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Author Topic: CPA has requested estimated expenses and income  (Read 1050 times)

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Offline KenMac

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CPA has requested estimated expenses and income
« on: March 03, 2019, 03:36:55 PM »
First, let me say that I have ordered a Cook's AC36 mill, sharpener, setter, and band roller due to be picked up in May. To get an idea of the best way to manipulate funding and taxes, my CPA has requested an estimation of expenses and income for the rest of 2019. Having never been in this business, I have no idea how to come up with somewhat reliable info for him.
 I should have enough blades and such to get through the year (60). I will be working to learn the mill and be milling part time until I retire at the end of 2019, and then I hope to have enough business to be full time. Is there any way you experienced guys can offer suggestions to help come up with sensible numbers?
 The mill will have a 69HP Perkins diesel and will probably be used mostly stationary, but could do portable sawing some. If nothing else, we should get an assortment of ideas and discussions going. Thanks in advance for your input!

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Re: CPA has requested estimated expenses and income
« Reply #1 on: March 03, 2019, 03:49:26 PM »
Adding your location to your profile might help with these and future questions.
Knothole Sawmill, LLC     '98 Wood-Mizer LT40SuperHydraulic   WM Million BF Club Member   WM Pro Sawyer Network

Never allow your "need" to make money to exceed your "desire" to provide quality service.....The Magicman

Offline KenMac

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Re: CPA has requested estimated expenses and income
« Reply #2 on: March 03, 2019, 03:58:00 PM »
Thanks, MM. I was doing that apparently while you replied. I thought about it as soon as I posted.

Offline Southside

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Re: CPA has requested estimated expenses and income
« Reply #3 on: March 03, 2019, 04:02:02 PM »
Do you have an idea on what markets you are looking at?  Types of wood?  Are you looking to do custom work or sell commodity ties / cants / grade lumber?   
Franklin buncher and skidder
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Enough cows to ensure there is no spare time.

Offline WV Sawmiller

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Re: CPA has requested estimated expenses and income
« Reply #4 on: March 03, 2019, 04:04:23 PM »
   I can't see any way to possibly offer an answer with no more details than that. We can likely help you estimate cost per hour or per bf of sawing but we don't know how many jobs you will be doing, are you buying logs and selling lumber or just sawing customer logs, etc. What other support equipment do you have and will you be using? Are you sawing alone or paying for help? Do you have jobs lined up? Who knows you will be sawing? what is your experience? Do you need to practice some before you feel qualifies to saw commercially? Give us more details and ask for specific details and we may be able to help. Good luck.
Howard Green
WM LT35HDG25(2015) , 2009 4wd Dodge PU, Kawasaki 650 ATV, Sthil 440 & 441, homemade logging arch (w/custom built rear log dolly), JD 750 w/4' wide Bushhog brand FEL

Dad always said "You can shear a sheep a bunch of times but you can only skin him once"

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Re: CPA has requested estimated expenses and income
« Reply #5 on: March 03, 2019, 04:20:39 PM »
With the exception of depreciation, your expenses will be dependent upon the amount of sawing that you do. 

I would quickly invest in a website.  Without yet knowing your markets, it could be generic in a sense, but it does need to advertise your sawing services.  I would contact Jeff because with a startup operation you need the power of the Forestry Forum to push your website to the top of searches.

I only do portable sawing but you could be in a prime area for selling specialty sawn lumber which is a market that you would have to develop.  Your income will be totally dependent upon your ability to market your services. 

Knothole Sawmill, LLC     '98 Wood-Mizer LT40SuperHydraulic   WM Million BF Club Member   WM Pro Sawyer Network

Never allow your "need" to make money to exceed your "desire" to provide quality service.....The Magicman

Offline KenMac

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Re: CPA has requested estimated expenses and income
« Reply #6 on: March 03, 2019, 05:06:25 PM »
Thanks everyone. My long term plan is to saw specialty lumber such as quartersawn oak and others for cabinet, furniture and flooring. In the meanwhile, I will do whatever I can to develop the business. I hope to not buy logs, but will if necessary. With my kiln, I can offer stuff not available from other local mills- most of which don't saw much.
I know expenses such as equipment can be figured out fairly easily. I have a Kubota B26 with a grapple and a New Holland T75 for moving logs and lumber. I will have a 40x60 pole barn built before the mill is ready. 
I told the CPA that it would be difficult to get reasonably accurate numbers. I'm really trying to do this right the first time.

Offline terrifictimbersllc

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Re: CPA has requested estimated expenses and income
« Reply #7 on: March 03, 2019, 05:18:50 PM »
Not counting equipment purchases, my expenses, including truck mileage (standard mileage rate) which is the largest expense, have been very roughly 25% of my revenue for a number of years.  

Maybe that would be helpful to you in estimating costs. I am 100% portable though so your operation may be quite different. 
DJ Hoover, Terrific Timbers LLC,  Mystic CT  2001 WM LT40SHDD (42HP Kubota, Accuset2, FAO's, Lubemizer, debarker), Peterson WPF 10-30 with chain slabber. Logrite fetching arch, WM BMS250 sharpener/BMT250 setter.  2001 F350 7.3L PSD 6 spd manual ZF 4x4 Crew Cab Long Bed

Offline KenMac

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Re: CPA has requested estimated expenses and income
« Reply #8 on: March 03, 2019, 05:24:24 PM »
  I can't see any way to possibly offer an answer with no more details than that. We can likely help you estimate cost per hour or per bf of sawing but we don't know how many jobs you will be doing, are you buying logs and selling lumber or just sawing customer logs, etc. What other support equipment do you have and will you be using? Are you sawing alone or paying for help? Do you have jobs lined up? Who knows you will be sawing? what is your experience? Do you need to practice some before you feel qualifies to saw commercially? Give us more details and ask for specific details and we may be able to help. Good luck.
If anyone can help with cost per hour or bd. ft., that would be much more than I have now. No experience, but a lot of common sense and mechanical ability. Not payiong for help- will have some help from friends. 
Can anyone recommend an insurance carrier for liability and equipment coverage? My farm equipment is insured by Alfa, but they probably be competetive in commercial.

Offline WV Sawmiller

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Re: CPA has requested estimated expenses and income
« Reply #9 on: March 03, 2019, 07:11:13 PM »
   Are you looking for liability insurance only or an "Inland Marine" policy for the equipment - be sure to use that term with your agent as he knows it that way. I'd start with my agent I had a relationship with and see what he can offer. I pay a little over $650/yr for $1Million/$2Million liability policy and self insure my equipment.

My 25 hp Kohler engine uses a little less than a gallon of gas per hour of operation/run time. I am averaging cutting about 150 bf/hr on my for run of the mill sawing including everything from 2" LE slabs to 4/4 random width edged lumber and mostly I am sawing alone. Band usage/sharpening varies with the kind of wood being sawed. If you are doing specialty sawing that will slow the rate of production and I am unfamiliar with the capacity of your mill.
Howard Green
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Dad always said "You can shear a sheep a bunch of times but you can only skin him once"

Offline Southside

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Re: CPA has requested estimated expenses and income
« Reply #10 on: March 03, 2019, 08:18:24 PM »
If you are not buying logs what is your source?  Do you have timber?  If you are going to rely on yard trees and customer provided trees then be prepared to buy more bands.  How many hours per month do you realistically believe you can dedicate to the mill during the transition time before you retire?  The limiting production factor with that mill will be your experience and ability to move material as it comes off if you don't have any help, not the capacity the machine can produce.  Anything you can build into your handling system to reduce the physical labor required on your part will increase your production exponentially.  
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.

Offline YellowHammer

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Re: CPA has requested estimated expenses and income
« Reply #11 on: March 04, 2019, 12:02:15 AM »
I dont see any way you can predict profit yet.  However, you can set realistic goals.

Expenses are easy to predict, there will be lots of expenses.  Insurance will be a big one and will be fixed.  Get good coverage and add an umbrella policy.  If you will have more than Infrequent and Incidental customer foot traffic on you personal property, most insurance companies wont cover you unless you re-deed that portion of the land as commercial, that cost money.  Then get your auto insurance restructured as commercial if you will use your vehicles at all for business use.  Bank note to pay for equipment, if you financed.  You mentioned drying, the price of the kiln and chamber is easy as well as the price of electricity to run it.  A kiln only makes money when it is operating, and figure it will run 24/7 to calculate electric bills.  Fuel for equipment.  Clothing, maintenance, and oh yeah, dont forget taxes.  The more money you make the more you pay.  Then add your salary.  A real salary.  Not $1 per hour. Then add the cost of a website, and yearly domain fees.  Its amazing how much stuff costs.  Last year alone, we spent over $600 just on receipt paper.  

Free logs are a two edged sword.  Free logs seems great at first, but when you tally up the expenses, unless you are milling for a fee, the only way for your company to make money is from a steady supply of usable logs.  With fixed bills per month, we have found it makes commercial sense to simply buy logs of the species, grade, and quantity that we require to make our montly production goals.  You mention quartersawing for example.  Around here I can get all the tree service low grade white oak logs I want, for free, I can literally get them by the dump truck load, but I dont want them.  However I cant get any free logs worthy of high grade quartersawn wood.  Why?  The tree guys know high grade white oak is worth money and will sell it.  Why would they just give it away? Im not saying people havent been able to get high grade logs for free, Im saying there arent many people who will give them away for very long whether they be tree service folks, farmers, or your best buddy.  A steady and predictable log supply keeps a sawmill company running, and paying the bills.  In my experience, free logs are worth what I paid for them.  

Then add all your estimated fixed expenses, double it, and that is about what you need to gross per year to pay for all the stuff you missed and still have a thriving company.  

Its very easy to get discouraged when the expenses are staring at you, but reality is reality and that is one reason why your CPA is asking, so he can amoritze, depreciate, and make adjustments as necessary. 




HobbyHardwoodAlabama.com

Offline Cedarman

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Re: CPA has requested estimated expenses and income
« Reply #12 on: March 04, 2019, 07:25:09 AM »
Set up an easy system to record expenses, capital expenses, income, and time spent.
At the end of 3 months, you should have a good idea of where you are headed.
List all of the things you can do to make income.  
Those that you do, see how they pan out.  This will help focus you in the future.
You are adding value to your time by increasing the value of the materials you are sawing.
By tracking, you can see where you get the biggest reward for time spent working.
As MM said, website is very important.
Update your CPA as you go.  They may see something you are overlooking.
I am in the pink when sawing cedar.

Offline KenMac

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Re: CPA has requested estimated expenses and income
« Reply #13 on: March 04, 2019, 06:45:00 PM »
Thanks, everyone for your insight! I'm getting a better idea of where I am and where I want to go. And, yes, I'm coming to see how many expenses there will be, but I've waited for this chance for a long time. I'm going to do my best to make it work and work right for everyone involved.
Please continue to offer tidbits as they come to you! They are valuable to me!
Ken

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Re: CPA has requested estimated expenses and income
« Reply #14 on: March 04, 2019, 09:24:42 PM »
I'm going to do my best to make it work and work right for everyone involved.


For sure you can make it work, and make it work right.  It's just very difficult to guesstimate how long it will take to get there given all the variables.   
Franklin buncher and skidder
JD Processor
Woodmizer LT Super 70 and LT35 sawmill, KD250 kiln, BMS 250 sharpener and setter
Riehl Edger
Woodmaster 725 and 4000 planner and moulder
Enough cows to ensure there is no spare time.

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Re: CPA has requested estimated expenses and income
« Reply #15 on: March 11, 2019, 07:12:11 PM »
I just wanted to let y'all know that I finally put together some numbers and took them to the CPA. How accurate they are will be seen soon enough. Thanks to all of you who offered your opinion and insight.


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