What do you all figure it cost you to put out wood ?

Taylor,

This is a big question that many loggers/forestry contractors face. The short answer is along the lines of what Carl mentioned. Know what you need to make in a day, know your production, and see if the value of timber/services gets you where you want/need to go.

The problem is that so many people wing it and don’t account for all costs, depreciation, and realistic production. To know your costs and average production rates are paramount to surviving and hopefully thriving. To do a job at or below cost is at best just buying work and at worst subsidizing the project with your resources.

You need to account for all operational pieces of equipment such as saws, trucks, trailers, that new forwarding trailer you got, etc. Your horses, although not “equipment” need to be factored in the same way since they are basically the “base machine”. These costs include direct & indirect as well as fixed and variable. Very basic examples include items such as gas, oil, maintenance (including your time for maintenance), repairs, transportation, feed, shoes, rigging gear, and on & on & on. It takes a serious introspective look and time to do it right. The principles of business are the same regardless if you’re a horse logger or a plumber. You have to look at every aspect of what you do in detail.

Depreciation is something many folks completely overlook. Even though by strict accounting terms you can expense out something like a saw rather than depreciating it, you still need to account for that replacement value in your hourly operational rate to accommodate a replacement when it wears out. If you don’t, you are running that saw for free. Again, the same goes for your truck, horse, etc…

Finally, even though it is elusive to most loggers, you need to factor in a profit. Profit is not your wages. You are an employee of your business. In order for the business to survive at a static level, let alone grow, there has to be a profit margin built in.

Production estimation requires a high degree of honesty to one’s self. You need to factor in all your time which in turn needs to be accounted for and paid for by your productive time. You spend 8 hours in the field. How much of that time is spent working on other stuff than cutting and skidding? The other time doesn’t make you money but is still required for running and maintaining your business and you still need to make your wages. When I calculate a reasonable production rate/time I will then place an additional “get real” factor on it by reducing it to 80%, for example, to incorporate bad weather, bad days, unexpected circumstances, etc… This method has proven decent enough for me; I’ll vary the percentage depending on the situation, job, season, etc.

One of the most useful tools I have is a calculation spreadsheet that was developed by R-6 of the USFS for calculating stumpage rates. It is machinerate.xls and I used it extensively when I had my large mechanical operation as well as currently for my horse logging business, calculating out delivered biomass energy costs, rates for subs, contract budget estimation, etc. You can input any type of harvesting system that you want from a full blown mechanical CTL operation with a harvester & forwarder to a guy with a saw and a guy hand piling slash. You could take this and enter everything that you use from a saw to a horse and after customizing the cells for your purposes, come up with exact projected costs on a per unit basis whether that is CCF, MBF, Ton, etc.

When I have time…. I am going to completely customize the spreadsheet to accommodate a horse logging operation. Once that is complete I will make it available to anyone who wants it at no cost. Being someone that has learned the hard way I am a firm believer in accurately estimating costs and revenues. In my opinion, this type of information is essential to surviving, and ultimately thriving, in this business. You have to know your costs!

For now, if anyone is interested in getting the normal version of machinerate.xls and modifying it to their needs e-mail me and I’ll send it to you. I’d post it here but the forum does not support Excel files. There is a good tutorial and examples on the first few worksheets explaining how to customize it for your application. I’d be happy, however, to help out with hints after you get started.

Take care,

This is a great “loaded” question, pun intended on the loads one may extract
per skid.

Just as with every question and situation everyone has their own take on it.

What does it cost to operate means different things to different folks. The
deep analysis used by Scott is appropriate and will surely be a part of the future of developing this work to be a wider chosen method.

For some the question is about how much hay, grain, saw gas, maintenance cost, and all the details that come out of the value of the products with the balance being the profit. That is a good model.

However, I must submit that these models are lacking a “quality of services” evaluation. The common way of buying standing timber through a bidded process lacks the same “quality of services” aspect. Given that we all know we will never compete with machines and hopefully we are all accepting that reality and customizing our approach and prices for quality services to reflect the difference our style of harvesting or forest management offers landowners.

It is this “Quality of Services” factor that makes our services superior to many landowners and how we refine/define that aspect will play a greater role in our future “business” than is commonly understood or practiced.

That is the position we (HHFF) have held, promoted and practiced for a long time and continue to refine.

For instance – I suspect it is difficult to include reduced erosion in a spread sheet, or enhanced residual aesthetics, fire risk reduction, reduced fossil fuel usage, increased productivity of the residual stand, education of the landowners about the value of the ecological services the forests provides and the many commonly not quantified values of the theater of our operations or the community forests. How do we account for the opportunity cost of this lifestyle choice? How much is personal independence worth?
What is the price for human dignity?

These values may be the greatest of our services and aren’t easily accounted for in a conventional approach.

This response is in no way intended to reduce the value of the accounting of costs of operations and details precisely lain out in Scott’s spreadsheet program – we will definitely download and employ that program. It is just a suggested addition to the way we may describe and define our work as being potentially greater than the numbers available from a sharp pencil analysis.

On the contrary this response is to keep the sharp pencil approach from reducing the values of our services to a spread sheet precision only. The point is that there is more to this work than is commonly accounted for and those values could be the tipping point information to access the best quality sites for those practitioners that provide the most superior services.

The demographics are so dramatically different in different parts of this country and the world, so adjustment of our definition of services will be more important in the future.

Thanks for asking the question Taylor and for all of those invested in sharing this thinking with anyone interested enough to find themselves reading these pages.

Carl,
I too have a good mental picture of my current costs as to where I need to be in order to make it work. Usually on small service contracts, I can provide a quote/bid on the spot because I already know my current costs based on an hourly basis. If it is a small sale, a simple cruise and working the same numbers on a piece of paper will do. I do, however, go back to the ‘puter to check on numbers periodically or when anything major changes. The rest, as you know, comes from experience; Access, length of skid, topography, forest cover/timber type, landowner attitude, etc. all go into figuring out the final number. The same end result is the amount of resources and time needed expressed in dollars plus my wage.

Jason,
What I was explaining were outright realistic operational costs for the business. There is no question on why we do what we do and the values other than financial that we benefit from. The reality is, however, if you do not know your true costs and do not plan for sustainability through depreciation and a small profit (hopefully) you are going in completely blind and entering a very high risk situation. Those of us that have been doing this for awhile have a pretty good handle on this, even if the numbers were just ruminated on in our heads. However, if you find yourself with horses past ready for retirement, a dead truck, and you’re paying for fuel & feed out of your personal wages, the simple truth is that you are screwed. Business is business regardless. The ethics, superior services, etc. are the values that set a business apart from the rest. From a horse logging perspective, the superior low impact harvesting is a higher value service that is (or should be) shouldered by the landowner, not the logger. The landowner realizes benefit from the superior service and hence is expected to pay more for it. Whether that increased value is compensated for by a higher hourly rate, decreased stumpage rate, first right to return on a sale due to your investment, or being first on the list for referrals; it is the value that builds your business. There is a big difference between value and cost. If a logger truly does not know what his financial costs are and he is bidding out a superior service without solid numbers, he is walking on extremely thin ice.

In order to provide all of the benefits and services that we all know exist from an animal powered harvesting system, and enjoy their life at the same time, the logger needs to be able to stay in business and not starve in the process or end up in a financial apocalypse.

My thoughts,
Scott

Treat potential bids the exact opposite of how we practice sustainable forestry…

Take the best & leave the rest.

No job is worth going broke over. As horse loggers we are in short supply, find your niche and market the hell out of it.

There are people out there who want your services and are willing to pay for a quality job. Going for the high bid on stumpage or low bid on service is an exercise in futility. We just need to think a little outside of the box and be a bit more picky about the work we take on…

There definitely is a period of time for paying dues. I also started out with a sense of apology for not knowing all that I thought I should. That goes for services that I might been able to provide, as well as skills that I required to be efficient and therefore profitable.

The point is to be clear about your actual cash expenses, so that as you are learning you can see what that learning is costing you, but then as you gain experience that equates to services then bring the charges in line with the expenses.

There is also a need to work “out” of the woods. Chatting up people who can provide new work opportunities, etc. And be looking for the work that you know will be advantageous to you. Networking, and open and honest communication with people in your community can be a very positive resource, that will cost to cultivate, but will provide results for many years.

Carl

scott mentioned about spreadsheet for calculating stumpage rates, well about 15 years ago i sat down with the head of the forestry contractors association to develop a fair system of payment based on what it actually costs to put a tonne of timber roadside. Fifty horseloggers participated in a survey of what their daily costs were, depreciation, saws, horses, vehicles, etc, etc. This was a very comprehensive study and all data went to dublin where it was inputed in to a programme that was set up specially for this study. The study was based on an average extraction distance and merchantable timber, the cost per tonne came out as £23.00, i never exceded
£13.00 that year. All we did was work longer hours to compensate for this and always thinking that good times were around the corner.
simon lenihan

@cousin jack 11030 wrote:

The problem is getting started though and getting a good reputation. The only way I could get going was to buy the standing timber and sell for firewood, meanwhile the wood owner has got me piling up all the brash, doing this and that, which is costing me time and money. Now, because firewood prices are rising he wants to charge me more for the standing timber, it’s hard work as you all know, but he just see’s what firewood is selling for to the end user and what I pay him, he dos’nt seem to equate the time, skill, sweat, fuel, repairs,haulage. What I am trying to say though is I have to put up with this to get going, and I am “winging” it at the moment, grateful for advice though 🙂

Ralph,
You start out with “X” for base stumpage value. Slash treatment such as hand piling, clearing social trails, TSI, etc.. all get get deducted from X as value added services. If you are buying the standing timber than that is all you should be doing, albeit with a low-impact harvesting system. All other forest improvement/enhancement practices need to be factored in as services and deducted from the stumpage check or paid for outright. Even though it is tough, stick to it and do not be afraid to say no to the landowner and walk away. I doubt there are folks offering your type of services knocking on his door to outbid you for firewood. If so, so be it. It is better than losing money. In my area people would think they died and went to heaven if somebody offered to do the work for the wood alone. It all boils down to the landowners values. Don’t sell yourself short man, you are worth a lot more than you think you are…