Starting Sawmill Business – Profit Margin, Cost & Business Plan

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sawmill business plan

In today’s world, a large number of people prefer being their own bosses i.e. being entrepreneurs rather than being employees. Of the millions of business plans that are cropping up one of the less traveled but profitable business is running a sawmill.

Things to consider before starting a sawmill business

  • Are you well aware of the sawmilling process?
  • Do you want to engage in the business full-time or want it to be of seasonal nature?
  • Depending on your needs, what type of mill should be purchased?
  • Is there a ready market for the lumber that will be produced? If not, how should you create a market for your produce? Will it be financially viable?
  • How much time and cost will it take to maintain the sawmill?
  • How much wood waste will be produced and can the wood waste be further used for chipping? If not what will be the cost of transporting it to a dumping site?
  • What other services can be offered other than sawmilling? Like harvesting or kiln drying?

Initial Investment

Before purchasing a sawmill, it is important to understand the kind of milling business you wish to engage in, the size the wood will be cut into and its subsequent usage. People usually have the misconception that the price of the sawmill is directly proportional to the amount of production. It is ideally better to invest in a high-quality sawmill with features such as portability and/ or expandability. The more versatile a sawmill is, the more the options of the user to modify it accordingly. For example, you can start with a manual portable band sawmill and then modify it later by adding hydraulic attachments, trailer package etc.

The sawmill machines are available to suit every budget and needs. For example, you can get a Bandsaw machine for as less as INR 25,000 while a Double Column Bandsaw Machine will cost around INR 8,00,000. Also, a standard wood chipper machine will cost you anything between Rs. 4,00,000 to Rs. 11,00,000 depending on your needs and specifications. A simple chainsaw machine will cost a mere Rs. 6000 while the advanced commercial ones will cost around Rs. 2,00,000.

Before buying the machines it is better to compare the prices from your local suppliers and the different online sites.

Choosing the Machines

CIRCULAR AND BAND MILLS – The main difference between circular and band mills is production and kerf. Band mills have thinner kerf and so can convert up to 20% more lumber out of each log than a circular mill. On the other hand, circular mills can cut more lumber than a band mill. So if your main criteria are production then circular mills are your call while if kerf is your main focus then you should go for a band mill.

CHAINSAW MILLS – This portable machine is a relatively cheaper option which more or less meets all the needs. By changing the length of the bar the number of cuts can be easily limited and as a result, this machine can cut wider and larger lumber than the band or circular mills. Its main disadvantage is the relatively large kerf but considering its low cost, it’s a good bargain.

NEW VERSUS USED – If finance is not a problem, then it is always better to go for a new machine as they come with a warranty and spare parts will also be easily available. But if you are looking to save up on the initial investment front, then look for a machine that is in good working condition and requires minimal repair and rebuilding. If you are not well acquainted in this, then it is better to hire a professional to advise you on whether the used machine is worth the buy or not. With a used machine you should also be ready for probably repairing liabilities as these usually comes without warranties.

STATIONARY OR PORTABLE? It mainly depends on whether the logs are to be saved at the harvesting site or they are to be transported to a fixed sawmill. Stationary mills can be operated in all weather conditions as they are built on fixed foundations with a roof cover. Usually, they have a higher production rate but the main disadvantage is that the cost of transportation of logs to the mill is high. While with portable mills, sawing can be done in remote areas. Since its portable, it has the added cost of a towing vehicle to transport it. Also, set-up time and dismantling time should be taken into account.

Subsequent Costs

 The outflow of money doesn’t stop at buying the machine. The following recurring expenses need to be considered as well.

  • Fuel to run the machine
  • Lubricants to be used
  • Transportation costs if the machine is portable and needs to be taken to the wood source
  • Band blade costs
  • Cost of wood if it is bought
  • Periodic maintenance cost to ensure smooth running of the machine
  • Operators cost which will depend on whether the operation is one-man or multi-person.

The operator should also keep in mind the amount of wood that will be lost as sawdust.

Sawmill Business Plan

  • CHARGING FOR SAWING SERVICES – The three most common methods are
  1. Charging by the Hour – This is the safest method for the operator as it transfers all the risk of daily output to the customer.
  2. Charging by the Board Foot – This is not the method for the risk averse mill owners. This pricing method gives the ability to make the greatest return in a day, but also potentially exposes the owner to the lowest returns as well. This pricing method places all of the risks of productivity to the sawyer as the customer only pays for the lumber they receive. It is the most common method used in the industry.
  3. Charging on a Share Basis – In this lucrative approach, the sawyer accepts a percentage of the finished lumber from the owner of the logs. In most cases, this pricing method is advantageous to both the sawyer and the customer. In this method, the customer doesn’t need to pay any money upfront to the sawyer and the sawmill owner can get significantly more money by selling a portion of the lumber in the open market.
  • FOCUSING ON A PARTICULAR AREA – Instead of constantly changing the directions of actions, it is better to pinpoint one’s actions on one particular need. For example, large overhead beams for homes, wood for furniture are some of the lucrative money-making avenues.
  • MARKETING – In today’s world marketing plays an integral part in the success of any business. Only word-of-mouth publicity isn’t enough. Advertisements in print media, promotion through social media platforms, creating a customer base by providing lumber or services at discounts are some of the ways to create a position for oneself in already existing markets.

Sawmilling can be a profit-making business as long as the owner has a plan and can stick to it long enough to streamline the business, create efficiency, increase productivity and generate a profit. Like all businesses, this will require time and patience but the rewards are fulfilling to those who are willing to wait.

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