Values of the Various Slices of the Pie

[Bud Man]

About to finally buy a mill and some heavily wooded ground. While I'm able to determine the approximate volume of footage on the property , I need some experienced help or opinions in projecting the total value and cost or sum of all the parts from logging to sawing to kiln drying on a per foot basis ?  Seems like a lot of possible variables but I'm seeking general guidelines or your thoughts.   Thanks in advance !

[dewwood]

Bud Man,

Costs vary by regions of the country.  I would use these guidelines to arrive at a starting point.

1. Value of timber sold standing
2. Cost to hire cutting, skidding and hauling
3. Cost to hire sawn
4. Cost to hire kiln drying
5. Amount  for which you can sell finished product

You can do any or all of these steps yourself and that will determine what you will receive as a net return.  Sometimes it can be less expensive to hire some of the steps done.

As I said above costs for each step vary considerably by region so you will have to use figures which will apply to your area.  I know this does not answer your original question about costs but it should give you an idea of where to start to come up with a figure that will work for you.

Dewey

[Ron Wenrich]

Here's the general guideline I use for most economic decisions.  Profit = finished value - raw material value - manufacturing costs.

Breakeven happens where the finished value = raw material + mfg costs.

If you are trying to maximize profit, then you have to minimize costs or maximize value or both.  A hard thing to do on a consistent basis.

Most areas of the industry is based on specialization.  A landowner is best at growing trees, a logger is best at harvesting timber, a sawmill is best at producing lumber, etc.

When you try to wear all the hats, then you will be trading off some of your profit for increased mfg costs.   At some point, it no longer makes sense to try to increase value, but pass on the product to someone who is better equiped to do the processing.

You have to remember to include all variables when building your equation.  Holding costs, interest, degrade, overrun, waste are all factors that come into the mfg costs and cannot be overlooked.