Author Topic: would you do it? (Read 1820 times)

dunmakinbabies · « **on:** January 19, 2012, 10:30:26 am »

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 · « **Reply #1 on:** January 19, 2012, 11:13:17 am »

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

MotorSeven · « **Reply #2 on:** January 19, 2012, 11:22:19 am »

.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 · « **Reply #3 on:** January 19, 2012, 11:25:29 am »

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 · « **Reply #4 on:** January 19, 2012, 11:33:22 am »

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 · « **Reply #5 on:** January 19, 2012, 12:17:20 pm »

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 · « **Reply #6 on:** January 19, 2012, 12:21:49 pm »

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 · « **Reply #7 on:** January 19, 2012, 12:45:30 pm »

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 · « **Reply #8 on:** January 19, 2012, 01:31:23 pm »

Quote from: DanG on January 19, 2012, 12:17:20 pm

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 · « **Reply #9 on:** January 19, 2012, 03:19:52 pm »

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 · « **Reply #10 on:** January 19, 2012, 04:08:25 pm »

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 · « **Reply #11 on:** January 19, 2012, 04:21:48 pm »

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

POSTONLT40HD · « **Reply #12 on:** January 19, 2012, 04:49:51 pm »

And that was with a hand saw.

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

redbeard · « **Reply #13 on:** January 19, 2012, 05:04:17 pm »

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 · « **Reply #14 on:** January 19, 2012, 05:23:49 pm »

Short answer is no.

woodmills1 · « **Reply #15 on:** January 19, 2012, 05:43:22 pm »

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

Ron Wenrich · « **Reply #16 on:** January 19, 2012, 05:57:44 pm »

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 · « **Reply #17 on:** January 20, 2012, 01:49:24 am »

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 · « **Reply #18 on:** January 20, 2012, 04:23:32 am »

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 · « **Reply #19 on:** January 20, 2012, 05:32:59 am »

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.

DrDialtone · « **Reply #20 on:** January 20, 2012, 11:36:58 am »

I,m relatively new to the sawing game about 7 years now. If someone asked me I would try it in a heart beat. ( of course with a helper who knows their way around a mill). In my area we charge closer to .20.

dunmakinbabies · « **Reply #21 on:** January 20, 2012, 01:29:06 pm »

Ok guys, you have all convinced me! I dont want all my eggs in one basket either. So here is my plan. I'm gonna call him and tell him ill do half what he wants for twice as much? The going rate around here seems to be .20-.25 (had someone make some calls yesterday for me) One guy went on to say it should be.30 or better but the menonites are driving the price down. Im sure that could be a topic of its own on here. Anyone else have that problem?
So when this deal was presented to me the rate was what it was. I tried to get more he would not budge. So we will see where this goes. I have done the numbers, with one person i could make money. You all say ill need atleast two more. Well there goes the profit.
Ill try to answer some of the questions asked. The logs were to be delivered on a self loader from a log yard. So the they would be prescaled and i would not need to unload them. All by product would be mine. Sawdust would go to a landscape supply company. They mix it with the top soil i guess. The slabs would also be mine too, no home for them yet. I know some of the other millers sell them for fire wood around here for $30 cash a pickup load. The lumber would be stacked w/out stickers. It goes to a grading facility there it is sorted than put in the kiln. The material going out would be loaded on a flat bed, with a hitchhiker so i would not need to load trucks either.
Anyway a board foot is a board foot weather you saw 1 of them or 3000 of em. They should all pay the same is the drift im getting.
Thanks for now guys! I really respect all your knowledge.
dun

dunmakinbabies · « **Reply #22 on:** January 20, 2012, 01:32:16 pm »

oh ya one thing, diesel engines run here everyday 365

Magicman · « **Reply #23 on:** January 20, 2012, 01:52:32 pm »

Quote from: dunmakinbabies on January 20, 2012, 01:29:06 pm

So the they would be prescaled....... dun

You just made more alarms go off! Saying that the logs are "prescaled", does that mean that you were going to be paid for the scaled logs or scaled lumber? There is a very big difference.

dunmakinbabies · « **Reply #24 on:** January 20, 2012, 02:05:09 pm »

What comes off the mill. He would want a tally faxed every wed. so the funds can be wired by friday.

customsawyer · « **Reply #25 on:** January 20, 2012, 05:41:57 pm »

You are raising a lot of eye brows so be careful. I will not tell you to not do it just make sure what you are getting into.

Peter Drouin · « **Reply #26 on:** January 20, 2012, 07:24:42 pm »

I will not tell you not to do it , but I think 4 men can do that much BF in a month but not 2. thats a lot of work with no time for break downs. what happens if you get the flu for a week and cant work.and all that equitment will cost at least $ 150,000. don;t for get all the paper work too for the IRS, workers comp ,billing, and the fellow that will show up that want you to cut his 2 logs

it all takes time. maybe at .35 for the pine and .45 for the hard wood. I tryed to sell slabs for 35.00 a truck load I sold 2

and if you try to give them away you will bring in men that might come to see you when your not there.then you might have to buy a another mill because your lt70 is gone. I lost 2 chansaws I chip every thing now

FeltzE · « **Reply #27 on:** January 20, 2012, 07:27:49 pm »

Excellent points from all,

Add in a permanent facility Roof, floor, electric, and lights MINIMUM (3ph power) you are going to be working in the winter, dark and rain.

Are you going to be shipping to a kiln? Expected to airdry on sticks? Yard how many MBF of logs and or lumber?

I'd recommend running a full log debarker and metal detector in your plan as a single piece of tramp metal stops (STOPS) production on a band mill until you change the blade.

Budget in extra material handling maybe a prentice loader? How about a dump truck for sawdust and bark(mulch)? Resale of the byproduct may be the difference between breaking even and making a profit.

Add in a hog or shavings machine and time to run it and handle that product from edgings and slab.

Full time ops will require at least 3 personnel on site, one running your headrig, one running gopher work (anything from stacking logs on the deck running the debarker, removing lumber packages strapping and general maintenance, and another sorting/stacking/edging. Plus you need backup for a sick day.

Don't forget OSHA compliance on everything and safety training

3500bf/day is achievable on thin kerf bandmills with an edger, but I think you are bridging to something bigger than 1 1/2 inch blade technology (IMO)

I'd look at a double cut mill or 6"blade based headrig. Faster through put.

Budget in log decks and lumber live decks you will need them over time.

I've got an LT 40hdg35 with a baker edger, with 3 people clean optimum sized logs I could make 3500' in 8 hours with no time for maintenance, sharpening, or cleanup. Everyone would be beat at the end of the first week. I personally would not attempt a contract of 70,000/ft per month with a 1 1/2inch band mill of any manufacturer. It just isn't productive enough. Select sawmill's website has some layout information and good videos, Woodmizer does as well, call them directly and have them work up a quote and recommendation for a sawline which supports that production. Don't forget the saw shop/sharpening and daily maintenance issues.

In closing, could you support 3 employees (assuming you are one of the 3) equipment payments, the 3 phase electric bill, diesel, and wear parts (blades, tires, lube, misc) and insurance on $11,900 (70,000bf x 0.17 cents) a month?

Eric

I'm way too negative these days!

Meadows Miller · « **Reply #28 on:** January 20, 2012, 07:40:47 pm »

Gday

Ill chime in and say I would think about it at say $180 to 200 per thousand plus any taxes or govt charges

Either with a Circular Mill Like a Meadows and a manual carriage would do it standing on its head and that would be multi edging on the mill with two men and only set you back about $38.000 plus Saw and Motor your where talking about shipping costs that setup would fit into a 20' container vs a 40' for a Bandsaw mill that been said a Lt40 super diesel could do it to with and edger but you have to think you are spread over two sawing units a WM and edger will runt at around $50 plus fright then

so you would be looking at repayments off say $1500 a month on the mill plus maint and upkeep

Both types off mills have their place and Ill make afew asumtions and more info is needed

the 70mbft is a rough figure will he take every stick you can cut if you have a good month rite upto say 120mbft a month will he take it

? Average log dia is going to be on the small side say 8" ?? with your log handling

It sounds good that you get to keep the waste you have to remember that you will be getting about 110 cubic yards off solid waste edgings and 145 cubic yards off loose sawdust here we get $15 to $20 a yard for sawwdust and Garden/Biomass chips go for $25 to $55 a ton your idea off getting rid off it for firewood and will the landscape co take that volume of sawdust ?? this is where your profit will be if you can get rid off every stick off waste and every bit off sawdust

say at $20 a yard for the firewood as is in large strapped bundles your looking at an extra $2200 there and sawdust say at $5 to $10 a yard $725 to $1450 per month there is between $2925 to $3650 per month if you can market it well

There is also a growing international market for clean sawdust and shavings for wood pallets the main markets being Europe and China but thay want it dried to <20% but there is gear on the market to do that take that into consideration

Now Consistent Work and getting Payed Weekly is the crutch of the matter

I always say its better to have a bird in the hand than two in the bush

and when you take into consideration that the International average rate for sawing is coming in at around $200 per thousand or about $90 a M3 Aust is more like $130 per m3 and China and Russia are rite down there at like $55 m3 Now you could sit around charging $300 to $400 per thousand and have spasmodic work where you might have a mill payment one month then nothing the next or you can do them when you are ahead or on your sat morning if you have have that money free n clear

You will be making money with the contract sawing not much but a good honest living IMHO

There is a young bloke on here Rocky from Idaho who brought himself an old handset mill and then added a larger belsaw to the mix to cut beetle kill pine into large resaw cants for pallet and he's doing the falling,skidding,Sawing and loading as a portable mill in the bush loaded on the truck for $250 to $280 per thousand and they are cutting 10 to 12000 bft per day with 6 people all up and he is still at it i think after about two years now is he making mega bucks on the work he dose no but is he having a Crack using a resource that is going to waste and providing ongoing work for 5 people and supporting their family in an area where jobs might be hard to find and getting on in life Yes !! I think he knows its more about numbers per unit cost rather than a strait out what you you get per bft My Hats off to him if he is still at it

Its A Numbers Game

Regards Chris

shelbycharger400 · « **Reply #29 on:** January 20, 2012, 08:20:19 pm »

it sounds like a fishing game to me... a buyer/exporter trying to get something done cheaper than another guy.
Ive delt with that game before... guy gets a quote... then says i can get it done cheaper than that..,

Meadows Miller · « **Reply #30 on:** January 20, 2012, 08:33:13 pm »

Gday

Shelby Just brought up another good point International Shipping aint Cheap and theres a reason they want it milled before it leaves the Country Of Origin

Weight and Volume they can fit more into a container if its sawn dried and dressed vs Logs and Green Sawn Timber will have you a little under payload in a 20' but in a 40' you would be overweight unless its sawn and dried alot also depends on the port they are shipping outa and freight rates and what volume off containers they have avalible to them . I would try them at $250 per thousand and start from there

Regards Chris

WH_Conley · « **Reply #31 on:** January 20, 2012, 08:55:33 pm »

Maybe you have figured a new angle on this that us old guys that have been doing it for awhile have missed. I am glad for you.

I figure I can saw for 17 cents, or, put wood in the stove. They both pay the same. At one I stay warm and comfortable, at the other, NO.

What looks good on paper does not always work in the real world.

Meadows Miller · « **Reply #32 on:** January 20, 2012, 09:30:30 pm »

Nah no new angles on this Bill

Im just coming in on 20 years worth off sawing experience doing just about everything at the start off next year only about 40 million bft so far and a hell of alot more if I had been doing it fulltime

You can shaft yourself and be shafted rite through the whole spectum low value rite on though to getting $1;50 a bft for sawing

So I have just a little bit off experience and the real world is always hard Mate

Meadows Miller · « **Reply #33 on:** January 20, 2012, 09:57:38 pm »

Ill add to this A fair few years ago I was sawing at a small circle mill and we got asked to do export cants & boards out of the wings it was only a small mill with three of us including the owner and the owner didnt know buggerall about sawing ! He wanted to do the trial run and to play it safe he wanted to do it on a Hourly rate to cover the mill now we came up with about $175 per hour wich he was more than happy with with we cut their trial run off two containers about 24000bft in about two 10 hour days so $3500 for the two days so that came in at about $140 per thousand he then thought he was getting ripped off and wanted to put the rate up We never did get that job and I ended up leaving as he was up n down with work and he is no longer running a mill

everything is relative

The big issue here I see is board thickness not so much cutting the 6/4 but the 4/4 lumber if you could take the 4/4 off the sides the the main cant gets cut into 6/4 it makes a difference than if they spec orders off each size

Regards Chris

Brucer · « **Reply #34 on:** January 21, 2012, 12:46:34 am »

Quote from: Magicman on January 20, 2012, 01:52:32 pm

You just made more alarms go off! Saying that the logs are "prescaled",
does that mean that you were going to be paid for the scaled logs or scaled
lumber? ...

I can't speak for the rest of the country, but here in BC the scaling rules are very different from in the US. Logs are sold by the cubic metre of firmwood. In other words, the entire volume of the log is scaled, with a deduction for any unsound wood. The buyer and seller negotiate a price per cubic metre for a given size of log. After that, it's up to the buyer to get the most value out of the log.

I pay a flat rate per cubic metre for 12" to 15" tops, 34' to 52' long. If I want something bigger, the rate goes up. All the logs I buy are pre-scaled.

Stumpage fees are based on the same figure. All scaling is done by private individuals and scaling courses are put on by private firms. However, the Ministry of Forests check-scales the loads periodically and their number must be within 3% of the contractor's scale.

As long as you know how the system works, t's no better or worse than the US systems -- just different.

Dun ... work out the volume of slabs and edgings you'll be generating each month. Have a plan for dealing with them.

I once had the local firewood guy offer to take mine away to make campfirewood bundles. It sounded great. I'd just drop the slabs on a set of 4x4's on 16 inch centers. He'd come in with a chainsaw, buck them to length, and have his helper load his truck.

Then he asked me to put the edgings in a separate rack. He was going to strap them with ratchet straps and cut them to length at his site, so it meant I'd have to load his truck. Then his truck broke down and I ran out of room to pile the slabs until his truck got fixed. Then he bailed on me, with no notice, leaving me with a rack full of edgings and a huge pile of loose slabs.

Now I make quarter cord bundles and pile them up to sell as firewood. I have room to store 1-1/2 year's production if they don't sell. In 2010 I needed that room. In 2011 I sold everything and at the end of the season was selling slabs green off the mill. I charge enough to cover the strapping, the loader, and my time. This works for me, but it takes time away from sawing.

One of my mid-size competitors ended up buying a whole-log debarker ($100k) and an industrial chipper ($30k) and selling the bark as mulch. The chips went to the local pulp mill.

Another mill down the road for me used to have it ground up for hog fuel. The income just paid for the grinding and loading. Last year the demand for hog fuel disappeared when Natural Gas prices dropped, so that mill has a serious problem.

Everything that comes off your mill has to go somewhere, and it has to get from your mill to whatever is transporting it. That's what sucks up your time.

dunmakinbabies · « **Reply #35 on:** January 21, 2012, 09:35:35 pm »

Quote from: customsawyer on January 20, 2012, 05:41:57 pm

You are raising a lot of eye brows so be careful. I will not tell you to not do it just make sure what you are getting into.

I hope that I have not offended anyone.

Sorry if i have.

beenthere · « **Reply #36 on:** January 21, 2012, 09:40:48 pm »

I didn't gather he was suggesting that you were offending anyone by the "raised eyebrow" comment.
I think there is genuine concern that you are racing toward a cliff, so to speak, and no one wants you to disappear over the edge.

At the same time, we are impressed with your ambition so are cheering you on and don't want you to fail.

That is my take.

I've seen business's get all geared up to meet some demand for sales promised to them, only to learn that down the road the markets just are not there.

A local cabinet manufacturer made high class cabinetry for doctors offices and the like. They were contacted by Sears to produce all the cabinetry for their catalog and store sales which would initially be big volumes and pretty substantial volumes per month. All was under a tight contract. The business built a huge facility gearing up for this additional production. Found out that Sears started telling them they didn't need the cabinets that were ready to ship. But the business said the contract states you will buy so many units a month. Sears said "go ahead and send them if you insist, but we will reject them per our authority also written in the contract". Bottom line, the local business just about folded up, but were able to survive on another new product line. Sears would repeatedly make such deals with producers, then let them go under.

Magicman · « **Reply #37 on:** January 21, 2012, 10:41:37 pm »

You asked honest and genuine questions. I have not seen any of your questions as offensive or trivial. Because of this, you have sparked an interest in yourself and your proposed business opportunity. I am sure that many of us have looked inward at our own business operations and many of the responses have been based on those successes, failures, and concerns. You may not hear the exact answer or response that you were expecting, but each has been a building block. The decisions will be yours.

FeltzE · « **Reply #38 on:** January 22, 2012, 06:46:33 am »

Hey, I'm very negative, but then again I see 4-5 absolute sawmill auctions advertised monthly of mills going out of business.

I want to see you succeed so pointing out the hard parts lets you plan to overcome.

Eric

zopi · « **Reply #39 on:** January 22, 2012, 09:46:55 am »

I know a bunch of guys that mow grass. That is all they do...and make six or seven hundred a day...and they do not work too hard....you are talking alot of bone crushing labor done with very expensive equipment for not much money.
Remember, the production specs given with new equipment, is very often not sustained production averaged over very much time...
Price is too low for the volume of work. Seventeen cents is too low even or a hobby guy, who is not into making dollars....and when you ramp up the production, you inevitably increase equipment costs, sometime exponentially, and you certainly decrease the mean time between equipment failures....what happens when a key piece of gear dies and you are on a deadline...
Just my relatively inexperienced opinion, but that sound like a two mill, two forklift, two edger, two truck deal with no outlet for quite a few tons of waste debris per day...softwood waste debris at that...slabs can be valuable, and so can sawdust, but it is a slim margin.

MotorSeven · « **Reply #40 on:** January 22, 2012, 10:13:58 am »

I don't think anyone here is telling you not to do business with the guy(although I would spend some time "checking him out"). We are giving you suggestions to modify your "plan". Like Majic says, the decision is yours.

My thoughts are not to buy new: If you buy new you have a bunch of depreciation if you have to sell the equipment down the road. You can buy two used LT40's in good shape for the price of one new one, then if you ever have to sell you won't loose your shorts. Same thing with a tractor/loader. Markets right now on heavy equipment is at all time low...there are good deals everywhere. Heck, you can even lease a loader machine to get you through the first couple of months. Once comfortable...buy.

As mentioned the weather is a problem. Do you have a building to operate in or store lumber? Mill sheds are a must for a full time operation and they take time to mill/build.

Opportunity is knocking, we just want you to cover all the bases before jumping.

ellmoe · « **Reply #41 on:** January 22, 2012, 10:43:30 am »

Having only one customer is a no-no to me. I'd want close to twice the $.17/bf you mentioned. Less than that, I am sure I'd be broke within the year. Maybe somone else could live at that rate, but not me.

Mark

FeltzE · « **Reply #42 on:** January 22, 2012, 11:22:34 am »

If this is inappropriate just flag the post.

What is the "commercial rate for sawing" Not that I ever found a "commercial mill" interested in small jobs. We by "commercial mill" standards are a legitimate business but not "commercial throughput" sawing only 1-2mbf per day and not sawing daily. We operate at a contract rate of .21 when sawing for others.

I can't imagine expecting the 3500+ft per day on a 1 1/2 inch bandsaw not that it can't be done. But why operate with no margin for expansion, surge or down time?

Eric

customsawyer · « **Reply #43 on:** January 22, 2012, 01:10:03 pm »

I was not offended in any way. I was saying that there is some of us with different levels of experience and I don't know of any that is sawing as cheap as what you are talking about doing. I am cutting in a very similar job as what you are looking at except for the fact that they are paying me more and expecting me to do less than what this man is asking of you. As to the production of a LT70 there is no problem getting that level of production as I have produced that much in a week on several occasions. Remember the milling is the easiest part of the work. The hardest work comes in all the other things you have to do to be able to mill. If all you have to do is mill that is one thing but when you have to unload/load trucks and deal with all your waste plus all the other things that comes with milling I would not be shocked if you don't have equal amount of hours in doing all the other things as you do sawing.

Cedarman · « **Reply #44 on:** January 22, 2012, 02:30:17 pm »

So far everyone is looking at pricing from the sawing end and what breakeven costs are. Take a look from what the final product is worth to your customer setting on his truck. What is he getting out of the product? What are his costs of drying, grading and shipping. What can he pay to have the wood sawn to his specs? If you can get some sort of handle on this, you may be able to figure how much you can ask. If his margins are small, you will not be able to raise your price. If he has big margins, then you might share in the wealth. Research all sides of this business.

dunmakinbabies · « **Reply #45 on:** January 22, 2012, 09:34:03 pm »

Quote from: Cedarman on January 22, 2012, 02:30:17 pm

So far everyone is looking at pricing from the sawing end and what breakeven costs are. Take a look from what the final product is worth to your customer setting on his truck. What is he getting out of the product? What are his costs of drying, grading and shipping. What can he pay to have the wood sawn to his specs? If you can get some sort of handle on this, you may be able to figure how much you can ask. If his margins are small, you will not be able to raise your price. If he has big margins, then you might share in the wealth. Research all sides of this business.

Yes margins are tight, I tried to negotiate more money today with no prevail! But here are some numbers he gave me. Pine $150 rock maple $300 per M3.Ok so here is the break down, Thats for the logger, sawing fees, grading/ drying and trucking to kiln. NOT ALOT TO BE SPREAD AROUND! For those who dont know there are 423 bdft in a M3. Than after that he pays $60 per M3 the ship it to India. Than he makes $25 per M3? If my math is right thats a little under .06 a board foot. I guess what it comes down to hes not making much either so no one else will in the process.
I knew the numbers were tight thats why i asked you guys what your thoughts were. Now weather these numbers he gave me are the truth or not is yet to be known.
There were many sleepless nights for me on this matter. But thanks to you all ill sleep well tonight. Originally when I got the idea to buy a mill i wanted a smaller hydraulic mill. Planed on working mostly by my self and my oldest son when he could. I think, no i know thats the rout im going to take. Keeping it simple and maybe work it into something bigger. I will say it truly amazes me the wide range of rates that have been thrown around here in the past few days.
It has been a dream of mine for years to own a mill and i will have one before the grass is green. hopefully! I have found some smaller markets locally and living in a small town word gets out people have been askin me when i can saw their logs. So we will see where it all goes.

shelbycharger400 · « **Reply #46 on:** January 22, 2012, 10:05:31 pm »

for one... i think the numbers he gave you were false, not shure on the other numbers but i know it costs way more than $60 to ship a container.
heck it cost 50 bux to ship 60 lbs from here in mn to tennessee.
big companies can survive shipping and only making a few cents on the dollar.. when you take it times say
3500 board feet per day times 365 times 6 cents equals to $76650
I know he is shippin way more than that. id say proceed with caution, they will only tell you what they want you to know

Ianab · « **Reply #47 on:** January 22, 2012, 11:21:33 pm »

Quote

i think the numbers he gave you were false, not shure on the other numbers but i know it costs way more than $60 to ship a container.

Not necessarily. That's $60 per M³. How many M³ can you cram in a 40ft shipping container? Then it's $3-4,000 to get that moved to pretty much any major port in world.

Based on that his freight numbers are along the right lines.

This is how even cheap stuff like construction pine can be shipped from NZ to the US, probably for less than it can be shipped 1/2 way across the US.

Ian

DouginUtah · « **Reply #48 on:** January 22, 2012, 11:29:23 pm »

Quote from: dunmakinbabies on January 22, 2012, 09:34:03 pm

But thanks to you all ill sleep well tonight. Originally when I got the idea to buy a mill i wanted a smaller hydraulic mill. Planed on working mostly by my self and my oldest son when he could. I think, no i know thats the rout im going to take. Keeping it simple and maybe work it into something bigger.

You are lucky Dun. You have learned one of the most important rules of being a sawyer. Sometimes you have to say NO.

dunmakinbabies · « **Reply #49 on:** January 22, 2012, 11:41:48 pm »

Ian, you can fit 22,000 bf in a 40 footer. 52m3 x 60= $3120 per container.
70,000bf a month=165m3 x 60= $9,900 a month for shipping to India

Ianab · « **Reply #50 on:** January 23, 2012, 12:51:11 am »

Quote from: dunmakinbabies on January 22, 2012, 11:41:48 pm

Ian, you can fit 22,000 bf in a 40 footer. 52m3 x 60= $3120 per container.
70,000bf a month=165m3 x 60= $9,900 a month for shipping to India

Yeah, that's the sort of numbers I was thinking.

Ian

Kansas · « **Reply #51 on:** January 23, 2012, 05:43:00 am »

I think that is making a correct decision. A smaller hydraulic mill, maybe used is the ticket. Meanwhile you can research markets a little. Find out what maple and any other species are bringing from loggers. You might be money ahead to put in a smaller kiln and retail some. We sell hard maple for 2.80 a ft. Even if your area doesn't support that price, you would still be money ahead.

The figures you provided indicate around 71 cents a board foot. Minus the 6 cents is 65 cents. I would think a decent maple log would cost 30 to 40 cents delivered to your place. The math don't add up.

stavebuyer · « **Reply #52 on:** January 23, 2012, 06:09:25 am »

I think you made the right call. I don't think .17 will come close to covering the expenses of operating a stand alone bandsaw mill and support equipment. The large bandmills mills that saw 50,000'+ in 8 hours can't run on that margin. With the overrun on a narrow kerf mill added in thats the exact reason you were offered a 5 year run.

You may have made a good connection in the process and I woud think more along the lines of possibly selling him lumber. Your plan would come a little closer if you could benefit from the mills over-run.

FeltzE · « **Reply #53 on:** January 23, 2012, 06:17:26 am »

Lower profit margins require higher througput to make you your dollar, bigger equipment, faster saws, fewer employees. Over all higher effeciency.

Banking on just one income source is dangerous, (I'd need a backup plan) If he slows down you can't make payment and payrole.

Our local commercial sawmills have been closing for the last 10 yrs here in NC, although there are some north of me they are much further than they used to be.

Eric

Norm · « **Reply #54 on:** January 23, 2012, 07:16:09 am »

A couple of times I've jumped in with both feet on a new business, each time I went belly up.

When I did as your going to do I've succeeded. Good luck.

alpmeadow · « **Reply #55 on:** January 23, 2012, 09:01:49 am »

Gee this was a good post with alot of solid input. I believe the right decision was made with this support. We have too, a partime custom milling LT40G28 hydraulic WM operation. Between custom vs commercial milling operations there are alot of pluses and minuses, and it needs to add up cost, time and revenue wise. Handling yard operations with storage, (un)loading, side lumber, waste byproducts etc are usually cost and time items that are not often fully accounted for, which we are still wrestling with. We custom cut fir, cedar and pine sourced from our own woodlot. Recently custom cutting for local building contractors, has worked, knowing that they have to be competitive and profit too. Keeping it simple, parttime and flexible has worked for us. Cutting approx 30 m bdft last year has been a good year for us.
Thanks again for being woodwise.

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