Wanting to be fair, don’t want to be taken advantage of - I am landowner

[jonesy_007]

Hi there,
I own large acreages that are never cut prime forest. Heavy white cedar density and ridiculous quality. The cedar is selling for $1000/1000MBF ($1 per foot) currently at mills within 45 minutes to an hour from my properties.
I approached someone who was in forestry in another field and wanted to get into logging and offered them a 50/50 split of all profits (so after trucking costs)from the timber on my land. High end veneer sugar maple, all the white cedar which is all together and the "fish board" stuff.
The only issue with my property is that it's in a trail (already cut and open and skidder makes it all the way no issues) that's about 6km (or 4 miles) from the trucking landing.
Apparently after speaking with other loggers he wants a 70/30 split after trucking in his favour.
Am I a jerk for offering 50/50 thinking that was more than fair and thought it would help him launch his logging company so we could negotiate a better rate for me later, or is 70/30 to the logger "normal".
I feel bad if I was the jerk, but I kind of feel a little blindsided by changing the terms of our agreed upon deal after he had already started cutting and not selling the cuts until this chat.
Please let me know, and don't hold back. If I am a jerk for offering 50/50 and not 70/30 or if I am a bonehead for considering 70/30 after expenses in loggers favour.
Thank you!

[Old Greenhorn]

First, welcome to the forum! We hope you enjoy your time here and become a participating member.

Second, lets get started on the right foot. Posting the exact same question in 3 different forum sections is considered rude at best, and against the rules at worst. Please do not do that! One post is suffrutescent for the people who have interest and knowledge in the subject to find it and respond if they chose. And no, you cannot delete those other threads now, only a moderator can do that. I responded to this one because it is in the correct forum section.

As far as your question goes. Are you working with a consulting forester as most folks would? Do you have a signed contract with this logger? Who is paying the loggers operating expenses? Do those expenses come out of the sale before profit? If he has to pay those expenses from his share of the sale, then he is really not getting a 50/50 split, is he?

 SO it's probably too late to do it the right way and find a forester who can negotiate a signed contract for you as well as supervise the cut including cleanup and mitigation work. But depending of the details, perhaps there is a little room to negotiate the arrangement before it gets worse.

 More information is needed hear before the more experienced folsk chime in with their thoughts.

[barbender]

It's really hard to say. I will say that landowners often don't realize the costs in logging, and a 3-4 mile skid would add a huge amount to his cost.

[TreefarmerNN]

If y'all had a 50/50 deal upfront, then no you aren't a jerk.  He may be if he's holding the logs as ransom.  I'd stop the harvest right now, tell him to sell what's been cut and show you the tickets for a 50/50 split.  I'm not big on selling timber on shares but it you do, the loggers should settle up each week and not hold logs.  That's a good way to find yourself without timber or the money that should have come your way.

If he had been upfront and sold the wood already cut and come to you saying he couldn't make it at 50/50, then it's time for a discussion.  As it is, I think you are better off breaking the business relationship now before it gets worse.  Find another logger who is more honest with you.

[barbender]

jonesy_007, I am trying to catch up and clean up your multiple posts of the same subject and you are posting faster than I can keep up. Don't post the same topic in multiple boards, that is against Forum rules. 

[jonesy_007]

First off, my apologies for the 3 posts. I was under the impression that some people simply live in one section of the forum and may not look in others.
Not knowing where the question was best asked, I assumed asking in the forums that looked most appropriate. Rude, was certainly not my intention at all.
Second, I appreciate the feedback and will work on keeping it in a single forum.
It was literally a copy and paste to the forums I thought might be relevant and if people didn't want to read they would skip over.
Lesson learned and feel like crap for bothering all of you
Thank you.

[jonesy_007]

This is a reply to old greenhorn about more information. The timber to be cut is about 5 million MBF of cedar alone. So, that would be $2.5M each. That's on 200 acres. So, not very far to go and the cedars are all together doing a 30-50 acre clear cut and a grid cut north / south on 100 acres and east / west on the other 100 acres.
I am not sure if this helps at all.
Thank you

[barbender]

No need to feel like crap about, it was just a heads up😊

[Old Greenhorn]

Agreed, don't feel like crap, it was just an entry level mistake. All good now and it's forgotten, lets move on.

You don't mention but the loggers costs are unclear here. Are they deducted before the profit is figured, or is he carrying his costs using his cut of the sale?
 A 4 mile skid will add a lot of fuel cost and time to the job.

[WV Sawmiller]

   I've got nothing to do with logging or selling timber but nobody changes the rates on me after we start a job. I'd tell him to comply with the original terms or pack up his stuff and leave immediately.

[jonesy_007]

Yes, the loggers cost would be included in their share of the 50/50 but the trucking costs are deducted. I have been in business a really long time and have always felt as though I have been very fair with my employees and subcontractors. I am new to logging and doing the math, he has told me he can pull 3 loads a week on his own. Fuel costs are about $1,000 per week 60 hours of work (skidder and saw). So, I am trying to figure out at 3 loads, sharing $10,000 per minus trucking of about $500 so $9,500/2 =$4,750.00 each minus his $1000 in costs (I shouldn't need to concern myself with broken equipment costs etc as no other industry would factor that in to a job as there's no way to know where the machine was compromised). He is getting $13,500 a week minus $1000 in fuel ($12,500 per week). Now, he hires a few guys and runs skidder all day instead of taking out loads here and there he could get to 5 loads a week. Maybe I have run so many different businesses and never expected the owner to cover my operating costs... that's why I am a little lost.

[Old Greenhorn]

I am getting near the extent of my working knowledge here, but as we develop this picture better others that so this work everyday will chime in with more pointed comments.
 In the meantime and with all honesty I have to point out that you seem to be oversimplifying the loggers cost structure. It's true you cannot cover nor anticipate his breakdowns, that's not your problem. However there is no functional logger that I have ever met that does not include a certain average overhead cost for operating his/her equipment as well as it's overall cost. They don't bring in a $100k piece of equipment to do your work for free. They have transportation costs just to get the gear on site and there are things that will happen and wear out such as belts and hoses. Changing ut a couple of hoses on a feller buncher can cane well over 8 grand, and that is routine maintenance. Rarely are there breakdowns that cost less the 5 figures on big equipment. That has to be factored in somehow or the logger will be bankrupt in no time.
 So to just consider fuel costs is a bit naive' if you ask me. I'm not criticizing, just making a point here. Still it is unfortunate that work was begun before a final deal was truck and written down. I sure hope you had a clearer understanding about the condition he will leave your property in when he leaves.
 Best of luck, let's see what the big boys have to say here.

[Peter Drouin]

Hi, and welcome.
For me, when I make a deal, that's it. If they walk away, it's on them. When the other guy wants to talk about price after the work starts, I show them the gate. A big red flag!! If he doesn't know what to change for his work he doesn't know the forestry laws, I bet. If he makes a mess he will walk leaving you with the bill and mess.
If it were me, I'd send him down the road.

Best of luck.

[jonesy_007]

Thank you so much for your feedback. I agree on all points. I am at a point where he wants 70 points because of expenses and potential expenses. To be honest I can buy a skidder, pay for all the costs (fuel, maintenance, breaks) and offer the opposite split is how I feel. At $2.5 million in revenue to the logger at 50/50 over 2 years (1 guy no team), I can't foresee any situation or costs that make sense for me to give up 20 percent or $1M for expenses or expected expenses. I am just confused. He could literally buy all new equipment if it all broke and still make a million dollars a year.
It's all hypothetical but if I assumed all risk, hired him to cut on a 30% split he would be making (on his calculations of 30,000 MBF a week) $9,000 a week at 60 hours. That's $150 an hour. I think that's outrageous but a more reasonable approach than a split where I am giving up a million dollars over 2 years. I see the "expenses" discussion as a red herring and feel a little blindsided.

[jonesy_007]

I want to add this in as well. I really wanted to help this guy out. I had a large company offer me 40% (it wasn't exactly that) but they offered me $4000 per 1000 MBF which at this point equals 40%. It's a large company. I always try to support the little guy. This other company is a mill so they will make way more on it than the logger in question. Saying that, they gave me a 7 week timeline of completion and payment up front. I really like this guy, and he has been through a lot and want to help him out but this will take him two years so for that I moved to 50/50 from a 40/60 from the big firm essentially for the increased time. I actually felt like I was doing him a favour. That's why I asked am I a jerk? I feel bad, but I can't see a scenario where this guy doesn't become a millionaire from being almost broke because of my offer... just lost. I don't want to crush another little guy and sell to a conglomerate but I am getting less now and it's taking 14 times as long 😔

[Plankton]

Im a little unclear on whether hes started the work or if your still negotiating a contract for the work.

Cutting on shares or percentages after trucking is a very common way of doing things here. Like others have mentioned there is many factors that go into negotiating a percent split. Truck acess, skid length, quality of wood, terrain, distance to mill etc. Etc. Etc.

I have cut some really nice wood for a 60/40 split my way and some junk for 50/50 its all job dependant.

I will speak to a few points you have raised. grossing 150$/hr isnt remotely outragous for this line of work and 1 million dollars doesnt go very far buying new logging equiptment. There are massive overheads associated with this 
work. I had a bad breakdown the other week and spent 8k$ and grossed 1k$. Those costs need to be covered somehow. Suggesting that you could purchase a skidder and do the work youself for more money is ignoring the fact that this is skilled work and takes a lot of experience and knowledge to do succesfully.

I would strongly reccomend involving a consulting forester to manage this sale and find a logging company that works best for you.

[WV Sawmiller]

  Its nice to help the small guy but he may be small because he is not very efficient. Don't punish the big guy who got big through hard work, being honest and doing what he promised while still working smarter than others. JMHO.

[jonesy_007]

Hi again,
We started on a hand shake deal and he was super excited for 50/50.
So, a couple loads are waiting to be delivered but then I got the call "I talked to other loggers and I should be getting 70/30".
When I said $150 an hour as outrageous if you read the message it says I take on ALL operating costs (buy a skidder, pay for fuel, maintenance, repairs etc...) and reverse the split to 70/30 for me. So the logger has no unforeseen expenses or any expenses other than time and labour.
I am starting to feel like I should back away and unleash the big company.
I don't like that but I feel like this may crush this little guy. Saying that, I didn't change the terms.

[jonesy_007]

I guess the question isn't now if I am a jerk for offering and agreeing to a 50/50 split. My word is my bond and I never break it, so that's on them.
The question now is do I even bother negotiating or just walk away from this guy?
I can have a cheque for $2,000,000 in my hand June 1st and the big company is off my property by end of July and I can do what I want to do building whitetail habitat or, try and discuss this with someone who has changed their mind and will take "hopefully" no more than 2 years to get $2,500,000 at 50/50 split. I can make another million off the $2,000,000 in a two years very easily and actually be ahead but again I want to help this guy but I can't just throw a million dollars in the toilet....

[weimedog]

For me this is a simple discussion so will try to put it in as simple language as possible. In my area I sell what I cut to a log buyer right off the landing. They have their own trucks & I receive a check that very day. I cash it and take 50 percent, the land owner gets the other 50 percent. If I'm the land owner ( as often) I take 100. The adjoining properties I cut I give them the "land owner 50 percent. The loggers I have dealt with are pretty much the same. When I cut off property, it's the still the same formula, 50/50, sell off the landing & payout. The only thing that can tweak the 50/50 is if it's a real risky felling & skidding hill side type thing or conversely simple & close to the landing work. And if it's junk wood or soft wood, then someone else needs to do it. This is Central New York & Hardwood. Also saw logging & not mechanical which has an entirely different business model around here. I can't speak to that. AND the pricing usually averages around a buck a board ft.

[WV Sawmiller]

    I would immediately tell the guy "Since you are no longer satisfied with our agreement I hereby release you from your obligation. Please remove your equipment immediately as I have another contractor coming in this week to take over."

    Him talking to others and no longer being willing to honor his agreement is his mistake. I have made many commitments that I later regretted but I honored them then learned from the experience for the next time. 

[thecfarm]

Must have some good trees for $2,000.000

[jonesy_007]

Actually, to the "must have some good trees for $2,000,000". I do. And they are very densely located. Other than the 4 mile skid this is a unicorn of a job. I have cedars up to 36" in diameter (not circumference) at chest height and almost 80 ft tall. Very little rot if any, and you can make 6 cuts in 1 minute and pull 6 trees down to limb every 20 ft. So, I am flustered by this change in attitude. The average tree is 24" diameter by 60 ft tall. The longest and most difficult part of the job apparently is the distance in and out on a trail already there.

[jonesy_007]

If I could figure out how to add pictures I would. I can't seem to figure that out

[Jeff]

jonesy_007, I am trying to catch up and clean up your multiple posts of the same subject and you are posting faster than I can keep up. Don't post the same topic in multiple boards, that is against Forum rules.

I got it cleaned up. Yea, welcome, and dont do that again!