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Pricing lumber

Started by Rknox, March 03, 2012, 12:39:46 AM

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Rknox

I know this is more than likely been asked but at this hour I don't have the time to search. I have someone coming out tommorow to buy a small quanity of my lumber. I have not really sold any lumber yet and I don't have a clue what it's worth. He wants some of my pine .very good quality. What should I charge for 1x lumber by the board foot. Thanks
LT40HD, Kamatsu 45,Takeushi TL150, Ford 550 backhoe, Cat 931 loader, Ford 700 dump truck, Ford 9600 tractor, Isuzu rollback, 1982 Chevy Luv Diesel, New Holland 6610 tractor, etc

Okrafarmer

Wow. Not trying to pick on you, or anything, so please don't take it that way, but you're really behind the eight-ball a little if you're having to come up with a price the day of your first sale.  ;)

But that's okay. Here's the way I figure up what I charge.

The simple form first: Figure up all my expenses and inputs to the lumber, and then approximately double it to get profit. That doesn't mean you have to do it the same way.

Now you can sell lumber either by the board-foot, by the piece, or by the lot. Most people I know of sell it by the board foot, if it is regular wood, or by the piece if it is something highly unusual.

So first you need to know your inputs. Did you buy the logs, or were they free to you? Unless you have a large supply of free logs, I would suggest putting a dollar cost on there even if you did get a small number of logs for free. But let's suppose you bought them.

Let me work up a little model for you. Let's suppose you are selling southern yellow pine lumber that you milled yourself. Let's suppose you paid $200 / thousand bf for your logs. [plug in your own numbers, these are for instance]. This amounts to $.20 / bf.

Now you need to know your actual cost for milling. You should figure out the cost of DEPRECIATION for your sawmill. That is a little complicated for me to show here, but someone else may be better at it. Let's suppose you bought your sawmill for $6,000 and it was expected that it would depreciate $1,000 per year for five years until it was only worth $1,000. (I realize this is some complicated theory, but bear with me, because it is a very real cost even if the way of figuring it is somewhat generalized or idealized). Let's suppose that if you would be running it 100 days a year, that means it depreciates $10 / day that you run it. If you can saw 500 bf in one day, that means you lose about $.02 / bf. [somebody please help me explain depreciation better than that]

Then you have to figure out your fuel costs. How much fuel does your mill use in an hour, versus how much lumber can you mill in an hour? If your mill uses 1 gallon of gas per hour, at $4/gallon, and you can mill 80 bf in an hour, gas will cost you $.05 / bf.

Then you need to consider blades sharpening cost. If you can mill 750 bf per blade sharpening, and sharpening plus blade depreciation = $7.50 per sharpening, then sharpening costs about $.01 per bf.

Then you need to consider other costs, such as blade lube, chance of hitting metal and thereby shortening both the endurance of your blade sharpening and the number of times it can be sharpened, and other little issues, and if it is significant you add that to the total. Right now I'm supposing that might amount to another $.01 per bf.

Then you really should put in a cost on your labor-- an honest wage, not including the profit you wish to make. Let's face it, you could probably go work at Burger King, or as a janitor, or something else in stead of spending your time this way, so include an honest wage in the expense. Let's say you choose $10/ hr. as your opportunity cost of labor. Let's say you can mill 500 bf of lumber in 8 hours. That's  ::)  :P  around $.16 / bf.

If you have any other rent, utilities, taxes, insurance, interest, etc. that you pay in direct connection with your sawmill or the operation thereof, then you need to factor that in, too. For sake of time, let's say you figure out that you pay about $100/ month for these things, all told.  So if you mill an average of 8.33 days a month, (100 days per year)  that's $12 per milling day, and we said you could make 500 bf per day, so that comes to about $.025 /bf.

Then I like to add a little in for extra little items that we seem to forget all about, like little repairs and lost time and little mistakes, and stuff like that which adds up to lost efficiency or extra expenses. Let's just to simplify, say that's another $.02 /bf.

Ok, so if we add all that stuff up, it comes to $.495  per board foot for your expenses. [guys, did I miss any obvious ones???]

Then I personally would take and double that price to get my profit. Which would bring you to $.99 / bf to ask for your lumber. Note: I would round up to $1.00.

Now, your numbers are going to plug in differently, but that is just a for example. And you may be willing to accept less profit. But that is the approximate formula I would use to find my price. There are variations you could do-- and we haven't even included the time it takes you to sell the lumber-- don't forget your time is worth money even when you are selling stuff rather than producing it. Your time is also worth money while you are maintaining or supporting the mill (buying gas for it, fixing it, adjusting it, and so on, but some of that cost may be absorbed into your daily production figures, ie bf/hour or bf/day).



He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

Okrafarmer

By the way, welcome to the forum! Glad to see new people on here all the time!
:)
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

Okrafarmer

By the way, my pricing structure I gave you was with the idea in mind that you are probably milling part time, not full time. If you were to work up to full time, you might not take such a hefty profit margin, especially if you are sawing for contract. These figures are for the idea of part-time sawing, and somewhat casual selling of lumber, not formal official deals.

When selling lumber casually, I generally find that the price you charge is the least important issue in the mind of the buyer, in most cases. Especially once you have them there in person. On the phone when they first contact you, price may be a chief concern, but if they come by, they will usually buy at your prices, if they like you. So it comes down more, I think, to having a love of the wood you are selling, and getting excited with them over what they can do with it. That is how to sell lumber, by sharing the excitement of the buyer as to what can be done with it and how great it will look. By the way, with the pricing formula I gave you, there is enough profit being made that you can always come down a little on the price if the buyer thinks you are asking a little too high. Just say, "tell you what, I'll knock it back to .90 a board foot, just for you." or whatever you feel comfortable with.

But I would advise against trying to sell your wood for whatever price other people are selling theirs for. Don't feel that you have to ask the same price as others. They have their price model, and you have yours. They have their expenses, and you have yours. They have their goals, and you have yours. They have their personality, and you have yours. Use your personality and passion for wood to sell your lumber-- not your prices.

Remember, every new customer who comes along is an old friend you just haven't met yet.  ;)
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

bandmiller2

Welcome Rknox,I charge .50 per board foot pine 1.00 per BF oak. Frank C.
A man armed with common sense is packing a big piece

Riggs

Wow Okra, that was a fantastic post, especially for 2am :D
Welcome to the forum Rknox
Every man's life ends the same way. It is only the details of how he lived and how he died that distinguish one man from another.~Ernest Hemingway

Norwood ML 26

shortlogger

Most all the pine I saw has been given to me so I have very little in it ,being that I can buy 1" dressed and dried lumber at the local hardware store for 60-70 cents a foot I try to stay under that price .
Welcome to the Forum.
1 Corinthians 3:7 So then neither he who plants is anything, nor he who waters, but God who gives the increase . "NKJV"

ladylake

 
The big box stores charge about .75 for 1"  no 2 pine, I'd go for $1 for nice pine.   They are around .55  for common 2x  lumber but go up fast soon as it get longer and wider.   Steve
Timberking B20  18000  hours +  Case75xt grapple + forks+8" snow bucket + dirt bucket   770 Oliver   Lots(too many) of chainsaws, Like the Echo saws and the Stihl and Husky     W5  Case loader   1  trailers  Wright sharpener     Suffolk  setter Volvo MCT125c skid loader

westyswoods

Great post Okra. I am in the process of doing a very careful and concise documentation of what it cost time and money to select cut and get the logs to market. This is a first time event for me on this scale so it will be interesting where it ends up the following are some of the factors which are being considered. I know the list is not complete although I figure minds greater than mine can add on.

1. Hours spent, this includes maintenance, saw, machine. I will take time and
    add one hour.

2. Fuel cost: saw fuel, bar oil, truck fuel, skid steer, bar oil.

3. Skid steer run time log start and end hours each day. T190 consumes close
    to 1.2 gallons of diesel per hour. Must figure in maintenance oil changes ect

4. Any breakage of machinery ect.

These are just cost to get to landing.

Figure another month before I actually attempt to market logs. It will be interesting as usually I work for nothing on stuff like this.

Westy
Stay Safe and Be Healthy
Westy

Rknox

Thanks all, Okrafarmer that was quite a disitation and helped me. The man just called me yesterday while I was at local hospital with my brother(knee replacement) and just have had the time to do any other research about pricing lumber. I don't do this for a living. I saw for my own needs and projects here at our farm. I will send pics of the rifle range I have wanted to build for a few years and now have and enjoy. We have around 5 miles of 4 board fence and I have been sawing fence planks for. That is why I bought mill and have really enjoyed the sawing. I'm a tool nut so this was a good excuse to buy another tool along with fork lift. I really don't save any money but o well I'm having some fun with it. Don't play golf. I'd rather be sawing. Again, thanks and everybody have a great weekend. Rknox
LT40HD, Kamatsu 45,Takeushi TL150, Ford 550 backhoe, Cat 931 loader, Ford 700 dump truck, Ford 9600 tractor, Isuzu rollback, 1982 Chevy Luv Diesel, New Holland 6610 tractor, etc

Ohio_Bill

WOW what a great place.  Someone new to Milling asks an honest questing at Midnight and before he gets up the next day has a detailed answer.  The level of knowledge sharing and help here is amazing.  This is a great community.
Bill
USAF Veteran  C141 Loadmaster
LT 40 HDD42-RA   , Allis Chalmers I 500 Forklift , Allis Chalmers 840 Loader , International 4300 , Zetor 6245 Tractor – Loader ,Bob Cat 763 , Riehl Steel Edger

JBS 181

I pay from 275 to 350 a thousand for lodgepole pine. I charge .60 to 1.10 a board foot for 1x material depending on width, length and quality. Some of the not so good stuff (cracks, splits, wany edges) I will let go for .40 an .50 a board foot.

Rknox

I agree, this is a great forum. I now have a answer to my question. Thanks everybody for the welcome and quick response. This was my first time to post a question and now that I've broken the ice it will be easier to post and contribute to this great forum.
LT40HD, Kamatsu 45,Takeushi TL150, Ford 550 backhoe, Cat 931 loader, Ford 700 dump truck, Ford 9600 tractor, Isuzu rollback, 1982 Chevy Luv Diesel, New Holland 6610 tractor, etc

Okrafarmer

I'm a night-owl and addicted to Forestry Forum. I'm just like some kind of addict sitting here continually clicking the "show new replies to your posts" link and the "show unread posts since your last visit" link. I get withdrawal when I click on it and nothing comes up.

Lest you think I never get out of my chair, I got out and did an hour and half of work this morning in the miserable wetness, and that doesn't even count feeding the pigs and chickens....
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

POSTON WIDEHEAD

I know what ya mean OKRA.

Sort like waiting on that AXE.  smile_juggle
The older I get I wish my body could Re-Gen.

BandsawWarrior

you have to charge a premium if they go through your whole pile picking out the best pieces such as clears or the widest pieces.
Tyler Hart
T&N Custom Sawmill

Magicman

Quote from: POSTONLT40HD on March 03, 2012, 11:39:44 AM
Sort like waiting on that AXE.  smile_juggle 

You had better be saving your "green stamps" if you plan on outbidding me.   ;D   :D
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

red oaks lumber

its important to know your costs but, you can't out price what your area is willing to pay. if your costs are higher than what  lumber sells for in your area you can 2 things.
1) figure out a way to be more efficient, this will bring your costs down
2) don't sell wood
i never let any customer rifle through a pile of wood. my reputation is, call ahead to order your wood in a week or two  it will be ready for you to come  pick it up. i ask enough questions to know exactly what you are looking for. this method has worked on selling several million bf of lumber in various species.
the experts think i do things wrong
over 18 million b.f. processed and 7341 happy customers i disagree

Okrafarmer

Quote from: red oaks lumber on March 03, 2012, 02:06:21 PM
its important to know your costs but, you can't out price what your area is willing to pay. if your costs are higher than what  lumber sells for in your area you can 2 things.
1) figure out a way to be more efficient, this will bring your costs down
2) don't sell wood
i never let any customer rifle through a pile of wood. my reputation is, call ahead to order your wood in a week or two  it will be ready for you to come  pick it up. i ask enough questions to know exactly what you are looking for. this method has worked on selling several million bf of lumber in various species.

As I said, you can't use my formula for wholesale or large scale applications.

And, as Saruman said, "There is. . . a third choice."  That would be to sell your lumber for more than the competition by either providing a better experience, better lumber, or better selection than the competition.
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

red oaks lumber

i ask my self.. self why do you try to offer your opioin?  most times others don't want your input :(
the experts think i do things wrong
over 18 million b.f. processed and 7341 happy customers i disagree

Magicman

Saruman got a sawmill  ??? 
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

Okrafarmer

Quote from: red oaks lumber on March 03, 2012, 09:18:38 PM
i ask my self.. self why do you try to offer your opioin?  most times others don't want your input :(

Didn't mean it that way, friend. Just trying to point out what I meant. You are probably right in your assessment for large volume.
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

Okrafarmer

Quote from: Magicman on March 03, 2012, 09:28:38 PM
Saruman got a sawmill  ???

No, he dropped the trees whole into his forge fires, remember?  :D Actually my Saruman reference really isn't fair because I don't think he said that on the recent LOTR trilogy. I know he did say it on the 1979 LOTR cartoon, which is a "quotation-rich environment" but actually not all that many people have seen it.  :-\
He that dwelleth in the secret place of the most High shall abide under the shadow of the Almighty. Psalm 91:1

Operating a 2020 Woodmizer LT35 hydraulic for Upcountry Sawmill, Dacusville, SC

Now selling Logrite tools!

Writing fiction and nonfiction! Check my website.

ladylake

 Red oaks is right, you can't sell it for more than the next guy down the road no matter what your expences are. Quite a few Amish mills moved in here that were selling cheap, now they're higher than me .   Steve
Timberking B20  18000  hours +  Case75xt grapple + forks+8" snow bucket + dirt bucket   770 Oliver   Lots(too many) of chainsaws, Like the Echo saws and the Stihl and Husky     W5  Case loader   1  trailers  Wright sharpener     Suffolk  setter Volvo MCT125c skid loader

Bibbyman

Quote from: ladylake on March 04, 2012, 07:01:07 AM
Red oaks is right, you can't sell it for more than the next guy down the road no matter what your expences are. Quite a few Amish mills moved in here that were selling cheap, now they're higher than me .   Steve

Not necessarily. We have a resale customer that buys from several mills. The other day he said our prices are the highest but our quality is the best.

He's got nitched into supplying beams and oak lumber to people that are restoring old barns for tourist traps. Got one large post and beam barn that will be built new for a restaurant. The implication is,we'll get some of that action.

The barn builder and restorer is Amish.
Wood-Mizer LT40HDE25 Super 25hp 3ph with Command Control and Accuset.
Sawing since '94

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