. 

What has developed is an alliance between two businesses.  We are doing business with each other as a matter of convienience and competitive advantage for both.  We both view it as a win-win situation.  

I'm sawing his logs on a board foot basis for him.  I'm buying logs for my own use.  His location is essentially another portable sawing venue with support equipment provided by the owner.  I'll just be sawing there on a more frequent basis.

His firewood processing business stays his and my portable sawmill business stays mine.  No need for contracts.  The two businesses can do business together or not.
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Offline Rhodemont

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Re: My New Sawmill Partnership
« Reply #18 on: June 06, 2018, 02:26:25 PM »
I like the sound of the way you are proceeding.  Otherwise if there were a partnership I would be in favor of a very complete operating agreement drawn up by some very expensive lawyers.  In your initial post you referenced "sweat equity".  I learned long time ago that "sweat equity" is not worth anything in the end, it is he who controls finance (or loses control of finance) that controls the destiny of the business even if it is called a partnership.

Offline SawyerTed

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Re: My New Sawmill Partnership
« Reply #19 on: June 06, 2018, 03:06:56 PM »
Rhodemont, the sweat piece has actually already paid off.  The edger he has was not running.  For about 2 hours of my time and about $80 it is running perfectly again.  He's letting me use it in exchange - cheap rent I suppose.  On my current mobile job, the edger has already more than earned back what I've put into it due to increased productivity. 

 I just need tail gunners who can keep up!
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Offline Southside logger

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Re: My New Sawmill Partnership
« Reply #20 on: June 06, 2018, 03:46:18 PM »
What is it for an edger?  I have no idea how I made lumber without mine, they are priceless.  
Franklin buncher and skidder
JD Processor
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Enough cows to ensure there is no spare time.


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