Question about board feet pricing vs. by the hour

Dave Shepard · February 01, 2015, 07:25:44 PM

Quote from: scsmith42 on February 01, 2015, 12:52:20 PM
Quote from: landscraper on February 01, 2015, 11:31:18 AM
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.

As always, a great post from the standpoint of making a success of things. You get a like: 8) :D

Magicman · February 02, 2015, 09:24:22 AM

I like to see the logs before quoting the sawing rate. On the telephone, I get the customer to describe what he has and what he wants. Sometimes they can email me a picture.

I have done quite well with my rate quotes and have never drove back home without sawing. I very rarely make a "pre-saw" site visit.

GAB · February 02, 2015, 11:28:03 AM

Quote from: Sawmill Woman on January 28, 2015, 09:57:35 PM
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).

The last box of 15 blades I bought, in 2009, cost me $330.00 or $22.00 each.
Based on that at $20.00 you are not covering your costs. Also I charge $10.00 for lost production or to cover my blade changing time.
Gerald

4x4American · February 02, 2015, 11:51:09 AM

:P

Tom the Sawyer · February 02, 2015, 12:31:45 PM

Sawmill Woman,

In my case, I don't consider by the board foot and hourly as equals. For me, hourly milling is a 'fail-safe' in that I only go to hourly when the yield (at the bf rate) would be a losing proposition. If you normally average 250 bf per hour of 4/4 and charge .40 p/bf then you should be averaging $100 per hour. If the job is milling 9" diameter and/or 4' lengths then your bf production per hour may fall below an acceptable return. That is when my hourly rate kicks in.

For those who offer 'either/or' pricing, if there is a wide difference between the two methods then I would think that their rates should be adjusted.

I'm not absolute about it, if most of the logs are decent size and they throw in a little one I'll usually do it by the board foot too (it doesn't take too long) but if the whole job is a mix then I'll explain which ones are by the board foot and which ones will be hourly. After a couple of small ones, the client may decide to be a little more selective once they see what they yield.

One benefit of bf pricing is that after the fact they can verify what you charged by measuring the product themselves. I round down so they will always have more lumber that what was actually charged on their invoice.

Hourly does have variables. In previous threads, some contributors said that hourly applies from when they arrive until when they are ready to leave. For some, it's the first time they start the engine until the last time they turn it off. Some bill by the mill's hour meter and others are somewhere in between. My hourly milling applies from the time a log is loaded until the last board from that log is pulled, including measuring, clamping, adjusting, re-clamping, milling, etc.. The clock is not running while changing a dull blade, refueling, rolling the next log a short distance to the mill or things like that.

At some point you'll find a method that works well for your and your clients. No method is perfect in all situations but if either side is consistently unhappy, you'll be out of business.

4x4American · February 02, 2015, 12:43:37 PM

Here's a picture of logs a guy wants sawed into material for raised garden beds and a pole barn....... ???

Dave Shepard · February 02, 2015, 02:48:15 PM

It doesn't look like there is enough good material there to make a model of a pole barn. :

4x4American · February 02, 2015, 02:58:47 PM

:D I told him in the politest way I could, that good logs make good lumber. He asked if it was even worth screwing with. I'll go there and see what I can do, by the hour.

Peter Drouin · February 02, 2015, 04:14:27 PM

Quote from: 4x4American on February 02, 2015, 02:58:47 PM
:D I told him in the politest way I could, that good logs make good lumber. He asked if it was even worth screwing with. I'll go there and see what I can do, by the hour.

Tell him to have a tractor there to pull out one at a time and bring it to the mill. That way you or he can do all the chain saw work before it makes the mill.

4x4American · February 02, 2015, 04:33:19 PM

Yes sir.

He said he has a bucket loader. He wanted to have them sawed this week, but we just got dumped on with snow, and this next week there is more snow in the forecast for the majority of the days. Going to make it even more difficult, hopefully he knows how to move snow! He said he has two sons to help us so there should be enough manpower. Is your hourly charge always the same? I.E. in my pricelist it says $50/hr for quartersawing, but in this instance, would it be fair to charge the same price even though I'm not specialty sawing, more-so just sawing ugly stuff.

Peter Drouin · February 02, 2015, 04:42:08 PM

I keep the price the same if by the hour.

4x4American · February 02, 2015, 04:50:45 PM

Thanks. So, what do you think about this: if I have a job that's an hour drive one way, and it's a bigger job, (I'll be there for a few days), what do you do for commuting to the mill and back from home? I leave the mill onsite, but I have mixed feelings about charging for my commute when I don't have the mill in tow. Half of me thinks I should charge for my commute, and the other half says that every other job I've worked I've never got paid to commute, so I don't know what to do!

Peter Drouin · February 02, 2015, 05:25:05 PM

In all the years of milling I only charge for milling. Just have to charge enough to start with. I never charge to go to work, or for blades, or set up, moving the mill or all that junk.
Some can charge all kinds of things and good luck, Run your jobs the way you want .
For me, If by the hour get what you need to make money. It's not like you don't know how far the job is. I always go look without the mill first. [for free] Then I know how big the logs are or if I have to move the mill, Do I need to trim the logs, After doing it for some years you will know how much work there is to get it done.
My way the customer knows how much it will cost, Not how much time did it take to move or trim or change the blade or how many miles it is.
I like simple, And the customer has nothing to argue about.

69bronco · February 02, 2015, 06:07:35 PM

4x That pic looks to me like left over pulp that wouldn't fit on the last load! Careful what you get yourself into.

4x4American · February 02, 2015, 06:21:28 PM

Thanks Peter, I like that. I had read somewhere that it is wise to have little charges for things. If I just had a higher hourly charge it proberly would cover any of those things. I too prefer things to be simple. I don't like scaling how much bdft I've sawed at the end of the day as it takes a long time. I've tried to keep a tally, but it just don't work for me. I have to have one hand on the valve for the feed all the time so it's hard to get a second to write it and then you gotta remember to write it and remember what size you're on and answer a question someone has and remember this and that. The dealer I bought it from told me that the only way to make money is to charge $70/hour. I thought that was a little steep for being fresh into it, but what do I know. I also don't need to be scaring customers off. I'm not that fast, I don't claim to be, so that's why I've pretty much stuck with by the bdft, so that way, no one can say hey you were too slow or you didn't get everything you could out of that log, etc. I thought I had my pricing down and I was pretty happy with it, but now I'm second guessing it.

4x4American · February 02, 2015, 06:22:31 PM

Quote from: 69bronco on February 02, 2015, 06:07:35 PM
4x That pic looks to me like left over pulp that wouldn't fit on the last load! Careful what you get yourself into.

You ain't kidding but I haven't had much sawing in January and I need some cash flow and to feed my sawdust addiction.

4x4American · February 02, 2015, 06:42:29 PM

He also offered to saw on a trade for wood basis. He has a pile of hard maple that looks just about like that pile of pine except much smaller stuff down to piddley things. He offered that I could take that pile of firewood in exchange for sawing his wood! I politely informed him that I had no interest in that exchange.

Peter Drouin · February 02, 2015, 06:50:34 PM

After a while you will go to a job and tell the customer, I will cut the pile for x amount, one price for all, BUT, you have to be good on how long it will take to cut the pile. :D :D :D :D :D

hunz · February 02, 2015, 10:30:43 PM

I'm in agreement that a sawyer running a larger hydraulic mill needs to be making $70/hr to make out okay. I have been charging $55/hr, but am now going up. On those jobs where you are commuting 45 minutes each way, with no compensation, that extra $15-$20 an hour makes up for those incidentals.

One thing that got me to the point where I decided to switch to bf, and up my hourly is when I had a visit from a local plumber. This guy got $80 an hour for his knowledge and a few hand tools. Us sawyers are totin' around $30-$50k machines, and we provide a professional service. I am by no means above any plumber, but I won't be underpaid by 25% compared to one.

4x4American · February 02, 2015, 10:33:20 PM

That is a great way to put it. I have friends with portable welders (which aren't really expensive compared to sawmills) and they're getting $75/hr and up.

Peter Drouin · February 03, 2015, 07:06:29 AM

Quote from: hunz on February 02, 2015, 10:30:43 PM
I'm in agreement that a sawyer running a larger hydraulic mill needs to be making $70/hr to make out okay. I have been charging $55/hr, but am now going up. On those jobs where you are commuting 45 minutes each way, with no compensation, that extra $15-$20 an hour makes up for those incidentals.

One thing that got me to the point where I decided to switch to bf, and up my hourly is when I had a visit from a local plumber. This guy got $80 an hour for his knowledge and a few hand tools. Us sawyers are totin' around $30-$50k machines, and we provide a professional service. I am by no means above any plumber, but I won't be underpaid by 25% compared to one.

The only thing I can add, Is if cutting by the BF AND the job is set up right, You can go way past the 70 an hour.

Dave Shepard · February 03, 2015, 08:57:55 AM

I am stationary with a WM LT40 Super. I have a 24' bed extension and twin blade edger. I charge $100/hour. My preference is to saw timbers, but will do most anything the customer wants to pay for, including nails, sometimes. I will sometimes add up production and figure out a bd/ft cost. Sawing pine timbers on one job, with side lumber, the bd/ft rate was $0.23/ft. Another job sawing 30' white oak, which required many turns, and 1/4" cleanup cuts on all four faces, worked out to about $0.55/ft. I feel hourly works the best for me and the customer, as the bd/ft rate is directly related to the complexity of the sawing job.

Brucer · February 05, 2015, 02:06:09 AM

Quote from: Tom the Sawyer on February 02, 2015, 12:31:45 PM
... For those who offer 'either/or' pricing, if there is a wide difference between the two methods then I would think that their rates should be adjusted. ...

For sure. I finalized my pricing structure after about 100,000 BF. I review it every year to see if it still makes sense. Keeping good records is important -- even if you charge by the hour, you should keep track of your BF production.

My pricing -- the lower of the BF price and the hourly rate -- works out to about the same if I'm working alone. If the customer helps (in a helpful way) then the hourly rate will give a lower price, I'll be done sooner, and my back won't complain at me for the next two days.