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Am I missing something?

Started by Firewoodjoe, May 15, 2014, 07:38:28 PM

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Firewoodjoe

Well I want to run my own operation. That's no secret to anyone that knows me. Well my brother in law works out of town most of the year. Hates it and wants to be home. Also wants to start his own business of some sort. And knows logging is real good right now. So I've been punching a few numbers and I can see large profits. That's what I don't understand. I must be missing something. Stumpage, fuel, insurance (not sure on that cost) trucking and machine payment. I curently work for a good crew cutting 80-100 cord a day and my dad ran his own one man show for 20+ years. I ask a lot of questions and my boss is very helpful. Without pushing my luck that is. So I feel I have a good idea. What can u guys tell me?

terry f

   I can't help with costs, but do a clean, honest, quality job, and you'll work forever. They will find you after a while. Good Luck

glassman_48

firewood joe,
Where abouts are you located?  I cant make much money doing firewood because I have to pay so much for my pulp cords.  I am in Kalkaska, so I do some mobile processing, sell eco bricks, and some palletized firewood.  My son and I do this part time only, I have owned and operated a glass business in our town for over 25 years.  Do you have a processor, a dump truck or dump trailer?  If your just starting out, then I think the dump trailer is the best way to start.  I started out just hoping to make a little extra money and keep my son with some extra work.  Last year a bunch of people started buying, now this year it has doubled, so the part time is getting more full time. A lot of guys that I have talked to all started out pretty small and got a customer base before expanding.  I wish you luck,,,,Ed

thenorthman

Quote from: Firewoodjoe on May 15, 2014, 07:38:28 PM
Well I want to run my own operation. That's no secret to anyone that knows me. Well my brother in law works out of town most of the year. Hates it and wants to be home. Also wants to start his own business of some sort. And knows logging is real good right now. So I've been punching a few numbers and I can see large profits. That's what I don't understand. I must be missing something. Stumpage, fuel, insurance (not sure on that cost) trucking and machine payment. I curently work for a good crew cutting 80-100 cord a day and my dad ran his own one man show for 20+ years. I ask a lot of questions and my boss is very helpful. Without pushing my luck that is. So I feel I have a good idea. What can u guys tell me?

Insurance is kinda hit and miss, but for the timber falling I pay around 1200 a year, the dump truck is something like 1000, all just for liability.  I still have health insurance through my straight job... I imagine that full coverage on every piece of equipment could get spendy.

What your forgetting is breakdowns, they cost you 3 ways, time lost, parts and labor, and time you could have spent making money.

The other thing is the time spent not working, logging while not really seasonal for most of the country, you will have down time between jobs or moving equipment, For me there is about a 1-2 month gap between finishing one job and getting paid for the next, granted I'm part timing it, however in that time I have to fall the trees move the equipment, possibly build some road or at least something like a landing, and then its 2 weeks or more wait for a check from the mill.  In this time you will be eating and fueling off of savings, and if anything like me hoping nothing breaks down.
well that didn't work

Firewood dealer

Thenorthernman is right. All your fixed costs are easy to put on paper, however the wildcards are breakdowns and weather. As for breakdowns,you can do the best maintenance you can but in the end, any moving thing is going to wear and fail at some point. as far as weather, a lot will depend on the ground you have to work. We usually figure on average 40-45 weeks per year, if you can do more that its a bonus.

Firewoodjoe

Thanks for the response. I'm near Cadillac.  I've sold firewood for years. I have a small dyna processor and a loader, a tractor, elevator the normal small scale and a 12 foot dump truck. It's just extra money stuff. I'm talking quiting my job and work for myself full time. I know I can double even triple the firewood if I advertise and start selling 100". All types sizes and quality of wood is needed in this area. The mills are calling daily. Partly due to the mud season. But it's been busy for a year or so now. That's about was I was quoted 3-4 years ago for insurance. It's just scary to leave a guaranteed paycheck when u have a wife and a little one in 8 weeks! When I put it on paper it's what I feel to be large profits. And I know there will be a lot extra hidden. What to do what to do

Corley5

Large profits can turn into large deficits in the blink of an eye  :)
Burnt Gunpowder is the Smell Of Freedom

gologit

Missing something?  Probably. Taxes, payroll, spare parts, WC insurance, permitting fees, performance bonds, spare parts, travel expenses and lodging if you're working away from home, having a mobile mechanic out to fix something that you can't, having a welding service come out for the same reason, rigging, spare parts, all night maintenance marathons so you can be up and running the next day, road usage fees, trucking expenses, tires, hoses, filters, oil, tools. Did I mention spare parts?  :laugh:

Don't take me wrong, I wish you all the best and I hope your little adventure works out for you. But if you've penciled out your costs and you see a huge profit ahead you better keep penciling, you left something out.

You can make good money logging.  Sometimes you can even make big money.  But big profits?  I haven't seen that yet.
Semi-retired...life is good.

barbender

Well, if you see big profits and logging is real good right now, you are in a different world than I am. I don't doubt you could make it, but just scraping by would be a more realistic expectation, if you do better great. If you have established firewood sales that's good, but I wouldn't base anything on doubling or tripling those. I know if I went on my own right now, l'd give myself a 50/50 chance of making it the first year. But I'm not a businessman,  it's not my gifting. I'm an equipment operator. Some guys have business savvy and seem to thrive in impossible circumstances, and I think it takes a person like that to do more than just survive in today's logging enviroment.
Too many irons in the fire

Firewoodjoe

I understand the parts. And logging is good. Like I said every mill we haul to is low on inventory. And we haul to about 15 or so. Largest one in lower mi to the small Amish. Thanks for the input and I'm always trying to move foward. I'll just take it one day to a time

timberlinetree

Do what will make you and your family happy and money is important but not the most important happiness is. I don't make a ton( more like just making it) but get to spend a lot of time with kids & Marcia. They work with me sometimes and help out a lot. Good luck!
I've met Vets who have lived but still lost their lives... Thank a Vet

Family man and loving it :)

luvmexfood

Think on things. Do a little planning, possibly get some leads on jobs and study it over. If I understand it correctly a new little on is on the way. Till that happens and maybe a month or two after to get in the "groove" of having a new one around maybe don't do anything sudden. You can still be laying the foundation for a future endeavor.

Think real hard about anyone you would take on as a partner. Look back on what you know about there work ethic and such. Just my 2 cents.
Give me a new saw chain and I can find you a rock in a heartbeat.

chevytaHOE5674

Mills are low on inventory because its spring and its been wet. Once things dry out and guys start producing and hauling again the demand will go back down. Then you could end up on a quota situation and being the new guy in town you could end up at the bottom of the ladder. I've seen huge swings in markets and their buying overnight.

Also remember that when you are the owner and operator you will suddenly have to work 10x harder. No more starting at 7am and quitting at 4pm. You will be up half the night worrying about downtime, break downs, moves, etc. Then you will spend your evenings/weekends/free time chasing new jobs, running down parts, wrenching, etc.

Another thing to think about is how are you going to find jobs? What is going to be your cost to acquire work? If your out pounding the highway looking for jobs who is going to be cutting timber?

Wish you the best of luck. But I don't think you will see "huge profits" because all of the little things will eat that up.

Woodboogah

I'll throw my 2 cents out there.  First,  I dont discourage you going out on your own.  Putting the numbers on paper in the logging business could just about be useless.  Good to get the fixed cost put down but the variables involved seem endless.  Taking on a partner in my opinion is one of the worst things to do.  I am speaking from experience and was warned not to do it before I did it and wish I had listened, owning a business itself is a headache, having someone to make decisions with someone else is even worse.  I wish you well and good luck to you.  I agree with timberlinetree 100% that its not all about the money.  Doing something you love is a huge reward, not to many people can wake up in the morning and look forward to work.
Keenan Logging & Tree Care, LLC

Ken

This industry is tough and although things seem to be improving they could turn south in a hurry.  I've had employees who left to go out on their own.  The ones who do well are highly motivated, mechanically inclined and business savvy.  If you fit that profile it may work.  As has been mentioned think carefully about a partner, especially family.  Good luck
Lots of toys for working in the bush

lynde37avery

yea i agree that partner thing didn't work out too well for me. when going solo in the wood biz i played with numbers on a calculator a lot. i still do but my figures were way off. but it was a good learning curve. nothing wrong with hitting it while its good. you can make some money as most of us have or we wouldn't be here talking about it. good luck.
Detroit WHAT?

Firewoodjoe

I already have the business. Work nights and Saturdays late after working and leaving at 4 am for my job. Long hours I'm use to. I do the SFI and  MATSIF training.  I have my cdl and have my FMC DOT numbers and enrolled in a drug program. I have owned my own skidder and cut my own jobs. But found logging nights and weekends was harder then firewood as far as time wise. The state and fed sends out bid sheets and there are many private foresters that also send them out. The stumpage is in a general ball park most of the time and I have mill sheets for log prices and a 2014 trucking price sheet. I know it's difficult and a lot of the time your buying a job. I do not plan to get rich and I love the woods. It's in my blood from generations and I tried other jobs and made good money only to come back to the woods. I will not let it happen fast and plane to use the firewood to buy and pay for a forwarder so I have a paid for machine prior to buying wood. Beside i can use it in my wood yard.

chevytaHOE5674

Be very very careful bidding on timber. Until you've been operating and know your costs to produce wood you can lose your shirt on one timber sale if you aren't careful. I've found the most effective bidders are the loggers who have been at it a while and can just about tell me how much it cost per minute to run a machine and how much they can produce in that minute given the timber quality/quantity and site conditions. They also anticipate and plan for weather and break downs.

To buy state/federal timber you need capital up front as all sales require a down payment and some sales require full payment of the unit before you can move equipment in. Along with that you will need the Cash performance bond within 3 weeks of winning the bid. That can all add up to a huge expensive before you start seeing a return on it. For example I cruised a state sale for a logger buddy of mine and he bid and Won, within 21 days he had to provide the down payment and performance bond, then because of other jobs, sale conditions, and weather he couldn't move there until 8 months later. So he had a good bit of cash wrapped up in the sale for a while before he ever moved a stick of wood and made a dime.

Not trying to discourage you in any way. In fact its good to see a young guy thinking about getting in.

John Mc

This is probably not what you want to hear, but...

If this is your first child on the way, I'd advise you to wait it out a bit before you make the jump to starting your own business. You have enough changes in your life coming at you. Having kids totally changes your life... the things you still have the time and energy to do will decrease dramatically.  Take some time to allow you and your wife to figure out the new routine.

I'm not saying don't do it at all: It sounds as though your job is somewhat stable now, and the boss a decent sort to work for. Having that stability will be a good thing over the next couple of years.  You can also use the time to observe how the markets do over time, and try to gauge how badly the slow times would affect you if you were out on your own.  This can be hard to judge until you are out there actually doing it.  When you are working for someone else, you don't get paid if you don't show up for work.  When you are working for yourself, not only do you have to show up for work, you have to find the work to show up to, organize all of your resources (equipment, time, money, manpower).
If the only tool you have is a hammer, you tend to see every problem as a nail.   - Abraham Maslow

BargeMonkey

 If you take it slow, and keep a regular job your better off till youve got a decent nest egg of money put up. Like these guys said, the equipment cost isnt what gets you, the money up front on the wood, the bond, and not being able to cut it for a while are what will do you in. I try to stay away from bid sales, maybe 2-3 a year because if the weather turns, or something happens my cost to move kills alot of the profit. A skidder, forwarder and truck is the way to go, you start getting big you cant do the small lots. It gets out of hand quickly, maintenance and fuel is starting to eat me alive sometimes.

John Mc

I would also advise getting a better handle on exactly what insurance you have.  Just liability is not enough (and would yo have enough of that anyway).  That does not cover you or your family if something happens to you and you are unable to work - either temporarily or permanently.  At present, you are covered by workers comp from your employer. There are less expensive ways to go than that, if you are self employed (check out A,D,&D insurance), but going without is crazy - it's one thing if you're single and on your own, it's quite another if you have a family to consider.

Also, are you going to be hiring any employees? If so, they'll need workers comp coverage. This is usually figured as a % of payroll.  I don't know what that percent would be for logging, but I'll wager it ain't cheap. (In my Solar PV installation business, we pay 27% for any employee who is working on a roof.)
If the only tool you have is a hammer, you tend to see every problem as a nail.   - Abraham Maslow

luvmexfood

Definetly not trying to discourage you because I am twice your age and wish I had started something when I was younger. A couple of my ex-wife's cousins started out with a very small contractor's business doing small concrete jobs as a sub-contractor. They are hard workers and pretty sharp and it is nothing now for them to get 5 or 6 million road projects. Still get along with them very well.

That being said If I remember correctly they started the business as a woman owned business and that helped them a lot with getting jobs that had any state or federal money involved. I have seen remodeling jobs go to minority owned businesses that subbed out all the work and if truth be told I bet they did not even own a hammer and were located several hundred miles from the job and maybe was on site twice.

You could possibly get some clearing jobs and get the wood free plus get paid for removing it. Lot of paperwork involved but the money is good. Just an option to investigate while waiting on the baby. Don't get into a hurry, review the options and possibly consult with someone. Down this way they have something like a small business consulting group that is free and sponsered (I think) by the goverment small business something.

Best wishes for you and an early congradulations on the addition to your family.
Give me a new saw chain and I can find you a rock in a heartbeat.

Firewoodjoe

Barge monkey. Do u knock on doors then? And that's why I was thinking to buy a machine now with firewood paying for it. (The firewood is not usually used for day to day bills) then when I went full time the money I barrow would be for operating cost and stumpage. I see no real way now a days in this area where I could do it without barrowing money. Everyone wants paid up front. And I like the idea of state sales as a lot of hardwood sales are a good mix of species and you can even get some without restrictions. Like bark slip. And we have better luck with a forester then a land owner

Firewood dealer

You should not live your life out wishing you had tried self employment. It is tough and demanding. Hopefully you will have a good run to start with and put some money away. I have seen a lot of guys get big EYES when they see their checks start coming in and start buying new furniture,cars,ATVs and stuff like that. Remember its not really your money to spend, it will go to the equipment. It is worth a try if you have enough wood ahead of you but the biggest thing you need to do is, set yourself up with a good EXIT strategy if you see things aren't going to work out. It is always exciting to see someone try to live out their dream and SUCCEED!! I wish you well.

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