would you do it?

[dunmakinbabies]

Hello All, first time poster here.
       I have putting together a business plan for a sawmill. So in the process i called a log buyer to get some prices. I told him that they were for a business plan and would prob. never buy from him. He took a liking to me and has kept in pretty close contact with me. About a month ago he phoned me. He hooked me up with an exporter that wants me to saw for him. Pine and hard maple,35,000 bdft each a month. He buys the logs, they are delivered to my yard. Most everything will be 5/4 or 4/4. We agreed on .17 an board foot. He wants a tally faxed every wed. so i can be paid by friday.
       I am looking to buy a Baker 3665 blue streak with an edger. If import fees are too much im looking at the wm lt70 with edger. whatever i get will have the big diesel. Also leaning twards some kind of tractor 45- 50 hp. Everything will be new.
       So with that being said, am i nuts or would you do it? Do you think i could produce that with either of them mills with a full time helper? Also have any of you ever wrote a bp for your sawmill? Did you do it your self or hire someone?
       I was a shift forman at a hardwood mill when i lived in Maine. So this business is not new to me. I now live in Canada, was born American and always will be one!  Any input woul be great!
                                                            Thanks, dun

[Papa1stuff]

I think .17 is a little to low ,but I am sure someone wih a lot more experence than I will chime in!

[MotorSeven]

.17 seems low to me too, but I don't saw commercially. My neighbor operated his own LT40HD on the exact same site as my mill about 10 years ago and his rate was .35. With the economy down .35 seems to be a going rate around here now.

[Dave VH]

what an opportunity!
  I've had some great oportunities in the past, they may sound great, then at some point in time fall through.  You might consider used equipment and save a lot of initial investment.  You really need to check into this guy with the 35,000 bdft a month.  is he already exporting a lot, and he want to up it 35,000, or is this new to him also.  If it's new to him, and it falls through, he ain't ought nothing, you on the other hand have got a huge nut to crack with some expensive equipment.  You really need to do the research and tread lightly.  I would be nervous putting all of my eggs in one basket.  Me personally I wouldn't get anything I couldn't support without this new guy, and upgrade your equipment as it pays for itself.  I am jealouse of your opportunity, I truly hope that it works out for you.  Good luck!

[mad murdock]

Welcome to the forestry forum dun.  I am not a commercial miller, though I have dealt with a lot of mills from the supply side (selling logs to mills, producing logs, delivering logs etc.)
I think it boils down to realistic production numbers.  What is you projected output in mbf/day mbf/hr etc.  if the numbers work at .17/bd/ft then I would go for it, with a signed contract in hand first.  On the surface, the margins seem real tight to me though.  Not a lot of room for mistakes.  If you can do it with low overhead then that would be the other way it could work.  You are talking about just under $6,000/month, which sounds good, but when you factor in the cost of a new LT70 or Baker, along with a new tractor, plus operating expenses, might not leave much for bread and butter at the end of the month.  It's all about the numbers IMO.  Good luck with your venture!

[DanG]

Welcome to the Forum, Dun.

You say, "35,000bf each of pine and maple?"  70,000 bf per month?  That would be 3500 per day, based on 20 work days per month. Considering you would have to unload at least 14 log trucks and load several semis with lumber, you would need more than a 50hp tractor.  A wheel loader with grapple and forks would be called for.  You also may need more than one helper.

Where would the lumber be exported to?  That would be a factor to me.  I would want it going to a very stable and friendly country before committing such an investment.  Be very brutal when asking questions to yourself.  Ask things like, "Does that guy really like me, or did he just think he saw a sucker coming?"  I know that sounds nasty, but it needs to be asked.   You didn't mention a plan B, let alone plans C-Z.  I would need to fill in several of those before taking the leap.  I'm not trying to talk you out of it, but you do need to proceed very carefully.  Sometimes, you can make more money with less work, just by being smaller.

[dunmakinbabies]

Me again, I prob should have been a bit clearer. sorry about that, he want 35,000 each a month. For a total of 70,000. We talked about contracts, he wanted to start out with a 5 year deal. I said no way! Year to year, cost of operations never get cheaper.
       I have looked into used equipment, BUT i never seem to have good luck with used. Wanting to produce that much you gotta run every day. I know new breaks too. But i feel i would get to know the equipment as it ages? Thoughts?
       I also have done some research on him and asked him LOTS of questions about him. Right now he exports 150,000 a month off the west coast. He gave me a contact out there and have spoken to the mill owner and everything seems to check out so far. He not only exports lumber but other raw materials as well. Altogether he imports/ exports 150 containers a month of various materials.
       When i started i was just planing to saw for the local farmer and such. I just feel this needs a good looking at and should not say yes or no right off the bat. I would not want to saw that volume for ever. I would just like to get my equipment paid for. Than i could work less for more.
                                            thanks so far for all your in put!
                                                                      dun

[Cedarman]

Who will own the sawdust, bark, slab and edging strips?  Who gets to market that?  What about the junk in the center of some logs?  Will it all be exported or just the better grades?  What if you can't keep up?
Some of the first that came to mind.

Your business plan should be a rather lengthy one to account for lots of eventuallities.

[mad murdock]

Welcome to the Forum, Dun.

You say, "35,000bf each of pine and maple?"  70,000 bf per month?  That would be 3500 per day, based on 20 work days per month. Considering you would have to unload at least 14 log trucks and load several semis with lumber, you would need more than a 50hp tractor.  A wheel loader with grapple and forks would be called for.  You also may need more than one helper.

 

Like DanG said 3500 bd/ft/day on a 20 day work month is about $600/day, I don't think that that will cover the equipment you would need plus help and other expenses, IMO.  I would crunch all the numbers in the big picture, like Cedarman said, you will have waste that may be able to be marketed, who will be responsible for it, and who will get the profit from any waste product? Bark dust, chips, sawdust etc? Run the numbers, if they work, then go for it, if not, numbers don't lie, as long as they are good numbers, you should be able to bank on them.  Good luck

[Magicman]

First, Welcome to the Forestry Forum.  Any time that your business is totally dependent upon one person, vender, or business, you are really laying your neck out.  If he bellies up, you belly up.     It could be OK, but there are definite and very real risks involved.

What about a sawmill breakdown that last a week and you can not produce? 

If he made the only offer of .17, then did you make a counter offer?  Maybe he was in a bargaining mood.

 

[POSTONLT40HD]

If you saw for 17 cents, you will be kicking yourself in the tail for the whole year! In my area, 17 cents was years ago!!!!
Where do you live now?
What's the weather like?
Will a diesel engine even perform in COLD, COLD weather?
Will you have a shed to mill under in BAD weather?
Do you have other equipment to move logs?

A job like you have explained seems like a great opportunity! But It's worth a try to get this job without a contract. I think twice EVERY TIME i sign my name.

[Magicman]

Thinking back, my first saw price in 2001 was $175 per Mbf.  That's 17.5 cents and 11 years ago.

[POSTONLT40HD]

And that was with a hand saw.

Sometimes even todays milling prices are not enough!!!!

[redbeard]

You might want to talk with some baker mill owners and tell them the average diameter logs you will be doing. Log handling vs blade in the wood can really knock profits down. Especially on the bigger hydraulic mills. .17 would be risky to buy equipment and make a living.

[Norm]

Short answer is no.

[woodmills1]

and u need to make the other 17 cents on the bark and the sawdust

[Ron Wenrich]

When you load the trucks, are they containers?  The loading of a container truck is a lot trickier than a flatbed.  We load trailers with a log loader and a front end loader.  You need something that can push.  We also charge to load containers.

I think you're too low for a band mill operation.  A circle mill might be able to do that at that price, but you would also need a crew of some type.  Your waste will give additional income, depending on how you handle it.  But, the income stream isn't necessarily constant.  Does the entire log get sawed into boards or are you sawing cants out of the hearts? 

You need to get some more information on the breakdown of the logs, how its to be loaded, what product is to be sawn, and what happens to the stuff they don't want. 

[Brucer]

A fully loaded LT70 will probably do it -- if you have the people. I would guess you will want 3 helpers to keep up that level of production. The most productive mill in the world does you no good if you aren't able to deal with all the material handling, waste, byproducts, etc.

My operating expenses for a hydraulic LT40 with a 28 HP gas engine came to $0.17 per BF in 2010. That included a few fixed-cost items like insurance so the number will be less at a higher volume. However, it did NOT include depreciation on the equipment.

I charged $0.35 for several years. Last year I raised it to $0.40.

The 3500 BF/day DanG mentioned assumes you're able to saw 5 days a week. But you will have to allow time to service the mill and do repairs (yes, even new equipment breaks occasionally).

If all the logs are sound, figure on 100 cubic feet per day of slabs and edgings. What are you going to do with it? How are you going to handle it?

Figure on about the same amount of sawdust. Same questions -- where does it go, how do you get it there?

Multiply those numbers by 250 to see how much you'll have to deal with in a year.

You will need space. Lots of it. You will need to receive logs, scale logs, store logs. You will need to accumulate piles of wood, probably sorted by size and species. You will need to assemble loads.

DanG is right on about the tractor. I'm using a Cat 910 articulated loader and I would not take on that volume of work with my machine alone. I'd want a bigger machine, probably a Cat IT18 or equivalent, plus a log grapple, forks, and probably a bucket.

If you offered me that job now, but at $0.40 per BF, I would say what Norm said -- "No". Give me a year at a much lower volume and I would then know whether I could handle it or not.

[Kansas]

The numbers just won't work. Its one thing to buy a WM and equipment, develop some good markets, and when you don't have anything to do, cut something for less money to keep the help going and make payroll. You don't want to start from the less money thing. You need some good margins and money for at least some products. Being dependent on one customer is a recipe for disaster. So many things can go wrong. Even if it all went right, It wouldn't work. "all went right" only happens in the sales brochures.

[customsawyer]

I will have to say that I run a LT70 cut a little bit more wood than you are talking about per month. I charge a little more per bf and have less of the extra work you will have and some months it just don't work. I don't have to unload or load any trucks and the logs are brought to me already cut to length. Will you have to stack the lumber on stickers? That will take some time.