Profit

[arboriculturist]

On 23/05/2019 at 20:33, Big J said:

Producing and selling firewood is only really viable if you are one end of the spectrum or the other. It works well for someone with a transit, a chainsaw and a splitter. Very low overheads and earns some beer money.

 

Or if you are on the other end, with a very fast highly automated processor, loads of space/kilns for drying and an efficient delivery method. You want to be processing upwards of 1000t/year really. 

 

It's the folk inbetween where I don't know how they do it. Not enough to live on really, but enough to require significant investment in machinery, stock and yard space.

 

Firewood is selling the unprofitable to the ungrateful, and it's worth remembering that. 

 

As regards, profit, someone once said to me to aim for your business to be 27% profitable after all day to day costs. It seemed like an arbitrary figure at the time, but over the years, it's rung true. So on that basis, you need to be turning over £100k on firewood for a £27k salary. Doesn't seem worth it to me, to be honest.

A profit of 27% would be diabolical were you an Electrician with just a van full of tools but when you talk about the timber / forestry sector it is of course a whole different ball game. With machines and equipment costing 10s of thousands then the figure of 27% net profit is looking much more realistic. Taking a look at your accounts generally demonstrates how the business is running and I know in the past our net profit has been well below that figure!

[Big J]

4 hours ago, arboriculturist said:

A profit of 27% would be diabolical were you an Electrician with just a van full of tools but when you talk about the timber / forestry sector it is of course a whole different ball game. With machines and equipment costing 10s of thousands then the figure of 27% net profit is looking much more realistic. Taking a look at your accounts generally demonstrates how the business is running and I know in the past our net profit has been well below that figure!

It's what I aim for with my contracts generally, or a bit more. That's once machine costs are paid, contractors paid and landowners too.

[monkeybusiness]

On 27/05/2019 at 17:31, ash_smith123 said:

You're bang on.
We started with a £6000 investment both working full time. Having to pay rent and finance any bit of mechinery we needed and built it from there but like you say even now having all the gear pretty much paid for it's still hard to make a tidy profit only doing firewood.
I look at the 3/4 decent sized firewood producers in a 30 mile radius from us that have started up since we started and they are all on farms with massive investments (one in the region of £750k in biomass boilers and firewood equipment in the last 2 years) and I just don't know how they think they will make enough money to pay for the equipment let alone any wage. One thing is though they are all on daddy's farm, with daddy's tractor, telehandler, no rent, no business rates, insurance already payed for, woodland on the land and as much land as they want for storage. We are looking to move into a slightly bigger unit/yard and there isn't anything available in the size we need for under £50k a year rent and rates. So I can see when you take all the above out of your monthly outgoings you might actually make a profit not doing too much firewood on daddy's farm.

I bet there are grants involved somehow on investments of that scale

[gdh]

1 hour ago, monkeybusiness said:

I bet there are grants involved somehow on investments of that scale

Not sure about the rest of the UK but there's been a lot of grants the last few years in Wales. Usually around 40% so the chances are pretty good they've had one. 

 

We've gone for 2 in the last 10 years and they're obviously a big help but I'm not sure I would go through it again - the paperwork is horrendous as an understatement and there's a lot of conditions attached; you have to create a job, machinery has to be new, multiple quotes through specific websites, keep everything for 5 years etc. On top of that we had to start a separate business as agriculture is exempt and there's still a couple of loans to pay off.

 

Obviously that's no issue though, life is easy on 'Daddys farm'

[gdh]

I'm not sure if the 27% profit works with a business like firewood, in reality we're all trying to make as much as possible (but probably coming out way under) rather than having a target figure.

 

Ours varies from year to year but it's never got that high, I expect we're like a lot of sellers where we've got x amount going out each month on overheads regardless so it's more dependant on sales than margin per cube.

 

I tend to do all my costings with myself in at a basic wage then if we make anything on top it's a bonus, which admittedly usually gets spent on wood anyway. 

[arboriculturist]

45 minutes ago, gdh said:

I'm not sure if the 27% profit works with a business like firewood, in reality we're all trying to make as much as possible (but probably coming out way under) rather than having a target figure.

 

Ours varies from year to year but it's never got that high, I expect we're like a lot of sellers where we've got x amount going out each month on overheads regardless so it's more dependant on sales than margin per cube.

 

I tend to do all my costings with myself in at a basic wage then if we make anything on top it's a bonus, which admittedly usually gets spent on wood anyway. 

GDH is correct, a lot depends on sales. Last Winter was poor compared to the previous year and as some fixed costs don't alter, the Profit Margin was reduced due to less sales.

 

We have almost reached critical mass - i.e. no further investment is required to increase turnover, however being in a rural area we are able to saturate the market and therefore it is very hard to increase sales.

 

It is not as though we can introduce other products to grow sales, the demand is Firewood and anything with lower value is not viable to deliver free. Always open to ideas though.

Edited May 28, 2019 by arboriculturist

[ash_smith123]

Not sure about the rest of the UK but there's been a lot of grants the last few years in Wales. Usually around 40% so the chances are pretty good they've had one. 
 
We've gone for 2 in the last 10 years and they're obviously a big help but I'm not sure I would go through it again - the paperwork is horrendous as an understatement and there's a lot of conditions attached; you have to create a job, machinery has to be new, multiple quotes through specific websites, keep everything for 5 years etc. On top of that we had to start a separate business as agriculture is exempt and there's still a couple of loans to pay off.
 
Obviously that's no issue though, life is easy on 'Daddys farm' [emoji6]

Not easy.... Easier [emoji57]

[gdh]

9 minutes ago, ash_smith123 said:

Not easy.... Easier

You've probably got a point, we only expanded rapidly because we could rent machinery and sheds off the farm business. There's realistically not many other savings though if you actually cost things properly. We've somehow got ourselves in the position of the firewood supporting the farm business but I think that's more issues with farming than success with firewood if I'm honest.

 

On a side note if you're looking at 50k rent wouldn't you be better off buying a couple of acres and building a shed or is that a non starter with planning? Just thinking that's 250k over 5 years and you could do an amazing yard with that.

[ash_smith123]

You've probably got a point, we only expanded rapidly because we could rent machinery and sheds off the farm business. There's realistically not many other savings though if you actually cost things properly. We've somehow got ourselves in the position of the firewood supporting the farm business but I think that's more issues with farming than success with firewood if I'm honest.
 
On a side note if you're looking at 50k rent wouldn't you be better off buying a couple of acres and building a shed or is that a non starter with planning? Just thinking that's 250k over 5 years and you could do an amazing yard with that.

Yes it's a non starter at the moment with planning being a major issue and having the money upfront to do something like that! We would need a unit 14/15,000sqf minimum really and you probably wouldn't get much change from £100k doing a concrete base and putting up a unit that size maybe more, plus putting 3 phase electric into it.
Land is also quite expensive around here, a nice plot with a few old barns on it came up last year for £375k. On a commercial mortgage we'd need the best part of £150k for a deposit. Plus your £100k+ to build a unit. I wish we had that much cash to throw at it [emoji23]

[arboriculturist]

The original poster said:

'My main job is landscape gardening etc but wanting to do less of this and focus more on the firewood instead but is it worth the switch due to running cost and the price of timber increasing if you can find it?'

Surely to move from Landscape Gardening to Firewood is madness if you live in an area where people have money.

 

It seems that the general consensus on this thread is that even on a large scale, retailing Firewood is not an attractive business as far as profit margins go, even when you become a 'large' producer. A huge investment is required in machinery, running costs are high due to  the amount of labour required, fuel, maintenance, delivery costs etc. etc.

 

Those that kiln dry the wood are now faced with the recent spate of timber price rises, which has dramatically increased the cost of the drying even those on the RHI tarriff. Timber price rises have also reduced our margins, as most of us have been unable to increase our prices in line with the rate at which the timber price has risen.

Actually finding timber is getting harder and harder as we all know, most that is harvested is now going to the biomass electricity plants.

 

You start to wonder if due to the cost of firewood now, people are starting to burn less of it.

 

I havn't heard of anyone new starting up new Firewood businesses for years now in our region of the country, but plenty throwing in the towel! 

 

 

Edited May 29, 2019 by arboriculturist