Managing The Small Stuff
Alberta portable sawmiller Don Allan finds that marketing savvy and mechanical ability are prerequisites to running a successful operation.
When sprinter Donovan Bailey competes in a 100-metre race, he knows that the race can be won or lost by fractions of a centimetre. The same is true for portable sawmill owner Don Allan, who understands that the line between profitability and insolvency is just as close in his business.
The cellular phone rings constantly and is practically glued to Allan's ear all day at the sawmill site. But he wouldn't have it any other way, given the peaks and valleys Lola Lumber Ltd. has experienced since it was founded two-and-a-half years ago.
"We're running a pretty strong business here," Allan says. "For the average person coming in, we may look like a small-time outfit, but we are definitely running with the capabilities of a larger company."
A few years ago, Allan found himself at a personal crossroads, and decided to try something completely different. He and his brother established Lola Lumber Ltd. in Red Deer, Alberta, centered on a 35-hp Wood-Mizer LT40 Super portable sawmill. The name "Lola" stems from their philosophy at the time, which was "Lots Of Laughs And Lumber". Allan had a forestry background, but not in sawmilling. His brother Dave was a golf pro.
"There were lots more laughs going on in the first year than there was lumber," says Allan. He decided to become more serious about the business, so he bought out his brother. He has made a few rookie mistakes and has learned many hard lessons. Yet, he has survived. In fact, he is about to embark upon a business expansion. There are certain ways to distinguish a hobby portable sawmilling business from a commercial venture. The first is the owner's ability to establish long-term contracts for every scrap of wood passing through the yard. Aggressive marketing is essential, and company profit can come from surprising sources.
"For every hour that the sawmill is run, I probably put a half hour into the marketing, collections, or staying on top of the books, he says. "I can tell you any day, at any time, what my cost is on any type of product. We've got total control of it, we are completely automated, and computerized for cost control and inventory."
Their primary products are large squares in the 6"X6" to 12"X12" range. They do produce dimension lumber, but it is as more of a mill byproduct. They don't even try to compete with large-dimension sawmills on these products; instead, they often operate as a broker and simply buy small lots of dimension lumber elsewhere to fill a customer's order.
Because portable sawmills use bandsaw technology, sawmill owners achieve excellent quality and wood utilization, but sacrifice productivity. Therefore, the success of a portable sawmill business usually depends on how the company manages its small wood.
"It's the smaller stuff that will make or break a sawmill like this," says Allan. "It's the difference between a hobby and someone like us who is trying to get into the business." Lola Lumber Ltd. has long-term contracts for their first cut, second cut and sawdust, and has enough business to carry them for a full year.
"By the time everything washes out, your profit sits in the scrap lumber," Allan says. "We'll do pretty close to $70,000 this year on firewood sales alone. And that's not a market you'll see too many other sawmills working."
Allan also understands the danger of putting too many eggs in one basket especially when manufacturing custom-cut lumber. They almost became a victim of the "Asian Flu" when three of their four major contracts to Japan turned sour in one week. They were left holding the bag on $70,000 worth of custom-cut lumber. Because he could find no other market for the lumber, he ended up donating the lot to a local non-profit group.
"We don't cut anything now unless we know it is for a market we can sell," says Allan. "We get a lot of stuff pre-paid. We at least get a down payment. It's C.O.D. on almost everything we sell, and there will be no more terms."
Since the Japanese economic fall-out, Lola Lumber has managed to find another very lucrative niche market using a specific wood species. This is another key to their success: they have found a niche market, have kept it a secret, and are selling as much quality product into that market as they can produce.
They have had as many as 15 full- and part-time employees, prior to entering a company expansion phase.
Allan says they are pleased with their decision to purchase a Wood-Mizer portable bandsaw. As a company, they did significant research before making a purchasing decision. What capped the deal was Wood-Mizer's long history in the business and their after-sales service. The company is headquartered in Indianapolis, but has a western Canada office in Salmon Arm, BC.
Allan says Wood-Mizer's staff have been very supportive with troubleshooting, and have provided excellent training. Yet, it is necessary that those running the bandsaw have a lot of mechanical ability, or at least have someone on staff with plenty of mechanical know-how.
"I'd say 90 per cent of the problems we have with it (the bandsaw) is blade maintenance," says Allan. "You have to understand how to sharpen blades and set the teeth." He and his staff have taken advantage of additional training provided by Wood-Mizer for blade maintenance, and it has paid off handsomely.
Another important investment Lola Lumber has made is the purchase of a John Deere 8875 Skid Steer loader to replace a forklift and a front-end loader. It is among the largest horsepower models in this equipment category, and they have the ability to put calcium in the rear wheels to lift more weight. They have three attachments for it, a log grapple, pallet forks and a bucket. "It runs as much as the sawmill," says Allan.
An important decision for Lola Lumber was the purchase of a John Deere 8875 Skid Steer Loader to replace a forklift and a front-end loader.
Lola Lumber sells most of its products within a 150-km radius of Red Deer, as that is where their best profit margin is. They have started to develop markets in Montana, and sell about five per cent of production to Australia and New Zealand. Their sawmill expansion will focus primarily on the purchase and installation of an edger. They expect it will increase their production between 30 and 40 per cent, and will create full-time employment for two more workers. Allan has estimated that it will pay for itself in less than a year.
They also have plans for a scragg mill, a chop saw line and a small wood-burning co-gen plant to help generate on-site power and heat. They will burn short wood pieces that are too small to sell for firewood.
When asked to provide some sound words of advice to anyone thinking of starting a portable sawmill business, or wanting to improve a faltering business, Allan says: "If you are going to get into this business, and you have to borrow the money to do it, then you had better have some long-term contracts. You'd better have some back-up plans. Don't sell everything to one company. And if you are customizing anything, get your money up front. Make sure the money is there before the wood ships out."
This venture may have started out with a few laughs, but after a lot of hard work - particularly in the marketing end of what can be an unforgiving business - Allan is now laughing a lot harder, all the way to the bank.
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