Starting a Sawmill Business to Supply Stakes

      The sawing and drying forum takes a hard critical look at a business proposition. April 20, 2011

Question
I have a rare opportunity to open my own business with a guarantee sale the day I open. But to get into this business I have to open a full scale sawmill. I will be manufacturing oak stakes. I was wondering if anyone can help me with information on what type of sawmill will be the most productive with a low cost. I will need to make about 150,000 stakes a month 1.5's x 48". I do know there will be a series of machines involved. We will most likely be buying 15" 16' logs. Does anyone have any suggestions on what I will need?

Forum Responses
(Sawing and Drying Forum)
From contributor Z:
The Woodmizer LT15 would be perfect for this.



From contributor Y:
If my figures are right, you will need about 40 log truck loads a month. Do you know where you will be getting the logs from?


From contributor C:
You can't buy just one size or length log. Any small, inexpensive mill is not going to be able to produce enough product to fill an order like this. You will need a larger mill, stake-pointer, chop saw, and a gang-rip saw to produce enough material for this order. You also cannot do this alone. Sorry to bust your bubble but Iíve been milling over ten years. You will need a dedicated supply of logs also. You need to be sure you can supply this order because you are going to invest quite a bit of money to make this work. This is a good order if you can get a contract. Don't be afraid to tackle it if you can put it all together.


From the original questioner:
Let me take out the word low cost, I know it will be expensive. I would like to keep it around $200,000 plus, but Iím hoping someone here can give me ideas. I would like your ideas on what type or brand for a main saw (something that can handle the work load). Why is supply of logs so hard to get? There are many logging industries around here.


From Gene Wengert, forum technical advisor:
The first step is to develop a business plan. This will indicate markets, log supplies, log sizes, yields, production parameters, and so on. Once you have this plan developed, then it would be possible to look at equipment.

Several big questions include: What price must you get for the stakes in order to be profitable? What to do with the bark? What to do with the low grade lumber? What to do with the clear or upper grade lumber which you can sell for more money and more profit than if you make such lumber into stakes? What to do with the sawdust? What to do with the wood scraps including the slabs and scrapes from the stake machine? Will you edge the lumber or use un-edged lumber for making stakes? What to do if the stake market decreases or another mill begins to compete? Must you run five days a week, 50 weeks a year in order to meet the demand? How many employees will you have? How much rolling stock (fork lift, log truck, lumber delivery trucks, etc.) will you need? Who will sharpen the various saw blades? Will your mill have a roof over it? Will you run in cold weather? Can you get the needed electricity? Also, there are only a few parts of the country that will have 16' logs mainly. Most will have 8' or 12'.

I do believe that $200K is a bit small for this size operation, especially because you must buy the equipment, pay for site preparation and various buildings (including an office, product storage building, sawmill building) and rolling stock (maybe $50K for a good lift and truck), and then pay for 30 days of log inventory and then 30 days after delivery of the product before the first payment, plus all the start-up costs, and so on. You need to have money for the incorporation, for an accountant and quarterly taxes, for various insurances (fire, liability, health), for electricity, for workers comp, You can use a business plan to address all these issues and answer all these questions; usually there is a local state extension person to help formulate your specific plan.

Overall, you should use a loan for getting all the equipment and buildings, and use cash for all other expenses. If you have extra cash after a month or so of full operation and you have some money set aside for a "rainy day," then you can begin to pay off the loans. Basically, you have two financial issues - making a profit and cash flow. It is surprising how often a profitable sawmill operation fails because of poor cash flow.



From contributor A:
How much per stake? Since your stakes are just 48" I would just buy pulp wood and buck them to 52" and run them through a scragg like my Morgan Mini Scragg. Then through a 2 or 3 head re-saw and next to a gang rip to make the stick. But it is done every day. There is a lot of equipment for sale at auctions every week for just above scrap metal prices.


From contributor S:
My concern would also be a dependable market for the stakes. Our local surveyors complain about finding oak stakes, and the price they have to pay. There is also in demand for silt fencing and reclamation industry. I have been asked to make stakes as a favor to a locals. I looked at the sharpeners out of curiosity. I have not seen one that seemed dependable enough to do the numbers you have mentioned. I suppose one is out there.

As for mills, I would go with a band mill and with as much hydraulics and automation as I could. I would also select a major brand with good customer support. We have a fork lift and a Bobcat skid steer loader. If I could only own one of those it would be the skid steer. I wonder if you might be ahead to hire some local band mills to mill the initial stock. Then you could concentrate on turning the lumber into stakes. The initial investment would be much less as would be the learning curve.



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