Any hidden costs in this business?????

[bikedude73]

What are the hidden costs in this business that somone like me that is new wouldn't think of??  I used to own another type of business and there were things I didn't think of until I was in it......

[Magicman]

Yeah, Taxes...    Seriously, keep good records.  Charge all of your expenses, including mileage, back to your income.  I do a quarterly statement to myself, which keeps my CPA happy....

[Dan_Shade]

maintenance and spare parts will eat a bunch out of you in the beginning.

[sgschwend]

For me it is the cost of keeping the saws sharp.

Another big one was the cost of material handling; I consider everything that is connected to picking up and moving materials.   If you sell lumber that would also include stacking and storage.
(most folks add another machine to help)

[Bibbyman]

I can think of a lot but it depends on how your business is ran.  i.e. doing only custom sawing or only sawing product from your own logs or, like us, a mix.

Inventory management for example; 

We take orders and fill the orders.  Yesterday we filled an order for 25 5x5s 8’ cedar.  The customer show up in the afternoon and paid for them.  That was great.  But we also produced about 100 bf of low-grade cedar lumber from the process.  I put them in the shed with about a 1,000 more bf of low-grade that got there the same way.  Someday, maybe, somebody will come by and buy a bunch to panel a recreation room or something and we’ll discount it and get rid of it.  But for now, it’s overhead taking up room.  Also they were sawn from logs bought at least a year ago so we’ve had our money tied up in them for that length of time.

Same goes for logs.  We saw a lot of long beams.  Early in the year we were out of long logs and couldn’t get any.  Had orders so we did everything we could to fill them. (first we cut 16’ logs down to fill orders for 14’, then we got orders for 16’ stuff and ran out of 16’ logs so we cut 18’ logs down to 16’, then, guess what? Yea, we got orders for 18’ beams so we cut even longer logs down to 18’.)  We hunted high and low and finally got a good supply of long logs.  I talked to my market and informed them that we now had plenty of long logs.  They don’t need any right now but hold on to them as they’d need them later.  We may have as much as $5,000 tied up in nice long logs waiting to get an order.  The lumber from them will degrade day by day.  (No.  I can’t go ahead and saw them up into beams because I’ll never be able to guess if they’ll need a 6x11, 6x8 or 8x8 or something else and I’d have no place under cover to store them.)

[Kelvin]

Insurance, and actually finding coverage, and not loosing coverage on your other property if your mill is at home.  Big pain in the bee-hind, and very expensive for me.  Went from hobby to a notice that my insurance agent for my home canceled my insurance b/c of my "sawmill operation"  Cheapest i found was $2500 for what i do.  Came out of the bottom line and there wasn't much there to begin with.  Equipment matainence is a biggie as well.  Trucks, trailers, tractors, saws.... etc.  Takes a lot of time as well.
KP

[backwoods sawyer]

Down time, there is a long list of things that will take up your time but that you will not be getting paid for. Maintenance cost on my mill the first year topped $10,000 and that was with me doing all of the work myself. However, I bought my mill for far bellow used cost and expected to have to rebuild it. Hand tools, chainsaws, and all the other nickel and dime accessories. Fuel cost, not for the mill but for the car and truck to drum up business. Shop tools, an addition to the shop to hold the shop tools, woodworking tools, another addition to the shop for dry lumber storage, barn rental, after shop filled up. If you are going to stock logs it seems (as Bibbyman stated) that you are always out of what is needed so you wind up with an even larger inventory and the logs degrade. The list is long………..

[John Bartley]

What are the hidden costs in this business that somone like me that is new wouldn't think of?? 

One of the hidden costs that most folks don't think of in any business until it happens is "replacement". Yes, if we're keeping good records we are depreciating our equipment, but that only serves to reduce taxes. It doesn't buy a new mill/motor/edger/skidder, unless...........you actually set money aside for whatever the situation is.

Example : You're in the middle of a 50,000 foot job. You've been sawing fairly successfully for several years and you're making a living, and 1/3 of the way thru' the job your motor packs in and it's terminal (rod thru' the block). If you don't finish the job you don't get paid.... Have you budgeted and actually set aside cash for an emergency fund? Can you rush your mill to the local Kohler shop and (with cash in hand) say "bolt on a new motor" so that you can finish the job and get paid? A lot of small business owners, especially youngsters, new to self employment, either don't know, ignore, or forget about these things and instead they spend their depreciation money on a new 4-wheeler....(or something else)

So......depreciate all you like, but don't forget that equipment wears out, and your depreciation money is supposed to be the value of the replacement and should be segregated from operating funds.

cheers

John

[Banjo picker]

Tags   (licence plates)  for trucks and trailers....Here in Miss... the tag for my one ton Dodge could be lower that 50 bucks with minimial weight....but if I am going to pull a heavy trailer the truck tag has to cover the weight of the trailer as well ...I am looking at a renewal notice right now...(that made me think of this post I had seen)   to the tune of $358.25  ...Not a big deal...but one of the little deals that add up...Tim

[Bibbyman]

 



Here’s one..   Retirees and crackpots coming by to eat up your time.   You’re standing there listing to how the goat got through a hole in the fence when you could be making $60/hr sawing – or eating supper.  Sometimes I feel like I’m standing there with a roll of one-dollar bills peeling one off at a time and letting them blow away.

[Kansas]

If your mobile, weather can do a serious number. Clear back when we started, we had this bright idea of going directly to the timber and saw. Being both me and my partner worked full time, it was the weekends that we sawed. Ever notice how it can rain every weekend? Weather can affect your log supply if your going to buy them and sell lumber, or count on custom cutting for income, even if they bring them to your log yard. When it rains, logs tend to stay in the timber.  And down time can be hell on a business.

[Cedarman]

I think the biggest thing people forget is mistakes or missawing.  Double check your order ticket.  Make sure thickness, width, and length are to specs.  Sawing alog for 12' lumber that is 11'11" is bad.  It happens.  Call customer and ask if they can use it before stockpiling.  Sometimes they were going to need some 11' stuff and figured they would have to buy 12'.  Chance to give a little on price, make customer happy.  Take a lemon and make lemonade if possible.

[Bibbyman]

In that same vein, it’s often good to talk to the customer and see what the “really” need.  Often they will order 12’ or even 16’ boards and plan to cut them into 4’ pieces.

Another is disposing of the byproducts – slabs, sawdust, cull logs, bad cant, etc.  While you can often find someone to take some of it,  it’s hard to dispose of this stuff and if you break even, you’re doing good. 

At this point we have as much area covered with “dead end” stuff as we have with good logs.  Hopefully by spring it’ll all be gone up in smoke is someone else’s stove. But even giving it away takes time away from work that could make you money.

[DRB]

As others have said handling, storing and disposing of less then perfect stuff is your biggest headache.  Storing good stuff till you can find a buyer is a big expense, plan on never having enough storage sheds or barns to store the stuff you want to keep.  Lumber will not keep forever stored outside and degrades fast if stored outside. Might as well start out sawing yourself out a couple big sheds to store lumber in. Learn to give away the crud or pile it up and burn it or you will go broke trying to sell it.

[Bibbyman]

One thing I may check out if it looks like we won’t get enough firewood business.  The stave mill has started chipping everything that don't make a stave. 

I hear they’re buying any kind of oak for $20/ton.  Restrictions on size.  They grind it for biomass fuel?  I could probably put together a log truck load of cull logs and cants.   The local logger figures he can haul $600/load.