I have just completed construction of my M14 Foley Belsaw saw mill as a hobby of mine. My question is, what kind of income can I expect with the following conditions? I am a retired Army Master Sergeamt my brother and I will be running the mill, all of our equipment is paid for i.e. frontend loader, skidder, sawmill etc. We own our own timber which ranges from white oak, red oak, poplar, pine, and cedar. Any input would be greatly appreciated.
Donnie
what types of markets are you aiming to enter?
how large is your woodlot? have you developed a sustainable strategy for the woodlot?
What Dan said is true and applies to the wood end of the business. You must also look at the "business" end of the business. What I mean is, no matter what type of business you're in, you must know your costs. You say the equipment is paid for which is good, but that is only one piece of the pie. You must also figure insurance, fuel, repairs, depreciation, legal and taxes, supplies, outside services such as sharpening, accounting, etc. You also have to figure that the equipment will wear out, so you should figure some funding for replacement. Lastly, you must figure a salary for yourself. Even if things get slow and you can't pay yourself, you should figure a salary as part of the equation. Remember, money coming in is only revenue. Profit only occurs AFTER you cover all the costs and pay yourself. My feeling is, this approach should be your starting point. From there you can decide if you are a business, or a hobby. Either one is fine as long as you know where you stand.
The formula I always use is:
Profit = lumber value - log costs - mfg costs
As pointed out, you need to know your mfg costs. They include all those things you need just to do business. You'll need to maintain a certain amount of inventory for those daily or weekly maintenance items. That would be saw teeth and the like. We even maintain an inventory on parts that might go out and put us down. They include electric motors, pumps, and chain. We even have a spare gen set.
Log costs look like their cheap if they're your logs. Right now, I wouldn't cut a stick of wood out of my woodlot. The price is too low. Let someone else cut their timber at a market low. Cut your timber when the prices are higher. But, even if you cut your own timber, you will have costs involved. That includes saws, chains, skidding equipment, etc. They also have a carrying cost that needs to be considered. Those costs and the value of your timber should be less than what you can buy logs in for. If not, buy the logs in.
Lumber value is dependent on your markets. If you have no markets, then your value is $0. If you think you have some markets, then your value is still $0. Only solid markets will do. Also consider the value of your waste products. If you can't get rid of sawdust, then that is a minus factor. It costs to get rid of it, even if you dump it in your woods. Same goes for slabs.
If you are considering speculating on lumber by sawing and stacking and waiting for a customer, then you also have to figure in how much of your lumber is going to degrade or won't be sold. You'll also have carrying costs. Most guys figure they have so much in stock and they have a carrying cost of what the local bank is giving in CDs. The reason is that's your alternative rate.
Your marketing costs are also going to have to be figured in. Time spent marketing is time away from cutting, either timber or logs. But, you need the marketing in order to make the other 2 pay.
Much of your profit/future will depend on your location, what the locals want, what you can produce that is different than any local competition.
I live is an area where there are a lot of do it yourself types. The locals have begun to bring logs to be used for their own projects. That is stable money, no need to market my own lumber.
A guy bought some beams from me, then returned for more. He got the ball rolling and others began to want beams. That is what I provide that the other two local guys do not.
One thing I have learned from this forum is that things are much different in other parts of the country. Some will not crank up their mills for less than $.35 a board foot. In my area 17.5 cents is more the norm. Most people around here want 2x4, 2x6 lumber for barns and such. I can not compete with the stores on that. So I do not try to do so.
There is not a big market for the Walnut and Cherry that I have been able to find. Folks here are just not into that. I would much rather be sawing the upper level lumber and is an area I am trying to enter. We shall see.
I am growing to learn that milling is a lot like life. Find your niche, do a good job, be honest and things will find a way to work out.
As far as money....it depends on what market you end up sawing for and how busy you can stay.
I like your business philosophy, Tim/South. If you're serious at all about making a go of it in this business, you gotta have a good business plan. But that plan has to have some flexibility built into it to follow the market into unexpected areas. It is mighty risky to enter into business with all of your focus on a single market.
We have seen many, many brand new sawyers come to the Forum saying, "I'm gonna buy a mill, and cut such and such, and sell it for this much." I'd much rather hear them say, "I'm gonna buy a mill and learn how to use it while I learn how to get the logs I need, and while I learn what the demand is in my area."
This is a sort of generic reply that would cover all sorts of businesses, but I was at it (successfully in another business) for many years, so here's what I learned, but translated to sawing......
- Add up all your costs, pretty much the way Stumpy says in his post, and divide that by the number of board feet that you think you can sell from whatever market research you've done.
- Decide how much money you want to make and divide that by the same number of board feet.
- Add the two numbers together and that 's how much you have to charge per board foot to "net" that much personal income.
- The more board feet you can sell, the less $ per board foot you need to get for your personal income portion, but the higher your expenses get and the faster your equipment wears our, and the more manpower you need....
- It's always easier to lower your price than to raise it....
- Sawing for a cheap price just subsidises your customer at the expense of your own standard of living
- Don't worry about your customers ability to pay - charge what you need to make a GOOD profit. If they need/want it badly enough they'll dip into their beer/cigarette money to pay you...
Can you tell I've had enough of customers who plead poor and drive nicer vehicles than I do? :D
cheers
John
Trying finding a good market first...if ya find one don't tell anybody else or it won't be good for long. ;)
I noticed you have your own woodlot. Have you ever had a timber stand improvement plan? If not get a forester to do one. You will end up with all kind of low grade trees to saw and at the same time improving your timber for future dollars. :)
Just because you have low grade trees to saw does not mean that you will produce low grade lumber if your grade sawing. It means the yield will be lower and time spent will be higher.
John B, your second to the last bullet point ought to be in capital letters. I love it.
Sawing is the easy part ,selling is the tough part.Fence boards and oak trailer beds are a big part of our sales.Be flexable enough to change tack and mill what you can sell.Frank C.
Gday
John you hit the nail on the head there ;) and Ill second Cedarman Mate ;) ;D ;D
And ill ad another point that when you own older gear the cost off maint when your in a production sawing situation can sometimes cost you the same ownership cost as payments on new gear when the costs of repairs are coupled with lost prod but that mainly comes into play when your paying wages
Good luck First shirt you and your brother should be able to make a real go off it as you wont have many overheads Mate ;) ;D ;D 8) 8)
Reguards Chris
X 2 on the business plan. If you can't make it work on paper, there's no sense in breaking your back trying to make it work for real. My mill/kiln is really just for fartin' around since my main business is custom woodworking (mostly commercial). However, I do use some of my own wood and plan to market more in the future to small users.
A neighbor of mine also has the Foley Belsaw mill and, although he is retired and doesn't really operate it as a serious business, he plans to buy and LT15 to supplement it and help improve his yield.
I have the same mill with a 60 HP diesel engine that I rebuilt. I am also retired with a wife that still works. I have under $5000. invested in the mill and I still consider this a hobby. I bought the mill after paying several bandsaw operators $65. an hour to come out and cut my wood. Now they want a minimum of 6 hours to come out. They must have formed a union around here. I consider them my competition now and I have made it clear to the people I know, that I will cut one log or 100 logs for the same price. Also I deal with the one commerical mill in town for finished lumber and they have sent a couple of customers to me with small jobs. Find a nich market in you area and be fair with you price. Also read the IRS instructions for a hobby vs a sideline business. Good luck.