The Lumber Chain of Value

Get more money for your lumber.

We have all heard of the food chain. In the world of sawing logs into lumber there is a chain of sales.  In this chain we have green lumber sales that include many things such as pallet lumber, crossties, hardwood flooring, grade lumber, etc. Then we have dry lumber sales to include framing and milled products such as flooring, moldings, and furniture both finished and unfinished. Finally, we have houses being built which use some of everything.

The point here is to get the small mill operator to think a little differently.  We all love to saw logs but most importantly we need to make money.  As I place positions and values on the top and bottom of the chain, remember that I am only giving an opinion and you may have a different one.  I merely want to help us think a little larger so we may improve our incomes.

When we saw green lumber and then sell it green we have the least potential of making the most profit.  Although when we sell it dry to a manufacturer we move up the chain a little higher.  But it’s when we produce a product from our lumber that we have sawn and dried that we move much further up that chain getting us closer to the top and we all want what is at the top!  To re-emphasize the point: when we sell our lumber green we don’t reach the true potential that the lumber is capable of producing.

So the idea is to take your sawn lumber and get as much profit from it as is possible.  Here are some examples of what I mean:

Example:  Green Hardwood Flooring

1) Green hardwood flooring lumber can bring roughly $0.50 per foot.

2) Take that green hardwood flooring lumber, kiln dry it and mill it into flooring and now it brings $1.80 per foot

3) Now take that milled flooring installed and finished in a house for $8.00-$10.00 per ft.!

Wow!  That’s a big difference going from $0.50 per ft. to $8.00 per ft.  A total increase of 1,600%!  Try doing that in the stock market!  And you can do this every day.

Example:  Grade Red Oak

1) FAS is selling for $1.00 per ft green and $2.00 per ft dried to a Cabinet Shop

2) When it’s made into cabinets it brings $10.00 per ft.

Again, the increase is substantial at no less than 500%

Example:  Pine Framing Lumber

1) Green it brings $0.30 per ft and $0.45 kiln dried

2) Frame a house with it and you’ll get $1.50 per ft.

So what could you do that would include all of the finished products that I mentioned?  The answer is, build a house.  That’s right, build houses.  Sure it requires you to learn things that you might not know at present, but you can learn to do every process. There are books and DVD’s available to teach you every process to complete a house.  Every time you put labor into building a house you get top dollar, for every stick of wood that you use in a house you get top dollar.  Just remember, it’s like everything else in life; you simply do one step at a time.

Have you ever passed by a house and upon seeing the price say to yourself “That house is not worth that much money” yet they sell everyday regardless.  You can sell things that bring more money than you might think they are worth when you participate in the house building market.

Think about this, if you know 10 building contractors and you give them your best sales pitch to use your lumber, the laws of sales averages says that 1 or 2 will use some of your lumber and the others will purchase somewhere else.  But if you are the house builder you’re going to use all your own lumber which will include that flooring, those cabinets, and that framing lumber we talked about earlier.  Now we’re talking about making some real money ~ getting to the top of that chain.

Now you may be thinking of all the things you might need to make this happen.  Firstly if you don’t have a sawmill then obviously we can help you with that.  Secondly, you might be thinking you need a big planer to make framing for the houses.  Well, no need for a planer.  Our edger makes that job simple since it uses straight running wide belts with inline moveable guides to create straight lumber with accurate width dimensions.  Saw the lumber 2” thick and as wide as possible, stack and dry to 19%, then run them through the edger for the dimensions you desire.  The lumber will be better than anything you could purchase from a building material supplier.  See there, I’ve already given you already have your first competitive advantage over the competition~Superior Framing Lumber.  That sells houses!

I will leave you with some points of advice from my experience:

1) Let a woman decide which wood and colors to stain in all rooms because you will be selling to a woman.  Wood is not like sheet rock where you can change the color at anytime with some paint.

2) Remember to know and to follow all building codes as this is important to the banks

3) When you have someone interested in buying the house the bank will order an appraisal and another competitive advantage you will have over the competition is that your houses (because of the lumber and flooring) will typically appraise for top dollar.  This is important when people are in need of the bank to finance most of the amount of the house and most banks are only loaning 80% of the appraised home value.  So if you are selling it for say $200,000 and the bank appraises that house for $230,000 then the bank will lend on 80% of $230k.  Another ‘Competitive Advantage’.

Even if the market is suppressed as it is today, it is better to have a finished product for sale than a raw product in a suppressed market.  Now is the time to prepare for the upcoming improving markets.  Just take one step at a time.

You might even start with something simple like a portable storage building or bunk beds, maybe even stands for aquariums.  Work it around things you like and can do.  Before you know it you will have grown into larger projects and a wider variety of products.

Until Next Time,

 

 

aka... the "Saw Doctor"
Co-Owner CooksSaw.com
Leaders in Bandsaw Technology!