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The future of small sawmills, sawmill manufacturers and milling ...?

Started by LOGDOG, February 25, 2010, 05:30:16 PM

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LOGDOG

I'd be curious to hear thoughts from our members on what they feel the future holds for sawmills, sawmill manufacturers, and milling in general. I know we have a presence here from some current and past sawmill and wood processing equipment related manufacturers. I think it would be especially interesting to hear their take on things as they stand now and what they're expecting going forward. I know they, like virtually everyone else in most other businesses, have had to feel the pain of the last two years economy.

Personally, I feel like the future is bright for the small scale sawmill as long as it is coupled with good business sense. When I look at the value that we can provide as a small scale operation and the components that I have made and seen others here make (some truly amazing craftsman here) it re-affirms in my mind that there will always be a place (in every economy) for good value and hard workers. When I look at companies like WoodMizer (and others ...TimberKing for instance) who grew through times that were much slower growing economically than what we see today and also witnessed high unemployment and lagging real estate sales, it reminds me that even when times are tough there is opportunity there. In fact, unemployment may have been (in many cases) the driving factor for the purchase of some individuals first mills.

One of the reasons I'm starting this post is because I think it's easy to let what's going on globally effect how we think locally. It can be depressing and cause us to lose our conviction regarding what it is we do and set out to do when we began our business. Reminding ourselves of the times mill manufacturers and owners weathered in the past and focusing on the value we provide to customers helps rejuvenate our convictions for why we're in this business - whether it be small scale or large scale.

I know I personally get auction notices nearly everyday for new mills and woodworking shops going under and being auctioned off. Most of them are fairly large scale though. For someone who was looking to tool up and had some cash on hand it seems like a less expensive time to do so with less competition in the immediate future.

What are your thoughts out there?

red oaks lumber

what i'm seeing now (this past year) people are spending money and, they are going to more of the small buisnesses. it's like the mind set is we are going to give our money to the small guy not the big ones. iv'e heard that from my coustomers over and pver.
i don't like the phrase "new economy" but it really is that how people spend money, their thought process i think what we knew about day to day life is changing alot good, some not so good. i think the future for small mill operators is very bright starting right now. all that we read about plant closures, layoffs  that has been mostly larger more leveraged companies, the small to mid size seem to be moving forward. for me this being my 12th year in buisness 2009 was our best year with 2010 starting out even better so go figure.
the experts think i do things wrong
over 18 million b.f. processed and 7341 happy customers i disagree

LOGDOG

That's awesome Red Oaks. People should know that Spooner (where you're located) isn't exactly a metropolis either is it? Just small town America. Glad to hear things are good up your way.

taschmidretired

  There should be a lot of of talk, opinions, and foresight coming in from everywhere on this topic.  And I want to read them all and contibute some.
  I have found only one thing that has truely gotten me through the roughest times, including impending failure: "If you get up in the morning and keep putting your pants on"  you will inevitably pass through that time and into a better one. Putting your "pants on"  allows a person to go out and face the fact that things may be changing, and figure out a way to capitalize on it.  Doing it "in the morning"  gives you the best chance to get their first. Remember when everyone is losing chips, someone or something else, is probably collecting them.  
Stay thirsty my friends.  T A
"Until I had turned Thirty Five, the longest I had ever stayed in one place was my Mother's womb."

"Beware of the man that shoots his arrow first, and then paints a bulls eye around it after."

Chuck White

I've only been associated with small-scale sawmilling for around 5 years now and this will be my 3rd year with my own mill.

It looks to me like it will be good for years to come now. 

I think what will sink small-scale sawmill/sawyers is when they try to go too big, too fast!

Just keep plugging along and stay intune with the local economy.
~Chuck~  Cooks Cat Claw sharpener and single tooth setter.  2018 Chevy Silverado and 2021 Subaru Ascent.
With basic mechanical skills and the ability to read you can maintain a Woodmizer  LT40!

sigidi

I think 'the economy' and how it's been represented in the media has put people in a 'ration-like' mentality so that has had a flow on effect making things even worse.

I figure there is business out there, opportunity to work can be found everywhere and people should stop thinking it's the end of things or we are all going to be in bad shape.

I heard a figure the other day about woodmizer selling something like over 40,000 sawmills, not sure if that is exact, but it'd be interesting to know how they have done in the past two years of 'global economic downturn' as it was called. I'd say they have still maintained sales... I know here in Aus Lucas advertised they had done better than a mill every 2 days - something like that can't remember specific number but remember working it out in my head thinking it wasn't quite 1 a day, but better than 1 every two days. I know here in town (pop. about 30,000) Lucas did a demo day a few months back, I was keen to go, get a look at a 10" and have a yarn with others of like mind. I didn't think of booking, (I mean it wasn't like dinner at a fancy restaurant on Valentines day or anything) thought I'd ring up in the morning find out where it was, have a lazy breakfast, stroll on over and spend the day talking about sawmills.... boy was I wrong!!! 75 people booked in :o :(

Logdog, I think you are right, it is a lot to do with mindset and general 'downward' thinking - doesn't do anyone any good.

Would be interesting to hear some 'figures' from manufacturers - I'm betting it would be good news in what seems to be an ocean of doom and gloom.
Always willing to help - Allan

LOGDOG

I think you're right Sigidi. I was actually thinking about WoodMizer specifically and how they've sold 40,000 mills. I would love to see a year by year tally of mills sold from the first to the most recent and then weigh that against what was going on in those years vs. this year. Granted not everyone can own a mill. From a sawmill owners standpoint that's a good thing. But as the results of that Lucas demo day show, there's plenty of interest from the buying public as it relates to sawmills and what they can make. It just might be that what they end up "buying" are the services of an existing mill owner to get them closer to making whatever project they're working on a reality.

Chuck makes a good point about trying to grow too big too fast. I'll add to that by saying that many spend money they need not spend buying new equipment, when solid, highly discounted equipment is available in the marketplace. Manufacturers may not want to promote buying used equipment instead of new because it could potentially void a sale, but they do gain the parts and blades business as well as service if they're in the business of providing such.

One other place that I think sawyers and business owners in general sometimes fall down is that they lose their conviction which is really what allows them to charge what they're worth and what they need to survive. I looked up "Conviction" in the dictionary. This was the definition:

con·vic·tion [ kən víksh'n ] (plural con·vic·tions)
noun 

Definition:
 
1. firmly held belief: a belief or opinion that is held firmly

2. firmness of belief: firmness of belief or opinion

You definitely need to know "why" you're worth the money you're asking for your product and service. The other day I found myself asking myself  :) "Can I do it "better" than my competition?" Since I own several businesses, I looked at that question in regards to each of them. Being brutally honest with myself the answers were surprising and enlightening as to which areas I should likely focus on and which areas I was potentially "out gunned" by much larger service providers. Surprisingly enough, custom millwork is one area that I could honestly answer "yes, I do it better than anyone around here and anyone most anywhere I've been". I may not be the fastest but I guarantee quality. That's worth charging more for.

I think now is a good time to spend money on developing one's self as well - as in knowledge and talent in your craft by way of education. The value add that you can bring to a project perhaps by providing consultative services may be the difference between you getting the job or not.




taschmidretired

 The Northeast Manager for Woodmizer told me at Boonville,NY ( Woodsman Field Days) last summer that US sales were keeping pace but that oversea's sales were down. I do know that TA Schmid Co. has seen the bottom in sales and from there everything is looking up!  I do know my support check has been improving this year over last year.  T A
"Until I had turned Thirty Five, the longest I had ever stayed in one place was my Mother's womb."

"Beware of the man that shoots his arrow first, and then paints a bulls eye around it after."


Magicman

Discounting 2005 (Katrina), 2009 was my best year.  I'm now beginning my 9th year sawing.  As folks tighten their screws and do more for themselves, they look for ways to save money.  My sawing saves them money.  Last year I dropped my sawing price $10 per thousand.  Not much, but I did it to make a point.  I tell customers that everyone is hurting, so I'm squeezing too.

Because of tight money and uncertainty, it may be more difficult for new potential sawyers to pull the trigger on a mill.  Startup takes time.  You have to find customers and develop markets.

I found out today that one of my "competitors" is "belly up" and has his operation for sale.  He put himself out of business sawing poor quality lumber, over pricing, and not keeping commitments.  Many of my customers were previously his. 
Knothole Sawmill, LLC     '98 Wood-Mizer LT40SuperHydraulic   WM Million BF Club Member   WM Pro Sawyer Network

It's Weird being the Same Age as Old People

Never allow your "need" to make money to exceed your "desire" to provide quality service.....The Magicman

campy

Thanks for broaching this very important topic.
A lot of things have changed in the last decade:
1)   Manufacturing had largely gone overseas
2)   The Internet has enabled us to cross train each other using text and multi media
3)   The Internet has enabled us to advertise at low cost and with great ease
4)   The banks have pulled liquidity/money  out of the economy
5)   There is an over supply of housing.   Houses are mostly wood.
Detroit is a ghost town and many other communities will be soon.  We are being devastated and our economy is in a scary transition.
It seems to me that the logical response is that we need to make and buy from people in our community.
What happens to the money that you spend at Wal-mart, the gas station or supermarket.
It leaves the local economy.  But if I trade with my neighbors we enrich each other and money stays in the local economy. 
That is how I feel we are going to survive this onslaught. 
We have to manufacture again and trade locally as much as possible.
We also have to vertically integrate.  By this I mean we need to use our wood to build finished products in our community. 
It is also very important not to borrow money.  Borrowing money is very dangerous to the small biz owner.   The reason I am still in business is that I did not borrow money.    I could use better equipment and that slows me down but I own it all.


Hilltop366

Well not being from or working and living in your country I'm not sure I can qualify my comments....but that has never stopped me before so here it goes.

I don't have cable or satellite tv but every time I do watch your big news channels I can't get over the brain washing repetitive style of broadcast that picks the subject of the day, week or month and hammer it at it's viewers until you can't stand to here another word so if the subject is a downturn in the economy then that is what gets hammered in to peoples heads. Some run around yelling the sky is falling and it makes "good" sound bites so that's what you see. Then people who are not effected by it (people who's incomes don't change)start spending less and it becomes worse. Seen this many times from growing up in the motel business where the largest % of our customers were from the US.
Note: not saying our news channels are any different.

On the subject of mill makers I have got a idea that thing are and have been a little slower, I've taken a few economics classes over the years and not once did any one say to lower your prices because sales are booming, I think in manufacturing it is some times better to a point to reduce prices to keep production levels up than lower production and cause a increase in production cost. Though a lot of auto builders seem to have had gone way past that point.

As with the motel business we had to change our direction and closed it a few years back (after 40 years) and made a large investment to convert it to apartments and it is going well. Just as some mill owners will have to rethink and reinvent there business but there will still be a demand.

LOGDOG

You make some good points Campy. Especially regarding the internet. Can't even tell you what I would have given to have a Forum like this when I was 17 years old starting out with my first mill back in 1992. I learned most everything the hard way. These days, you're right, we're in a position to help shorten that curve for each other. Add to it advertising and locating new markets for product as well as sourcing raw material.

I agree that a person needs to manage their debt responsibly. I liken business debt to a "business partner" that never shows up to work, but always shows up to get paid. If a person has to borrow the money for something it should be put to use in a way that will yield visible returns in a relatively short time period.

I know out tendency in this business is to think "housing" but we need to remember that the market for wood products is so much bigger than that. Perhaps while housing is somewhat soft it would pay to look at some of those other markets.

I also think you're right though about "using the wood to build finished products in our community". Spot on. That may require us as individuals to expand our abilities through education if we'd like to be part of that building process - take timber framing for example. Great application in the parks and recreation arenas locally but it may not be a talent we already possess.


Hilltop366

Quote from: LOGDOG on February 25, 2010, 11:28:27 PM
I liken business debt to a "business partner" that never shows up to work, but always shows up to get paid.



O man that's a good one, mind if I borrow it?

LOGDOG

It's all yours Hilltop.  ;)

Doesn't that just about sum it up though?

Hilltop366

Yep it does...... but I won't use it tomorrow when I go into work long enough to make my pay cheque. ::)

sgschwend

The future for small scale sawmill business can be quite varied.  Have you thought what the capacity of all these mills together could be?  I did a calculation once it was a very large number (500MM/yr), I estimated that there is something like one sawmill for every 10,000 people.

We should find a way to become one organization so that we would have the power to solve the grading stamp issue.

In my area we are making inroad to the large beam market.  And why not?  Large natural beams (from my understanding) are not kiln dried due to their size, hence there isn't a good reason to purchase beams from a large mill.  On the other hand there are lots of good reasons to purchasing beams from a small mill, such as high quality, able to see the product before delivery, able to talk directly to the sawyer to name a few.  The current style folks are looking for now is a rough sawn beam, our success are setting the standard.

Don't fool yourself though, house starts are down, that has a big effect on the industry, be it siding, flooring or stud.  Certainly the more affluent folks still have the bucks to do anything, but there are a lot of basic Joes that don't.  The crash in the world economy was started with the failure of the home loan industry, housing drive the world economy!
Steve Gschwend

sjgschwend@gmail.com

Coalsmoke

Most mills up here have slowed down for these first two months of 2010 vs 2009. So, time will tell. Two more mills in the area have gone under that I have heard about since the start of the new year.
Visit Coalsmoke's website at www.coalsmoke.com

2008 Norwood Lumber Mate 2000 with Honda 20HP engine.
White 2-60 Field Boss > 65HP Tractor with loader.
Husky Chainsaws 353 and 395XPG heavily modified.
Loving wife who endorses all of the above :)

Brucer

I have two serious competitors. One's in the US and offers kiln-dried timbers -- they have a huge radio-frequency vacuum kiln and can easily handle big timbers. The other one is about 2-1/2 hours drive away -- they have a Hundegger that will produce finished timbers with all the joinery already cut.

The US firm is in trouble. They've had to restructure their line of credit and are having cash flow issues. The local firm is offering pre-cut timbers at stupidly low prices, probably because they need business to cover their overheads.

My overheads are pretty DanG small -- cost of insurance for the mill and the truck, depreciation on the mill, cell phone and bank fees.

People might save money on a big order by going to my two competitors, but what happens when they miscut a piece? Or leave one off the cut list? When someone orders from me, it's first-come, first-served. But if they screw up a timber or forget to order one, I'll always squeak them in as soon as I can. That way they aren't hung up waiting for wood.

And, yes, last year I lowered my prices for the small contractors. I always made a point of telling them I'd done it because I wanted to make it easier for them to get work in hard times.

I'm getting requests for quotes about 6 weeks earlier than normal this year. We've had so little snow in the West that it looks like mid-April right now. Everyone's thinking "spring" already, so the contractors are picking up work earlier than usual. Of course if we get the normal March and April snowfall it's all going to come to a grinding halt :(.

My best customer died last year (brain tumour at 43) and his widow is going to wrap up their timber-framing business. But one of their former workers is planning to start up a TF business to fill the gap. I'm helping him out with some of the administrative stuff, because he likes to buy local.

When I look around the region, it's the big outfits that have packed it in. The mid-sized outfits are hanging in, and sometimes re-organizing. The little ones like me got weeded out last year.
Bruce    LT40HDG28 bandsaw
"Complex problems have simple, easy to understand wrong answers."

bandmiller2

Its a form of natural selection,but cruel,the weak and foolish that survive and prosper in the boom times will get winnowed out.Well managed and conservitive co.'s will struggle yet survive and reap their just rewards when this subsides.Its a chance for the small and lean to survive when the big boys fade away.Frank C.
A man armed with common sense is packing a big piece

Coalsmoke

Below are a few thoughts I am currently writing up for my website, and I figured they fit pretty well in this conversation.

"The thing with a small sawmill business is when sizing up the field of competitors, it should be remembered that there is a lot of diversity out there and quite often a lot of the competition may be an exception rather than the norm. Some people will have a good situation handed to them (ie. their relative is a lumber broker) and will always do ok no matter how smart or stiff their competition is; some may be dumb as a stump, but if they are bull headed enough they may very well keep themselves in business; and I know of some in this business that have been eating beans for 20 years because there is just enough money to keep the taste of success in their mouth keeping the dream alive, but they are not really living as well as they should be after putting in 20 years of blood and sweat into it. Its sort of like farming in that way. Out here is perhaps a little different than other places though being that it is the most expensive place in the country to live. I've also seen people get sucked into "living the small business dream" and slowly loose all their money and investments trying to float the business. A couple bad months here, a couple bad months the next year, and so it continues, never being a "hot" enough market to recoup the lost funds of the bad times, until one day they have run out of money and equipment to sell.

That last point is something I have noticed out here with local mills, mine included. Take my former welding business for example, a bad month may be a $2,000 month, but a good month at $15,000 makes up for it. But, with the mill business a bad month may be a $1500 month, but a good month is only a $4800 month, and it fiscally can't recoup for 2 or 3 bad months. The best thing any of us can do in these times is remember to treat a business like a business and not an object of sentiment. For these reasons, I have sold off the sawmill division of our small business."

Happy trails  smiley_deadheader_ride_alligat
Visit Coalsmoke's website at www.coalsmoke.com

2008 Norwood Lumber Mate 2000 with Honda 20HP engine.
White 2-60 Field Boss > 65HP Tractor with loader.
Husky Chainsaws 353 and 395XPG heavily modified.
Loving wife who endorses all of the above :)

red oaks lumber

everybody here talks about have no debt, well to stay in the forfront of millwork and sawying you have to be updating equipment often,  which means borrowing money. to keep running old equipment ya you aren't in debt but, the quality will suffer, more costly down time from breakdowns, which delays jobs which translate into less cash flow each month. debt is like dancing with the devil you don't like to but, almost have to.
each year i budget $ 40,000 for upgrades , new purchases, or just shop improvements.when a small buisness man says he won't be in debt, what i hear him say is he really dosen't have that much  confident in his buisness, either dosent think he generate enough money per month for the payment or wont be in buisness long enough to get it paid off. thats like old people not buying green bananas, they might not live long enough to see them ripen.
with debt im not saying go into debt up to your danG, be realistic about it
the experts think i do things wrong
over 18 million b.f. processed and 7341 happy customers i disagree

Brucer

Quote from: red oaks lumber on February 26, 2010, 06:14:53 PM
everybody here talks about have no debt, well to stay in the forfront of millwork and sawying you have to be updating equipment often,  which means borrowing money.

Yep, I wouldn't have been able to upgrade to a hydraulic mill without going into debt. I was conservative in predicting my extra income so I was comfortable taking out the loan (so was the bank).

You have to understand your financial situation inside out and you have to be honest with yourself about the risks. You should have a plan for bailing out if things go wrong and you should set yourself some markers for when to bail.
Bruce    LT40HDG28 bandsaw
"Complex problems have simple, easy to understand wrong answers."

LOGDOG

I don't think anyone is saying that debt is 100% a bad thing. Best to use it constructively and sparingly if you're able to. It's very important to know where you're at with your buyers in certain instances before diving off into debt. Let's say for instance that you decide to borrow $100K to buy either some logs or maybe some KD lumber to process for the purpose of selling to a client. You borrow the money, take delivery of the material, process it, and ship it to your buyer. Now in many cases, buyers out there want to pay in 30 days. Let's say that something doesn't go right in that 30 days. The bank you borrowed the money from on a line of credit maybe is going to be looking for a payment but you haven't seen any money from the wood you shipped. Uh oh. Let's say your buyer turns out to be one of these big cabinet shops that is going under. Now you're stuck going after them for your money (likely along with others). It can get ugly.

Whenever I'm in a position where someone is wanting me to "front" a large pile of money for logs or lumber ( or anything for that matter) on the basis that they're willing to buy it from me on the tail end - I require them to put up a letter of credit at the bank that guarantees me payment as long as I deliver on my end. I've been bit a few too many times when I was younger and hungry. If they're a stand up outfit there's no problem. If they object - walk away. Save yourself some hassle.

One thing that I saw business owners doing in the last couple of years is using their lines of credit to pay their employees for extended periods of time while there were no receiveables coming in. You just can't do that for long until you're hung. Worse yet, some of them were using those lines of credit to live off themselves during the drought. You have to know that's going to be shortlived. What happens when the line of credit comes up for renewal and the bank asks for a financial statement and tax return from the previous year? All of a sudden they're "terming out" your line of credit into principal and interest payments or telling you to move it to another bank. Problem is, at that point another bank may not want to pick you up. I hear about it all the time. My wife works in banking and so does one of my partners in a business I have.

I don't think avoiding debt shows a lack of confidence in a man's business so much as it shows concern over the variables presented by others that you do business with. I can control 100% of what I do but I may not be able to control them and what they have going on. All I can do is use tools like letters of credit to help ensure payment or perhaps substantial deposits. That said, have I borrowed a truckload of money in my life - you bet. Too Dang much at times and had the ulcers to prove it. Eventually some things went right and it put me in a position to use cash.

Something else to consider is "is the debt in your personal name (guaranteed by you and personal assets) or maybe in the name of your LLC seperate from you personally and your home etc?".

red oaks lumber

my view on borrrowing money to buy logs or lumber  is i wont do it, way tomany things can and will go wrong.invest with debt on equipment, material flow upgrades, the things that will help make money day in and day out.
when i'm thinking of upgrading equipment, i look at several factors
1) will it pay for itself
2) will it increase flow without adding more labor costs(employees)
3) does it work with the short and long term plan
4) is it a want or a need - this one is very important to determine
the experts think i do things wrong
over 18 million b.f. processed and 7341 happy customers i disagree

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