Job Pricing?s

[fishingmike]

I have been offered an opportunity to do a small logging project. In the past as an arborist company we have done some very small stuff like one or two loads to the sawmill. This job has probably about 20 loads. I usually bid based the amount of time I think it will take. This seems unrealistic for a job this size. The customer of course wants to make as much money as possible and I don't want to end up going broke. How would you price such a job? Hourly rate? Daily rate? On shares? I should mention that this is all nice douglas fir.
Thanks for your input

[beenthere]

A question.. is the customer the landowner of the trees? I assume 'yes'.

If so, seems to me you should price your work and time for doing the job of taking down the trees and make your profit from your labor after expenses.  Any more profit from the value of the trees, be it high or low, IMO belongs to the landowner. It is his/her investment. You are the service guy hired to do the work, not profit off the investment.  But that is just my thoughts as you presented the situation.
Whether you are hired to load bricks of mortar or gold, would be the same price for your work.

Might be that some skill to buck the trees to proper length for best value would earn you more, if you have that knowledge and skill.

Not sure what you mean by "seems unrealistic for a job this size".  Why, if you usually bid your jobs on the time it would take, would this job cause you to go broke?

[fishingmike]

The job is for the landowner. I agree that the landowner, owner of the trees, should profit the most from the trees. I am just concerned that with a job of this size I could grossly under estimate the time involved. I know that a lot of the large logging companies in the area work on shares but they are dealing with much more volume and greater expenses. I was mostly curious if working for a percentage is even an option here. I will probably just go with what I am used to and come up with a quote for all the work. The downside with that is that if I underestimate the time the landowner will be unwilling to pay more. Just trying to get a feel for what others think.
All opinions are appreciated ;)

[beenthere]

Then work by the hour... not by the job.  Hour has less risk. No way do you want a job that you don't make some min. return for your time and materials.  Seems to me anyway.

[jwilly3879]

We almost always work on a percentage basis on the logs and a per cord price on the pulp we get.

[Ron Wenrich]

I've always hated shares or percentage.  Several problems can arise.  One is that the logger has control of the proceeds.  In some cases, some of those mill slips get lost.  I'm not saying all loggers do that, but we've all heard the stories.  Also, the landowner has to believe that any particular logger is a really good at marketing logs.  They can best buck the logs for value, and will utilize as much of the tree that they can.  They also have the best markets to sell those logs.  But, the incentive isn't really there to utilize material that is below a certain quality, because they can't make money on certain logs.  So, the landowner has a greater risk for sales on shares.  They are also a partner in the operation.

I'm not saying that a stumpage price is equally a good deal for the landowner.  But, if put on bids, the landowner gets the best estimate from all the loggers.  His price is locked in, and they can decide well in advance whether the sale is worth their while.  The landowner also has to realize the logger is taking a risk that the quality will cut out and that the logger can make a profit.  Here the landowner isn't a partner.  They are selling a resource to be extracted.

Operators do have an idea how much it costs to cut, buck, and load timber.  There are variables, such as volume per log, skidding distance, slope and other factors.  They could charge a rate to do the work and then all proceeds for the logs goes to the landowner.  If the logger or forester sold the logs, then they could charge a fee.  The landowner would then deduct the logging costs from their proceeds.  In some cases, the landowner will lose money.  The logger has no risk in timber value, and how the timber opens up.  Their profit is guaranteed.  In that case, the logger is selling his service. 

Mills and many loggers in my area buy on a stumpage basis.  There are some loggers that work on shares.  No one uses the work for a fee system.  But, it is a way to handle this particular project. 

[Southside]

Respectfully I am going to disagree with Ron here. For every story about a lost mill slip there is one where the landowner accepted a bid based on an assumption of X board feet/ton/cord of wood was going to be harvested and it turned into X + 30% meaning the landowner got a lot less than if the wood had been sold on shares. It boils down to if you can't trust the person working on your land then they should not be there.  There are plenty of ways to account for each and every load that leaves a woodlot which gives everyone peace of mind.

From your description it would be easy for you to either under estimate or over estimate the amount of work here, meaning either you or the landowner will come out short. If I were in your shoes I would cut on shares or not take the job. It would be similar to me being asked to do arborist work, whole new ball game and I would not want to damaged my reputation due to my lack of understanding what I was getting into.

[landscraper]

I'm not a full time logger, but I do a lot of bidding for work.  My 2 cents is if you don't have a very firm grip on the amount of time it will take to do the work, you are taking a big risk as a business owner by offering any sort of fixed price.  This is the nature of estimating and contracting.  Unless you already have dozens (or more) of similar jobs successfully and profitably under your belt and can comfortably state that it will take X amount of time therefore it will cost X dollars, then there is no other responsible thing to do than bid it as a unit price, be it hourly or daily work with whatever profitable hourly/daily rates you already use.  To go shares on it is even worse because not only do you have know how much it will cost you to do the work, but also how much your share of the logs will bring - before the chainsaw makes the first cut.  Guys who log day in and day out have a keen eye for the potential value in a tract, and even the experienced loggers will tell you about jobs they got burned on. 

I'd stick to hourly rates, but discuss your guesstimate about the total time/value of the work with the landowner so there are no surprises later when it took 2 weeks or whatever to get 20 loads out and the meter was ticking the whole time. 

[Rick Alger]

I did a small job like this for a friend a few years back. I charged a bare bones day rate. Then we split the after trucking returns after deducting my pay.