I built up a good size landscaping business and sold it years ago. One of my biggest tips to young guys getting into the businesses is to know exactly what each piece of equipment actually costs to run per minute/hour/day/week.. price it including depreciation and maintenance costs per year decided by the hour. Always helped me bud jobs and not loose my shirt. It’s awesome to see a true professional like yourself break down the details like you did.
Love a good numbers breakdown video. Of course we have to remember to figure tax implications, which of course will be different for everyone. Sometimes it's ok to have a loss if it's due to depreciating equipment that you would like to own anyway. As for wood cost it would be difficult to harvest your own logs for less than 125/cord if your time is worth anything, assuming you're figuring clean up/brush stacking time, although I'm still doing it because I'm removing standing dead, blow downs, and thinning that needs done anyway. As for what you should charge, well I would say price it by the face cord and let the customer decide how much they want to buy. If your cost is 60/face cord minimum would be 135 + delivery because you have to figure not only your time, but you will be sitting on that wood for a year, so you need a return on that money you'll have tied up for that year. Also need to think about your supply of seasoned wood, if you only have 20 cord seasoned ready to sell then up the price because there's no hurry to sell and you'll know the ones who buy are willing to pay for your product and those are the customers you want. I put right in my ads "if you're looking for the cheapest thing that will burn, I'm not your guy" because I produce and sell a premium product, I'm not making boiler wood. Keep up the great videos, I really enjoy them.
I used to make maple syrup for 30 yrs as a hobby, anywhere from 5 to 15 gallons. I kept a couple and sold the rest ,the amount of time spent collecting, boiling, bottling and cleaning up was a crazy amount of time and nothing hurts more when someone says they can buy pancake syrup for less at Walmart.
Ken. I sell auto parts on line for my main source of income. When someone tells me they can get it cheaper somewhere else I don't let it bother me. Same with firewood. Because someone will come to me and get it because they know they will get a good product that will last..
Ken I can understand your pain, yes it hurts. People have it way to easy now due to all of the machinery. It is also the same when it comes to growing gardens. A lot of time, hard work and sweat, but damn it sure tastes a lot better than Walmart. When I grew up we ate out of the garden not Walmart.
Just purchased 160 acres in Southern Manitoba, Canada. I'm looking at getting into the hobby/buisness as well. I've already got the labour with 3 boys that are eager to make some money and help out. This video is exactly what I've been looking for. The comments are excellent as well. Thanks so much for posting and keep up the great work with the Chanel.
Appreciate your time doing this exercise. Glad we have a number cruncher in the firewood group to bring prospective to this hobby/business we are so passionate about. Stay safe.
I can add a lot more real world expenses to your cost of production. But it only really matters if you are doing this as a legitimate "stand alone" business. We all love doing firewood. But don't get to carried away with the numbers if this is just a hobby.
After reading comments and digesting some of these data points I have questions. 1) Nowadays more than ever I look at firewood as a commodity. I wouldn’t be surprised if in the near future we are using FW as such 2) some commenters value there time like they are the potus. Me, I look at it as 1…heat, 2…exercise/health, 3…family time 4. Yes family can do this together. Manual labor is neither above or below anyone. 4. Commodity. This may be moving up the scale in coming months/years. 3) Depreciation??…again nowadays for the equipment you have there is very little if any. Limited workforce, astronomical inflation, artificial shortages. 4) This winter when natural gas prices double, propane triples, electrical brown/blackouts get more widespread, firewood and wood heating appliances and generators are gonna be gold. 5) Having land large enough with firewood resource and area to use processing equipment become invaluable
Adam, thanks for an easy to understand explanation of calculating the cost of producing one cord of wood. You are an enthusiastic teacher and made a great video for us out here in 'viewer land'.
Hi Adam. Great video! As a CPA, I was very into the numbers. Don’t forget about Fed and state taxes, local earned income tax and of course everyone’s favorite, Self Employment Tax. Also have a couple types of insurance. When I’m behind a desk all day, none of those costs matter in the end. I can’t wait to get on the tractor. If nothing else, it’s therapy. I’m sure tractor / firewood therapy is cheaper than professional therapy! Keep up the great videos.
You could do what the rich do, donate all profits to an entity that you or an entity your control owns. The entity could be a exempt non-profit, such as those recognized by the IRS under 508.c.1.a, conventions, churches or their auxiliaries. Or you could remove your "self" from the jurisdiction as a tax (contribution-imposed [1898 Legal Definition]) slave and renounce your citizen-ship by changing your political status from a 14th amendment citizen to a state national. Non-Resident alien to the US INC. Or you could capture your straw-man completely with a proper UCC-1 filing and funnel all your sweat equity into an entity that again is foreign to the US Inc. Remember folks, when starting a business, first realize that we live in a merchant system (admiralty law.) It's based on contracts, contracts are voluntary and require consent. Including dealing with PRIVATE, FOR PROFIT, entities such as US Inc, your STATE INC, and your Local municipality. They all have DUN and BRAD #'s and operate under commercial "codes." Just don't operate under their "flag" and instead operate your own "vessel." Keep your sweat equity for your self, don't be a peon. Great video.
Paying yourself is always a battle if you choose this as a hobby and not full/part time employment. If you are depending on the money from the firewood to pay for the equipment, which is used for other things on the property, then adding an hourly rate for employment is tough. The clients I serve in my handyman/mowing business are less fortunate than most, and I provide those services to offer some dignity and peace of mind knowing they are cared for. If I charged what I was worth, then I couldn't help those less fortunate.
Daniel - I too served the less fortunate community where I lived, until recently I sold the accounts. Yes, I made some extra money that I reported as self-employed,; however it got to a point where my customers were getting too dependent on me...i.e. picking up their mail, picking up a pizza for them, driving their car just to keep it operable, and last turning around from on my way to my real job b/c the customer fell and needed help getting up. I sold the accounts as a Win, Win, Win. and I haven't looked back. I transitioned into the firewood Biz as a hobby/Biz and I am getting ready for 23'. I do want to pay myself, so this is why I am learning as much as I can as time moves forward. All is good, with what we do! CBJ
Adam… I would be scared to calculate the cost of my woodworking hobby…. 1. I have a lot of tools, gadgets and equipment. Some of it is homemade or cheap/used/refurbished. But, there are several big ticket items involved. 2. I am very slow and meticulous when making things. There is no such thing as a weekend project for me. Most items are one-offs. So the output volume is very low. 3. I never sell anything. Everything I make is for personal use, a gift or a favor. The only payback is satisfaction, pride and love. As a result, the cost is inconsequential to me. Because… the rewards are priceless!!! However, the three basic drivers of cost (labor- materials- overhead) do matter to my wife. If I ever figured out a cost on a project… she might make me give up my hobby! Thus, I carry the fear to attempt a cost analysis. Thanks for putting this together… it reinforced, that my fears are justified!!!
I agree. I sell a cord for $450 minimum. That doesn't include delivery or even more stacking. A customer just told me that she values a reliable firewood guy just as much as her hvac and plumber. I dont understand how people can sell it for so cheap.
While nothing about your math is wrong.. who is paying $300/cord.. at the point of paying $300/cord you may as well be using oil, gas or electric heat for that matter just for convenience of not having to worry about a wood stove. I cut and burn wood to save money by not having to use the other mentioned options. If I had to pay $300/cord I would just use my electric heat.
@@codydaldo1537 my buddy sells a cord of wood, delivered for $600 in N.Va. He's already informed his customers prices are rising due to fuel cost. I'd never pay that much but I guess some folks don't care.
@@MAM-cy3yy YIKES... I think I would be quitting my job and cutting firewood full time if I could get a steady supply of buyers for $600/cord! That's insane people would pay that. Around here the going rate is anywhere from $175-225.
Good morning Adam - thanks for taking the time to crunch this for a lot of folks - I think it has helped put some perspective on it for folks. I don;t think you have captured all the costs that I would have, but I think you have provided a basis for folks to perhaps follow your outline to do their own cost exercise and add the other costs they have, to make it more specific, or accurate, to their specific operation, including what they would cost their own labour out etc as you suggested. Great stuff- thanks for taking the time to do this for everyone - wow, the little guy is getting big! Cheers!
Excellent break down. We sell firewood also. One tip I was given along time ago is that if you are always out of wood your charging to little for it. We charge what we need to make it worth while for our operation. $114000 for your equipment isn't bad at all. That equipment will pay for itself 10 times over plus make you all the firewood you ever want. We use ours on jobs we do. Then use it to make firewood.
Imho, the labor cost has less to do with what you think your time is worth and more to do with what the market would pay to hire someone to do the work, $20 per hour seems fair to me. That would add $55.50 to your cord price. My market gets $180 per face cord so $540 per cord. You didn't include the cost of the land in your equation. You have to buy or rent space to work. You need a lot of space to receive, process and season wood. Michael
Wow. Around here a face cord is 50-65. And you can get deals buying a full cord or even multiple cords. We usually get free stuff to cut and split, rarely buy firewood.
I was self employed for years and the thing I see a lot of people do, is not put enough vale in their time. Not just anyone can process wood, at the level you do. The wood is sized alike and well seasoned. That is a high quality product, that can be seen when burning. If you've ever tried to burn green wood or had to reprocess it, after you've paid someone to do it, then you'll understand. You have to pay income tax and figure a portion, of health insurance, because you probably can't get WC insurance. Charge the going rate, for the same quality product, and then decide how much is profit and how much is wages. I really enjoy your channel.
I thought the same, last time I used a log splitter it was hard work and almost lost a finger... burning a cord of firewood is equivalent to $675 worth of oil at today's prices. $100 delivery... the inconvenience of stoking a fire all winter... you are talking maybe $450 per cord of seasoned hardwood delivered at today's prices... After all the intangibles he missed that is best $200 per cord of profit, at 4 hours per cord how many cords could one man process in a season? 100 in a 100 days? $20K profit.
Great video Adam. Knowing your overhead is critical to running a profitable business. I love your analytical approach. One of my videos was about how much wood an IBC tote holds. I got into some number crunching and had to make reference to you in the video. Love your channel!
I haven’t had time to read all the replies but Unless I missed it, Adam, you missed one unique piece of the equation that applies to you and other RUclipsrs - your work, be it firewood, mowing your lawn, whatever, is also generating income. That’s what makes this medium so amazing and it also requires your “time” but all in all, it is a piece of the equation. And I have to imagine, there are certain tax advantages as well. Keep up the great work - I really enjoy your videos and subject matter!
Great discussion Adam. Hobby vs business is a big difference. The true cost of running this machinery is much higher. My excavator, tractor, truck, trailer, and a lot of other stuff really adds up. Annual maintenance, repairs, insurance, taxes, etc. Office time, marketing, daily wood yard cleanup and maintenance, is all part of producing a cord of firewood. Delivery expense, delivery loading and unloading time. Dump trailer insurance! This is important, and not covered on most auto/truck policies. If this is a hobby, most of the true costs of firewood production are ignored, which is OK. I'd like to see a cash flow analysis of how someone starting out buys all this stuff and actually pays for it as a stand alone firewood business. Usually these assets are purchased as the business grows over many years. Buying several loads of logs to get an inventory established is another cost, and ties up money for months.
@@billypitts6368 My deer meat is the most expensive thing in my house. Guns, Bows, Tree stands, Food plots, Quad, Property, and etc... please don't share this with my wife.
@@billpendley2561 ha, she knows. My wife knows about my boat, snowmobiles, and 30 fishing poles. At least snowmobiles are multi purpose for trail riding and ice fishing.
Great job of getting in to the details on this one, Adam. It certainly puts firewood sales into perspective. And it's great to hear it from an accounting point-of-view. Thanks for sharing!
Thanks for the video, it was great to see calculated, what costs really are! I´m making firewood here in Finland, home of Japa. I also think that this a good hobby and you also get some money from it. I don´t have big machines, just decent chainsaw and hydraulic splitter. Electric woodprocessor and small tractor with front loader is my aim in the future, cost would be approx. 30000 eur/$. So far wood has been coming from my own forest. Keep up doing the good work!
From what I’ve seen you sell your firewood for before, your prices seem pretty fair. Fair enough for you and the customer. It’s definitely nothing you will be able to live on, but you put your hobby to good use. You also have to factor in the delivery of the wood. Remember, people will always pay you more for excellent customer service, convenience, and quality, which you provide. I think you are on the right track.
@@tompurvis1261 I also started in the late 90s, built a website for skateboarding and snowboarding photography. Back then you couldn't upload videos or clips, instead it was looping 3 second animated gifs 🤣
thank you, that was interesting for about 2sec, no i di watch it all, but it dose show anyone who is interested in setting up a small business, thanks again
Great video it was nice to see the true accountant side to help understand the cost. Figuring depreciation is sometimes confusing. In north east Ohio I see a cord of wood going for $300 to $350 delivered.
@@MAM-cy3yy I know we do it’s my main heat source, but I haven’t started selling any yet, seems like everyone around here had a roadside wood stand, and guy down the road must cut and sell 300 plus cords a year.
I use $20 per hour for time when doing things on my woodlot. Like you this is my hobby. I don’t sell anything. It’s a lifestyle thing. Some do the beach in the south, some golf, some go fishing…we love doing firewood.
@hometown acres, I agree with you Roger and if you don’t sell whatever you are making to at least pay yourself a typical “market driven rate”, call it a hobby because you are not covering the real costs.
I see some comments of people saying $20 or $25 per hour to pay yourself. In my opinion, that is greatly short changing yourself. Your accounting job, I'm guessing pays more than that. And they probably provide your health insurance, life insurance, retirement, social security, etc. The real cost the employer pays for your time is about double what you actually see. So I believe, at minimum, you should pay yourself $50/hour. I did a video about why I DON'T sell firewood. And this is the exact reason. I can't make enough money to make it worthwhile. I have a 40+ hour a week job and a family. I have enough to do that making a few bucks from firewood isn't worth it. I probably didn't explain it well enough. But I just don't see the value in cutting, splitting, and selling firewood. Good video!
Awesome video with great attention to detail. I would add that your analysis only includes "supply" factors. The other element for pricing lies in the "demand" side. If the market in your area is rich with $200 per cord firewood, you'll not be recouping anything by pricing at $350. Often times the market cares nothing about what your costs are. The good side is that with the price of energy skyrocketing, that cord of firewood is bound to cost more in a year. Good luck and keep up the great videos.
Exactly! If you want to sell your product the selling price will be based on what the market rate is. The real question is are you willing to do the work for the market rate? Ohio Wood Burner talks about this all the time and he is correct, that's why he is always looking to create a higher value product and not compete with the mass cord wood producers.
From one accountant to another - GREAT video, Adam!! :) One thing you left out was - How much do you sell a cord of wood for? In the end, for you, it's really not all about making money with this - it's more about getting out and doing something you enjoy and selling the wood to offset the cost of equipment that you would like to have anyway. Curious about what kind of accounting do you do? Public? Corporate? etc.? Your fellow accountants probably think you're nuts doing all the things out at your property that you do. You should hire that sort of thing to be done!! When I worked for one of the "Big-8" years ago, everyone thought I was a little off because I drove a pick-up truck as my daily driver. And they'd kid me about being on "This Old House" as I was rehabbing my 1915 home I owned at the time. Keep up the great videos! Always enjoy seeing what what you're up to.
Phenomenal video. I ask the hobby versus business question to one of the silver/gold refiners to figure out if he could cover his expenses w/o RUclips and never get a straight answer.
I also built a landscaping business and am currently building a firewood business, and one of the professional publications I used to read suggested you "rent" your equipment to yourself and this would help understand your costs better, this seems to me was much more extensive than your analysis, it would include all of what you did plus air filters, oil filters, oil etc. This added category of the cost of maintenance makes a difference and setting aside those real costs allows you to have the cash flow to maintain your machinery. I agree that firewood especially in this time is under priced or a bargain for the consumer. We should all work together to get the message out about local, sustainable, carbon nuetral energy.
Great video. I appreciate people that show the numbers. A few points - dont forget to include taxes and insurance in your costs. The real hourly rate to operate, what you are calling depreciation, would also include the costs of maintenance and repair. And the $175-ish cost for one cord was from the log pile to the totes. Didn’t include your time and equipment costs to get the logs to the pile nor your time and equipment costs from storage to final sale
I raced alcohol dragsters as a "hobby". One racer said it cost him $75/run. I did a detailed cost analysis & mine was $3500/run. "Accountants" can make numbers do anything they want, but I commend you for a FAIR, middle of the road approach, to help others considering getting into the "biz". Enjoy the channel, but worry a lot about the "pond".
Well thought out and brilliantly executed. I personally would love to see you get your channel far enough along that you can do this full time. I have no doubt you’ll get there. See you on the next installment.
Did you see the Werk-Brau rake that Mike @ Outdoors With The Morgans put on the mini-ex? That looks perfect for firewood handling. Going to see if I can afford one on Monday :)
Let’s be honest about firewood. You can only make money with volume or you have to have a niche product that you can capitalize on or is your main money maker. If you paid yourself $20/hr plus insurance and workers comp you would have to make $500 per cord if you are delivering it. Most markets are not going to support that. You can definitely make a good living as a firewood producer but the reality is you are not getting paid for your real value. You have to love making wood to make it worth it. Just one other note that no one thinks about is to get maximum life of your equipment you will have some hefty maintenance bills. Hydraulic pumps fail, engines need to be rebuilt. You can’t figure your cost solely on depreciation. A percentage of profit has to be set aside for the unexpected break down. Good video though. 👍
Interesting video. I'm not sure that there is a right or wrong answer, but certainly variations in how the answer is arrived at in your situation. Many assumptions. As for your labor, I'd be inclined to view it from an opportunity cost perspective. In other words, what would you be doing with your time if you weren't processing wood and what would that time be worth? An intangible that you can't place a value on is the health benefit you are deriving from staying active and performing physical labor. It differs greatly from pushing a pencil or punching keys on a computer while working at a desk. Good analysis.
Yeah sounds like you folks have some real issues going on over there. We are not to far behind. Soo…is your gubment cooking the books on your inflation numbers too?
As always, well done Adam. It's refreshing to see other like minded people run the numbers and be realistic about them. When I ran my own company, I knew how much it cost me to open up every day, and my time was worth a minimum of $30/hr in 2019. How much money could you command operating your mini-ex? Use that as a guidepost, but I think 3.7 hours to make a cord of firewood you should be able to secure about $35/hr on top of your cost of $167. That'll put the sold price at around $300 which is a nat'l average.
This is why i started buying firewood already processed after i calculated it up. Cord firewood 180$ delivered and split and done. Cord of slabwood is 20$. Cheers
Hey Adam-I’m curious which exercise you enjoyed the most. Crunching the numbers and making the video OR the actual process of running the machines while also creating a product? Appreciate the VALUE you strive to bring your viewers! Jeremy Carr Hamden, CT…..by way of good ole Memphis, Tennessee!!!
Love that you took the time to discover ur worth doing this as a hobby. It's been done on various channels, with various total cords and various schemes of equipment. To me, it all crunches down to 40 to 60 per hour for ur time involved minus all the real expenses you've given. 40 to 60 per hour is awesome for most people or a side hustle. The real question is??? Why do I watch firewood videos? It's because firewood is like building a better mousetrap or bigger watermelon truck. It all seems to make sense to upscale ur business, but really, all ur doing is more volume to make the same 40 to 60 per man hour. Every business in America is based on the same stuff. If you go to an auto repair shop, they charge you 90 to 100 per hour on the mechanic's time. Guess what they pay the mechanic? 25 to 30 per billed hour. The rest goes to overhead. Land and lease costs, healthcare, FICA, and anything else the government can screw small businesses with. Also, these numbers permeate most businesses. The bigger businesses like Walmart, Apple, Facebook, Google, can work with smaller margins because they are huge. Anyway, sorry for the ramble. Thanks for ur time on the numbers. 40 to 60 per man hour That's what is costs to stay in business these days. Inflation anyone?
You have a great start for your Profit/Loss(p&L). There are other factors to consider what is right for you. Location? What is the average cord cost for your area? Your competition? Is there a less expensive way to buy or even get logs for free? Tree services have to pay dump fees? And the list can go on. It all boils down to supply and demand.
Excellent analysis of your costs to produce firewood. For those who don't want to buy any equipment or cut up their own firewood, this video should be truly eye-opening. Also, for anyone considering the idea of trying to make a living selling firewood, this should be a warning video! Factoring in your time spent can make or break something like this, because that cost is highly subjective. If you had a great time doing this, you shouldn't count that cost at all. If this was "work", and you're to the point where you're really only doing it to make a profit on the investment you've made into equipment, then a certain per-hour rate should be part of the equation. If nothing else, this should help people understand why good quality firewood is now selling for $200/cord, in some places. It also illustrates how a guy with a chainsaw and a splitting maul or small hydraulic splitter might be able to heat his own home for very little money, but it's at the expense of a lot of time and labor.
I look at 'cost' of producing firewood in a whole different format: "Principle / Interest" (as in a bank CD). It cost me about $900 per 6 Cord of firewood as the 'Principle' amount invested. Selling that 6 cord at $1,800. That means I am making 100% 'interest' on the 'Principle'. Adam is getting about 80% 'Return' on his $167.75 (per cord; IF he sells at $300) investment. Try getting that kind of 'Return' on a CD at the local bank.
I used to work in IT for a company that was really good at calculating cost per hour to have me available. Using that info they made some rules. That company allowed busy employees to buy their own inkjet printer for their desk. My personal labor cost was so high, they figured within about 10 minutes I would cost more that a new crappy inkjet printer - so we were forbidden to even bother with them (we had corporate LaserJet for most work). Then I learned of the work of Michael Porter of Harvard, his work on supply chains fits right into this.
Great video Adam. I love getting into the numbers because it shows if you're truly profitable or not. One of the best things I ever did for my business was to sit down with my CPA and learn how to run my numbers To be able to set my prices and my profit margin. The way that I would figure what you need minimum is about $35 an hou To break even on labor plus whatever you want to add For profit margin. The basics without going into major details on how I come up with $35 an hour for my base cost for labor per hour is $20 pay plus 75% for workman's comp and payroll taxes. That pay scale is my starting point and that is for a basic labor so for an employee to run all the firewood equipment the employee might be as high as the $30 per hour pay scale plus the 75% so would be up to $52.50 an hour plus profit margin. So there is some labor cost numbers to play with. So any where from $129.50 to $194.25 for labor costs to make a cord of firewood. Plus still need to add profit margin.
Wow! Makes me glad I was a criminal justice major in college! Great job! LOL, I did have to take calculus 1 & 2 to go to pilot training for the AF. That was bad enough!
I think a lot of people approach price vs cost backwards: product costs this much and I want to make this much from it, therefore my price has to be this much. That's great, as long as customers are willing to pay it. Similarly, if customers expect to pay much more, then you short-change yourself if you only charge your calculated price. In fact, your local market sets the price. Your firewood per cord costs $168 plus 3.7 hours of your time to produce. If customers in your area will pay $300/cord, you can make $35.67/hour on it. If they will only pay $200/cord, you can only make $8.65/hour. If your market is at $200/cord and you have to make $15/hour to justify the activity, you have a problem. Just numbers chosen to illustrate the point - market prices vary all over the country.
Here in the UK everyone says that selling firewood is selling your own time. You have machinery to reduce time and labour as opposed to physical labour and time, which maybe about the same cost. Depends on your accounting estimates, I do know however that it is physically demanding. Interesting analysis, do you still wonder why you do this? I did.
Replacement cost of equipment, general maintenance parts and labor, insurance (assuming your equipment is under house insurance at least?) Dump trailer and maintenance on that as well. Time to restock your wood box and ur gate and Doug's, milage and time for any deliveries of wood. So many more hidden costs than just time taken on the tools. Cost of land to store everything, equipment, raw wood, processed wood, consumables on your bundler... replacement totes and preparing them for use, haha I could go on an on
What stood out for me was the surprisingly inexpensive cost of operating an excavator for one hour. Renting starts to look less appealing if you need it over several months each year. Thanks for the heavy lifting.
I figured 85$/ cord for cost of processing bucking and splitting. I get my wood for 120/cord in 8 ft length however there is a adjustment to be factored from 8ft to 16in so i figured my true wood cost is closer to 150$ to yield one full cord. So my net cost is 235$/ cord and that includes 3hours of labor @20$per hour. I add 25-30% for profit. I charge extra for delivery enough to sub contract if need be.
Hello Adam, Good video, Great Explanation! Only thing you missed was, what trouble did you avoid by staying at home working firewood😂 Take Care and Stay Safe 🚜🪵👍🏼🇺🇸
A cord here in New Mexico is on average $350-$450. For quality hardwood I would charge $450-$500 if the local market allows. In Connecticut my cousins would cut a couple cords of wood and bundle them in tiny amounts. They would set up in Beacon Hill in Boston and sell them for $12-$15 a bundle to rich people and sell out in hours. You could try that in the wealthy part of your closest city to bump your income from sales.
Great video. However you forgot Insurance on the equipment, and possibly Liability Insurance. Our Insurance doubled for 2022 from 2021. Insurance is now our biggest expense for our Sawmill operation.
Time is the hardest to figure. If you figure it at minimum wage you probably won't make alot of money. If you factor in the therapeutic value, then the money made becomes better I'm sure. Good video
I do machining, powder coating, welding, fabrication, building (houses, shops, etc) as hobbies and have an excavator, skid steer, trailer. Regarding the value of your time, I'm retired and very much value my free time. I look at it as I could have stayed working if I wanted money. Now, I was obviously at the height of my career when I retired so was making the most I ever did. I worked IT as a manager of a fairly good sized crew. Then there is the whole is your hobby a business. Do you have to pay taxes, unemployment insurance, etc. That would jack it up even more. Because of this I don't "contract" out my work (time). If it's a small job and we're friends I'll do it. If it's not I'd rather point them somewhere else than try to explain that my free time is worth more to me than they are willing to pay. Having said that I've had a few people who were persistent and didn't bat an eye at what I thought would be considered a high hourly rate, and they walked away happy.
Your time value depends on your work options where you live. I would take what you can sell the cord for and subtract the total cost for a cord to produce. Look at that difference divided by your work hours and ask yourself "is this a decent wage." You have also not added in any delivery costs or hours involved in the delivery or loading onto customers trailers.
Great video. I guess my question would be, how much time are you saving with the better equipment vs the additional cost of that equipment? How long would it take you to make a cord of wood with just a chainsaw and a wood splitter, and still buying the logs? Also, meeting supply and demand does come with a cost and sometimes you have to take a hit on ROI to do so if you plan to grow the business. So, my question would also be, hobby or business for you at this point.
Then there is the question if the teactor, the excavator and the teailer brings any other money? Four hours would be around 100$ without any taxes ("moonshining") if working for somone else. I would like to get at least 20$ every hour after all expences are paid. But that is over here in Finland, I don't know your rates and wages "over there"...
I work full time with the railroad. I also have a BBQ trailer I do part time. the trailer cost me 63k total furnished. my product is not the cheapest by any .means. I use quality meats and sides. . I've heard I'm too expensive and thats ok. I say maybe. my bbq is not for everyone. but it's funny to me on holidays I sell out of ribs. July 4th I cooked 110 Boston butts. last Thanksgiving I pre-ordered turkeys and hams. and had to turn people away because I didn't have the room on the smoker to cook all the meat
Supply and demand will set your price. If you’re looking to become a business, you always have to look at future possible barriers and mitigation actions. For example investigate if cherry is more valuable as lumber vs firewood. This is my final thought, I’ll be here to watch your journey.
I think you need to talk about how you sell your wood. For example you could just pile it on the groung and after it has seasoned use the bucket and fill your trailer and go dump a load at the costomer home. If you sell it in smaller quantities then there is more labor in stacking and filling the caddies and as you showed replitting oversized piecies. I've seen roadside stands that sell small bundles, they need more constant attention. I have also seen small bundles on specialized bags sold at retail stores. The amount of labor varies greatly depending on how you market your product. As stated by others you didnt mention taxes and financing cost if you borrowed to purchase you machines. You didnt say what you are selling your cords for. Kinda makes the whole excersize imcomplete. Still a good start at anylising basic cost of production.
That was a very interisting video, im going to have to do the same thing and try to figure out about what it cost me,i may be charging a little bit to low im at 300 per cord picked up, i do also sell bags, i tried plastic streatch and sold very little until i went to bags ,i uped the price a bit to cover the bags, now i sell 20-25 bags a week ,i bought one of the ez baggers and that has cut my time in half ,with 2 people it goes realy fast ,thanks for the great cost video, take care
It really depends on the type of wood as well, but $300 is Fair. I've seen as high as $450 and as low as $200. I love your breakdown of your cost. People need to understand that it's not just a piece of wood.
Interesting Vid, M8, My Father was an Accountant (and a good one!!) he would fret over his balance sheets being 3pence out , and yes im serious, all i can say being British, is i whish i could burn wood to heat my house as our bills for Electric and Gas, have tripled over the last few months , from £114 to £360 a month, because of some Looney in Russia,
114k in equipment isnt that bad considering what you have. Ive got almost that in one tractor. Like you I use it for other things not just getting wood.
I appreciate a number breakdown. I assume you have insurance policies on the excavator and tractor that are not factored in along with an overall larger policy for everything else.
Adam, I was a business major so... thanks for the refresher course (send me a bill for the educationO ) as for what is your time worth, you were having fun so that should factor in , there is only a time cost if it is an oppertunity loss (in other words, what else would you be doing and did during that time frame and did it cost you anything for not doing those tasks during that periond of time_great video, thanks what you did not do say was how much you would take in for that 1.33 chords of wood.
Another forgotten expense is delivery costs. That is, assuming most people that sell firewood also deliver it. The spreadsheet I made up also factors in 'rolling cost' per km (or mile). Rolling costs being fuel (based on fuel rates at time of delivery), tires, oil changes. A separate line included for repair expenses. Then there's labour wages for the driver as well. All of that mentioned has to be calculated for the distance traveled to and from the delivery location. Also, there's the need to define a cord. If you get 16 cords of logs delivered and you sell 16 cords of logs, then you are selling a 'log cord'. But if you are stacking the split wood to a defined amount of 128 cu ft for a true cord, then you will only end up with approximately 14 to 14.5 true cords. So that 12-15% difference becomes an added expense.
Delivery would be a separate business. You’d have to calculate depreciation on the truck, and trailer, fuel, repairs on truck and trailer and your time to load and deliver. Then you can determine how much you should charge for delivery. Delivery is an add in service and should be accounted for separately from the production of the product. Some people come and pick up the wood so you can’t factor delivery depreciation into your cost of producing the wood if you’re not delivering to them
I built up a good size landscaping business and sold it years ago. One of my biggest tips to young guys getting into the businesses is to know exactly what each piece of equipment actually costs to run per minute/hour/day/week.. price it including depreciation and maintenance costs per year decided by the hour. Always helped me bud jobs and not loose my shirt. It’s awesome to see a true professional like yourself break down the details like you did.
I have heard several times that some folks don’t charge enough for their firewood. This helps put it all into perspective. Thanks for the video Adam!
Love a good numbers breakdown video. Of course we have to remember to figure tax implications, which of course will be different for everyone. Sometimes it's ok to have a loss if it's due to depreciating equipment that you would like to own anyway. As for wood cost it would be difficult to harvest your own logs for less than 125/cord if your time is worth anything, assuming you're figuring clean up/brush stacking time, although I'm still doing it because I'm removing standing dead, blow downs, and thinning that needs done anyway. As for what you should charge, well I would say price it by the face cord and let the customer decide how much they want to buy. If your cost is 60/face cord minimum would be 135 + delivery because you have to figure not only your time, but you will be sitting on that wood for a year, so you need a return on that money you'll have tied up for that year. Also need to think about your supply of seasoned wood, if you only have 20 cord seasoned ready to sell then up the price because there's no hurry to sell and you'll know the ones who buy are willing to pay for your product and those are the customers you want. I put right in my ads "if you're looking for the cheapest thing that will burn, I'm not your guy" because I produce and sell a premium product, I'm not making boiler wood. Keep up the great videos, I really enjoy them.
I used to make maple syrup for 30 yrs as a hobby, anywhere from 5 to 15 gallons. I kept a couple and sold the rest ,the amount of time spent collecting, boiling, bottling and cleaning up was a crazy amount of time and nothing hurts more when someone says they can buy pancake syrup for less at Walmart.
"Pancake Syrup". I feel this.
I wouldn't worry too much about that. I bet you can't make baby formula cheaper than China, either! 😂
Ken. I sell auto parts on line for my main source of income. When someone tells me they can get it cheaper somewhere else I don't let it bother me. Same with firewood. Because someone will come to me and get it because they know they will get a good product that will last..
No kidding, firewood is a LOT of work and a lot of time. If one is in it for the money, quit now, it is only get more expensive.
Ken I can understand your pain, yes it hurts. People have it way to easy now due to all of the machinery. It is also the same when it comes to growing gardens. A lot of time, hard work and sweat, but damn it sure tastes a lot better than Walmart. When I grew up we ate out of the garden not Walmart.
Just purchased 160 acres in Southern Manitoba, Canada. I'm looking at getting into the hobby/buisness as well. I've already got the labour with 3 boys that are eager to make some money and help out. This video is exactly what I've been looking for. The comments are excellent as well. Thanks so much for posting and keep up the great work with the Chanel.
Appreciate your time doing this exercise. Glad we have a number cruncher in the firewood group to bring prospective to this hobby/business we are so passionate about. Stay safe.
Thanks Tony, FYI people have brought to my attention 2 important things I missed. Insurance and taxes so the true cost is even a little higher
@@HometownAcres plus land
I can add a lot more real world expenses to your cost of production. But it only really matters if you are doing this as a legitimate "stand alone" business. We all love doing firewood. But don't get to carried away with the numbers if this is just a hobby.
After reading comments and digesting some of these data points I have questions.
1) Nowadays more than ever I look at firewood as a commodity. I wouldn’t be surprised if in the near future we are using FW as such
2) some commenters value there time like they are the potus. Me, I look at it as 1…heat, 2…exercise/health, 3…family time 4. Yes family can do this together. Manual labor is neither above or below anyone. 4. Commodity. This may be moving up the scale in coming months/years.
3) Depreciation??…again nowadays for the equipment you have there is very little if any. Limited workforce, astronomical inflation, artificial shortages.
4) This winter when natural gas prices double, propane triples, electrical brown/blackouts get more widespread, firewood and wood heating appliances and generators are gonna be gold.
5) Having land large enough with firewood resource and area to use processing equipment become invaluable
What a great video to share with customers who might not see the value in what we deliver them! Thanks Adam!
Perfect subject matter for anyone considering selling firewood or for any other product.
Adam, thanks for an easy to understand explanation of calculating the cost of producing one cord of wood. You are an enthusiastic teacher and made a great video for us out here in 'viewer land'.
Hi Adam. Great video! As a CPA, I was very into the numbers. Don’t forget about Fed and state taxes, local earned income tax and of course everyone’s favorite, Self Employment Tax. Also have a couple types of insurance. When I’m behind a desk all day, none of those costs matter in the end. I can’t wait to get on the tractor. If nothing else, it’s therapy. I’m sure tractor / firewood therapy is cheaper than professional therapy! Keep up the great videos.
You could do what the rich do, donate all profits to an entity that you or an entity your control owns. The entity could be a exempt non-profit, such as those recognized by the IRS under 508.c.1.a, conventions, churches or their auxiliaries.
Or you could remove your "self" from the jurisdiction as a tax (contribution-imposed [1898 Legal Definition]) slave and renounce your citizen-ship by changing your political status from a 14th amendment citizen to a state national. Non-Resident alien to the US INC.
Or you could capture your straw-man completely with a proper UCC-1 filing and funnel all your sweat equity into an entity that again is foreign to the US Inc.
Remember folks, when starting a business, first realize that we live in a merchant system (admiralty law.) It's based on contracts, contracts are voluntary and require consent. Including dealing with PRIVATE, FOR PROFIT, entities such as US Inc, your STATE INC, and your Local municipality.
They all have DUN and BRAD #'s and operate under commercial "codes." Just don't operate under their "flag" and instead operate your own "vessel." Keep your sweat equity for your self, don't be a peon.
Great video.
👍
👍
@@hvacstudent967 Not many think like that unfortunately. Staying in the private will be crucial moving forward
Excellent cost analysis! The way you explained it was easy to understand too. Great job Adam! Have a good week man!
Thanks Pat
Paying yourself is always a battle if you choose this as a hobby and not full/part time employment. If you are depending on the money from the firewood to pay for the equipment, which is used for other things on the property, then adding an hourly rate for employment is tough. The clients I serve in my handyman/mowing business are less fortunate than most, and I provide those services to offer some dignity and peace of mind knowing they are cared for. If I charged what I was worth, then I couldn't help those less fortunate.
That's awesome that you do that. Consider that as part of your tithes to mankind
Sometimes when I don’t get paid for bundles at my firewood stand I consider it a donation to those less fortunate. It definitely helps my mindset.
Daniel - I too served the less fortunate community where I lived, until recently I sold the accounts. Yes, I made some extra money that I reported as self-employed,; however it got to a point where my customers were getting too dependent on me...i.e. picking up their mail, picking up a pizza for them, driving their car just to keep it operable, and last turning around from on my way to my real job b/c the customer fell and needed help getting up. I sold the accounts as a Win, Win, Win. and I haven't looked back. I transitioned into the firewood Biz as a hobby/Biz and I am getting ready for 23'. I do want to pay myself, so this is why I am learning as much as I can as time moves forward. All is good, with what we do! CBJ
love it Adam. Really appreciate you taking the time to make this video.
Adam… I would be scared to calculate the cost of my woodworking hobby….
1. I have a lot of tools, gadgets and equipment. Some of it is homemade or cheap/used/refurbished. But, there are several big ticket items involved.
2. I am very slow and meticulous when making things. There is no such thing as a weekend project for me. Most items are one-offs. So the output volume is very low.
3. I never sell anything. Everything I make is for personal use, a gift or a favor. The only payback is satisfaction, pride and love.
As a result, the cost is inconsequential to me. Because… the rewards are priceless!!!
However, the three basic drivers of cost (labor- materials- overhead) do matter to my wife. If I ever figured out a cost on a project… she might make me give up my hobby!
Thus, I carry the fear to attempt a cost analysis.
Thanks for putting this together… it reinforced, that my fears are justified!!!
Thank you for making this video I totally agree with you!!!! No one should sell a cord of wood under $350 my opinion.
I agree. I sell a cord for $450 minimum. That doesn't include delivery or even more stacking. A customer just told me that she values a reliable firewood guy just as much as her hvac and plumber. I dont understand how people can sell it for so cheap.
Great video on costs. Sometimes, when we have a hobby, I think we just do it for the enjoyment and don't take costs into account. Have a Safe Day
Great vid Adam.
3.7 X $20 per hour = $74 + $167 = $241
$300 per cord would be a reasonable price.
But you didn't figure in the fun factor.
Good, but then you have the time and cost of fuel to deliver. Not a huge money maker, but doing what you enjoy and not going in the hole. :):)
I was thinking the same $18-20 per hour. Nothing is free, got to pay yourself.
While nothing about your math is wrong.. who is paying $300/cord.. at the point of paying $300/cord you may as well be using oil, gas or electric heat for that matter just for convenience of not having to worry about a wood stove. I cut and burn wood to save money by not having to use the other mentioned options. If I had to pay $300/cord I would just use my electric heat.
@@codydaldo1537 my buddy sells a cord of wood, delivered for $600 in N.Va. He's already informed his customers prices are rising due to fuel cost. I'd never pay that much but I guess some folks don't care.
@@MAM-cy3yy YIKES... I think I would be quitting my job and cutting firewood full time if I could get a steady supply of buyers for $600/cord! That's insane people would pay that. Around here the going rate is anywhere from $175-225.
Good morning Adam - thanks for taking the time to crunch this for a lot of folks - I think it has helped put some perspective on it for folks. I don;t think you have captured all the costs that I would have, but I think you have provided a basis for folks to perhaps follow your outline to do their own cost exercise and add the other costs they have, to make it more specific, or accurate, to their specific operation, including what they would cost their own labour out etc as you suggested. Great stuff- thanks for taking the time to do this for everyone - wow, the little guy is getting big! Cheers!
Thanks GP. Yeah after posting I keep coming up with other expenses I missed. The 2 biggest are insurance and income taxes
Good morning Adam, great breakdown. You forgot to factor in. Enjoying Your hobby is priceless!
Nice video … Love the number crunching analysis.
Never been here this early, almost feel like I should go and come back.
Excellent break down. We sell firewood also. One tip I was given along time ago is that if you are always out of wood your charging to little for it. We charge what we need to make it worth while for our operation. $114000 for your equipment isn't bad at all. That equipment will pay for itself 10 times over plus make you all the firewood you ever want. We use ours on jobs we do. Then use it to make firewood.
Imho, the labor cost has less to do with what you think your time is worth and more to do with what the market would pay to hire someone to do the work, $20 per hour seems fair to me. That would add $55.50 to your cord price. My market gets $180 per face cord so $540 per cord. You didn't include the cost of the land in your equation. You have to buy or rent space to work. You need a lot of space to receive, process and season wood.
Michael
Wow. Around here a face cord is 50-65. And you can get deals buying a full cord or even multiple cords. We usually get free stuff to cut and split, rarely buy firewood.
I was self employed for years and the thing I see a lot of people do, is not put enough vale in their time. Not just anyone can process wood, at the level you do. The wood is sized alike and well seasoned. That is a high quality product, that can be seen when burning. If you've ever tried to burn green wood or had to reprocess it, after you've paid someone to do it, then you'll understand. You have to pay income tax and figure a portion, of health insurance, because you probably can't get WC insurance. Charge the going rate, for the same quality product, and then decide how much is profit and how much is wages.
I really enjoy your channel.
I thought the same, last time I used a log splitter it was hard work and almost lost a finger... burning a cord of firewood is equivalent to $675 worth of oil at today's prices. $100 delivery... the inconvenience of stoking a fire all winter... you are talking maybe $450 per cord of seasoned hardwood delivered at today's prices... After all the intangibles he missed that is best $200 per cord of profit, at 4 hours per cord how many cords could one man process in a season? 100 in a 100 days? $20K profit.
Great video Adam. Knowing your overhead is critical to running a profitable business. I love your analytical approach. One of my videos was about how much wood an IBC tote holds. I got into some number crunching and had to make reference to you in the video. Love your channel!
I haven’t had time to read all the replies but Unless I missed it, Adam, you missed one unique piece of the equation that applies to you and other RUclipsrs - your work, be it firewood, mowing your lawn, whatever, is also generating income. That’s what makes this medium so amazing and it also requires your “time” but all in all, it is a piece of the equation. And I have to imagine, there are certain tax advantages as well. Keep up the great work - I really enjoy your videos and subject matter!
Great discussion Adam. Hobby vs business is a big difference. The true cost of running this machinery is much higher. My excavator, tractor, truck, trailer, and a lot of other stuff really adds up. Annual maintenance, repairs, insurance, taxes, etc. Office time, marketing, daily wood yard cleanup and maintenance, is all part of producing a cord of firewood. Delivery expense, delivery loading and unloading time. Dump trailer insurance! This is important, and not covered on most auto/truck policies. If this is a hobby, most of the true costs of firewood production are ignored, which is OK. I'd like to see a cash flow analysis of how someone starting out buys all this stuff and actually pays for it as a stand alone firewood business. Usually these assets are purchased as the business grows over many years. Buying several loads of logs to get an inventory established is another cost, and ties up money for months.
Nice calculation of the expenses, Nice Explanation this was well constructed,
Excellent video Adam! Nice Job!!
This is a interesting concept and video. I would hate to have this done for my fishing hobby. The price per fish would be pretty high.
Same for Deer hunting, lol. Gonna take years to pay off the new gun.
@@billypitts6368 My deer meat is the most expensive thing in my house. Guns, Bows, Tree stands, Food plots, Quad, Property, and etc... please don't share this with my wife.
@@billpendley2561 ha, she knows. My wife knows about my boat, snowmobiles, and 30 fishing poles. At least snowmobiles are multi purpose for trail riding and ice fishing.
Great video Adam! I think this will be a helpful video for a lot of people. Kept my attention and i dont even process firewood.
You just talked me into putting a propane furnace in. Thank you:)
Great job of getting in to the details on this one, Adam. It certainly puts firewood sales into perspective. And it's great to hear it from an accounting point-of-view. Thanks for sharing!
Thanks for the video, it was great to see calculated, what costs really are! I´m making firewood here in Finland, home of Japa. I also think that this a good hobby and you also get some money from it. I don´t have big machines, just decent chainsaw and hydraulic splitter. Electric woodprocessor and small tractor with front loader is my aim in the future, cost would be approx. 30000 eur/$. So far wood has been coming from my own forest. Keep up doing the good work!
From what I’ve seen you sell your firewood for before, your prices seem pretty fair. Fair enough for you and the customer. It’s definitely nothing you will be able to live on, but you put your hobby to good use. You also have to factor in the delivery of the wood. Remember, people will always pay you more for excellent customer service, convenience, and quality, which you provide. I think you are on the right track.
I'm a software engineer / web developer that also sells 30 cords a year on the side. Hobbies that make money are the best!
Web development was a hobby of mine in the 90s. I’m now in my 22nd year as developer/manager and have many more hobbies. None that make any money.
@@tompurvis1261 I also started in the late 90s, built a website for skateboarding and snowboarding photography. Back then you couldn't upload videos or clips, instead it was looping 3 second animated gifs 🤣
Great informative video. Did I miss what you can sell a cord of wood for?
thank you, that was interesting for about 2sec, no i di watch it all, but it dose show anyone who is interested in setting up a small business, thanks again
Great video it was nice to see the true accountant side to help understand the cost. Figuring depreciation is sometimes confusing. In north east Ohio I see a cord of wood going for $300 to $350 delivered.
SE OH everyone cuts their own firewood for the most part. Cords sell for $200 delivered.
@@MAM-cy3yy I know we do it’s my main heat source, but I haven’t started selling any yet, seems like everyone around here had a roadside wood stand, and guy down the road must cut and sell 300 plus cords a year.
Same here. I live close to Rocky Fork and Paint Creek state parks. Everyone sells campfire wood. I saw it priced for $3.00 a bundle yesterday.
I use $20 per hour for time when doing things on my woodlot. Like you this is my hobby. I don’t sell anything. It’s a lifestyle thing. Some do the beach in the south, some golf, some go fishing…we love doing firewood.
@hometown acres, I agree with you Roger and if you don’t sell whatever you are making to at least pay yourself a typical “market driven rate”, call it a hobby because you are not covering the real costs.
I see some comments of people saying $20 or $25 per hour to pay yourself. In my opinion, that is greatly short changing yourself. Your accounting job, I'm guessing pays more than that. And they probably provide your health insurance, life insurance, retirement, social security, etc. The real cost the employer pays for your time is about double what you actually see. So I believe, at minimum, you should pay yourself $50/hour.
I did a video about why I DON'T sell firewood. And this is the exact reason. I can't make enough money to make it worthwhile. I have a 40+ hour a week job and a family. I have enough to do that making a few bucks from firewood isn't worth it. I probably didn't explain it well enough. But I just don't see the value in cutting, splitting, and selling firewood.
Good video!
Awesome video with great attention to detail. I would add that your analysis only includes "supply" factors. The other element for pricing lies in the "demand" side. If the market in your area is rich with $200 per cord firewood, you'll not be recouping anything by pricing at $350. Often times the market cares nothing about what your costs are. The good side is that with the price of energy skyrocketing, that cord of firewood is bound to cost more in a year. Good luck and keep up the great videos.
Exactly! If you want to sell your product the selling price will be based on what the market rate is. The real question is are you willing to do the work for the market rate? Ohio Wood Burner talks about this all the time and he is correct, that's why he is always looking to create a higher value product and not compete with the mass cord wood producers.
Great video Adam! Love the honesty. As with any type of farming it has to be a labor of love. Very few people are getting rich in Ag.
From one accountant to another - GREAT video, Adam!! :) One thing you left out was - How much do you sell a cord of wood for?
In the end, for you, it's really not all about making money with this - it's more about getting out and doing something you enjoy and selling the wood to offset the cost of equipment that you would like to have anyway.
Curious about what kind of accounting do you do? Public? Corporate? etc.? Your fellow accountants probably think you're nuts doing all the things out at your property that you do. You should hire that sort of thing to be done!! When I worked for one of the "Big-8" years ago, everyone thought I was a little off because I drove a pick-up truck as my daily driver. And they'd kid me about being on "This Old House" as I was rehabbing my 1915 home I owned at the time.
Keep up the great videos! Always enjoy seeing what what you're up to.
Phenomenal video. I ask the hobby versus business question to one of the silver/gold refiners to figure out if he could cover his expenses w/o RUclips and never get a straight answer.
I also built a landscaping business and am currently building a firewood business, and one of the professional publications I used to read suggested you "rent" your equipment to yourself and this would help understand your costs better, this seems to me was much more extensive than your analysis, it would include all of what you did plus air filters, oil filters, oil etc. This added category of the cost of maintenance makes a difference and setting aside those real costs allows you to have the cash flow to maintain your machinery. I agree that firewood especially in this time is under priced or a bargain for the consumer. We should all work together to get the message out about local, sustainable, carbon nuetral energy.
Great video, so many good comments also. Too deep for me, I’m sticking with the smaller scale operation😀🇺🇸👍🏻👏🏻
Great video. I appreciate people that show the numbers. A few points - dont forget to include taxes and insurance in your costs. The real hourly rate to operate, what you are calling depreciation, would also include the costs of maintenance and repair. And the $175-ish cost for one cord was from the log pile to the totes. Didn’t include your time and equipment costs to get the logs to the pile nor your time and equipment costs from storage to final sale
I raced alcohol dragsters as a "hobby". One racer said it cost him $75/run. I did a detailed cost analysis & mine was $3500/run. "Accountants" can make numbers do anything they want, but I commend you for a FAIR, middle of the road approach, to help others considering getting into the "biz". Enjoy the channel, but worry a lot about the "pond".
Well thought out and brilliantly executed. I personally would love to see you get your channel far enough along that you can do this full time. I have no doubt you’ll get there. See you on the next installment.
Did you see the Werk-Brau rake that Mike @ Outdoors With The Morgans put on the mini-ex? That looks perfect for firewood handling. Going to see if I can afford one on Monday :)
Let’s be honest about firewood. You can only make money with volume or you have to have a niche product that you can capitalize on or is your main money maker. If you paid yourself $20/hr plus insurance and workers comp you would have to make $500 per cord if you are delivering it. Most markets are not going to support that. You can definitely make a good living as a firewood producer but the reality is you are not getting paid for your real value. You have to love making wood to make it worth it. Just one other note that no one thinks about is to get maximum life of your equipment you will have some hefty maintenance bills. Hydraulic pumps fail, engines need to be rebuilt. You can’t figure your cost solely on depreciation. A percentage of profit has to be set aside for the unexpected break down. Good video though. 👍
Interesting video. I'm not sure that there is a right or wrong answer, but certainly variations in how the answer is arrived at in your situation. Many assumptions. As for your labor, I'd be inclined to view it from an opportunity cost perspective. In other words, what would you be doing with your time if you weren't processing wood and what would that time be worth? An intangible that you can't place a value on is the health benefit you are deriving from staying active and performing physical labor. It differs greatly from pushing a pencil or punching keys on a computer while working at a desk. Good analysis.
In Germany with 1cord u usually can earn around 300-350€. Currently in our energy crisis it is more like 500-600€.
Yeah sounds like you folks have some real issues going on over there. We are not to far behind. Soo…is your gubment cooking the books on your inflation numbers too?
As always, well done Adam.
It's refreshing to see other like minded people run the numbers and be realistic about them.
When I ran my own company, I knew how much it cost me to open up every day, and my time was worth a minimum of $30/hr in 2019.
How much money could you command operating your mini-ex? Use that as a guidepost, but I think 3.7 hours to make a cord of firewood you should be able to secure about $35/hr on top of your cost of $167. That'll put the sold price at around $300 which is a nat'l average.
Thank you Adam.
This is why i started buying firewood already processed after i calculated it up. Cord firewood 180$ delivered and split and done. Cord of slabwood is 20$. Cheers
Hey Adam-I’m curious which exercise you enjoyed the most. Crunching the numbers and making the video OR the actual process of running the machines while also creating a product?
Appreciate the VALUE you strive to bring your viewers!
Jeremy Carr
Hamden, CT…..by way of good ole Memphis, Tennessee!!!
I enjoyed both equally haha.
Then you my friend are “living the dream”!!!
@@HometownAcres I am pretty sure that no one would be an accountant if they did not enjoy it. I cannot think of a less glamorous profession.
Love that you took the time to discover ur worth doing this as a hobby. It's been done on various channels, with various total cords and various schemes of equipment. To me, it all crunches down to 40 to 60 per hour for ur time involved minus all the real expenses you've given. 40 to 60 per hour is awesome for most people or a side hustle. The real question is??? Why do I watch firewood videos? It's because firewood is like building a better mousetrap or bigger watermelon truck. It all seems to make sense to upscale ur business, but really, all ur doing is more volume to make the same 40 to 60 per man hour. Every business in America is based on the same stuff. If you go to an auto repair shop, they charge you 90 to 100 per hour on the mechanic's time. Guess what they pay the mechanic? 25 to 30 per billed hour. The rest goes to overhead. Land and lease costs, healthcare, FICA, and anything else the government can screw small businesses with. Also, these numbers permeate most businesses. The bigger businesses like Walmart, Apple, Facebook, Google, can work with smaller margins because they are huge. Anyway, sorry for the ramble. Thanks for ur time on the numbers. 40 to 60 per man hour That's what is costs to stay in business these days. Inflation anyone?
You have a great start for your Profit/Loss(p&L). There are other factors to consider what is right for you. Location? What is the average cord cost for your area? Your competition? Is there a less expensive way to buy or even get logs for free? Tree services have to pay dump fees? And the list can go on. It all boils down to supply and demand.
Here in CT wood goes for 250-325. If I buy it off season during the summer I can get it for 200 a cord with a $30 delivery charge on per truck load
Excellent analysis of your costs to produce firewood. For those who don't want to buy any equipment or cut up their own firewood, this video should be truly eye-opening. Also, for anyone considering the idea of trying to make a living selling firewood, this should be a warning video! Factoring in your time spent can make or break something like this, because that cost is highly subjective. If you had a great time doing this, you shouldn't count that cost at all. If this was "work", and you're to the point where you're really only doing it to make a profit on the investment you've made into equipment, then a certain per-hour rate should be part of the equation. If nothing else, this should help people understand why good quality firewood is now selling for $200/cord, in some places. It also illustrates how a guy with a chainsaw and a splitting maul or small hydraulic splitter might be able to heat his own home for very little money, but it's at the expense of a lot of time and labor.
I look at 'cost' of producing firewood in a whole different format: "Principle / Interest" (as in a bank CD).
It cost me about $900 per 6 Cord of firewood as the 'Principle' amount invested. Selling that 6 cord at $1,800. That means I am making 100% 'interest' on the 'Principle'.
Adam is getting about 80% 'Return' on his $167.75 (per cord; IF he sells at $300) investment.
Try getting that kind of 'Return' on a CD at the local bank.
I used to work in IT for a company that was really good at calculating cost per hour to have me available. Using that info they made some rules. That company allowed busy employees to buy their own inkjet printer for their desk. My personal labor cost was so high, they figured within about 10 minutes I would cost more that a new crappy inkjet printer - so we were forbidden to even bother with them (we had corporate LaserJet for most work).
Then I learned of the work of Michael Porter of Harvard, his work on supply chains fits right into this.
Great video Adam. I love getting into the numbers because it shows if you're truly profitable or not. One of the best things I ever did for my business was to sit down with my CPA and learn how to run my numbers To be able to set my prices and my profit margin. The way that I would figure what you need minimum is about $35 an hou To break even on labor plus whatever you want to add For profit margin. The basics without going into major details on how I come up with $35 an hour for my base cost for labor per hour is $20 pay plus 75% for workman's comp and payroll taxes. That pay scale is my starting point and that is for a basic labor so for an employee to run all the firewood equipment the employee might be as high as the $30 per hour pay scale plus the 75% so would be up to $52.50 an hour plus profit margin. So there is some labor cost numbers to play with. So any where from $129.50 to $194.25 for labor costs to make a cord of firewood. Plus still need to add profit margin.
Wow! Makes me glad I was a criminal justice major in college! Great job! LOL, I did have to take calculus 1 & 2 to go to pilot training for the AF. That was bad enough!
Side question. Do you have to charge sales tax for whole sale or road side sales or is firewood considered like an agricultural product?
I think a lot of people approach price vs cost backwards: product costs this much and I want to make this much from it, therefore my price has to be this much. That's great, as long as customers are willing to pay it. Similarly, if customers expect to pay much more, then you short-change yourself if you only charge your calculated price.
In fact, your local market sets the price. Your firewood per cord costs $168 plus 3.7 hours of your time to produce. If customers in your area will pay $300/cord, you can make $35.67/hour on it. If they will only pay $200/cord, you can only make $8.65/hour. If your market is at $200/cord and you have to make $15/hour to justify the activity, you have a problem. Just numbers chosen to illustrate the point - market prices vary all over the country.
Here in the UK everyone says that selling firewood is selling your own time. You have machinery to reduce time and labour as opposed to physical labour and time, which maybe about the same cost. Depends on your accounting estimates,
I do know however that it is physically demanding. Interesting analysis, do you still wonder why you do this? I did.
Replacement cost of equipment, general maintenance parts and labor, insurance (assuming your equipment is under house insurance at least?) Dump trailer and maintenance on that as well. Time to restock your wood box and ur gate and Doug's, milage and time for any deliveries of wood. So many more hidden costs than just time taken on the tools. Cost of land to store everything, equipment, raw wood, processed wood, consumables on your bundler... replacement totes and preparing them for use, haha I could go on an on
What stood out for me was the surprisingly inexpensive cost of operating an excavator for one hour. Renting starts to look less appealing if you need it over several months each year. Thanks for the heavy lifting.
Wow, very well put together!
I figured 85$/ cord for cost of processing bucking and splitting. I get my wood for 120/cord in 8 ft length however there is a adjustment to be factored from 8ft to 16in so i figured my true wood cost is closer to 150$ to yield one full cord. So my net cost is 235$/ cord and that includes 3hours of labor @20$per hour. I add 25-30% for profit. I charge extra for delivery enough to sub contract if need be.
I get $175/face + Delivery easy here in western PA. Never had a season where I didn't sell out. (20+ Cords every year). Quality over Quantity is key
Hello Adam, Good video, Great Explanation! Only thing you missed was, what trouble did you avoid by staying at home working firewood😂 Take Care and Stay Safe 🚜🪵👍🏼🇺🇸
Ahh a fellow accountant! Great video. Cash flow statement would be interesting. But that can get to personal for a YT video
A cord here in New Mexico is on average $350-$450. For quality hardwood I would charge $450-$500 if the local market allows. In Connecticut my cousins would cut a couple cords of wood and bundle them in tiny amounts. They would set up in Beacon Hill in Boston and sell them for $12-$15 a bundle to rich people and sell out in hours. You could try that in the wealthy part of your closest city to bump your income from sales.
Great video.
However you forgot Insurance on the equipment, and possibly Liability Insurance.
Our Insurance doubled for 2022 from 2021.
Insurance is now our biggest expense for our Sawmill operation.
Time is the hardest to figure. If you figure it at minimum wage you probably won't make alot of money. If you factor in the therapeutic value, then the money made becomes better I'm sure. Good video
I do machining, powder coating, welding, fabrication, building (houses, shops, etc) as hobbies and have an excavator, skid steer, trailer. Regarding the value of your time, I'm retired and very much value my free time. I look at it as I could have stayed working if I wanted money. Now, I was obviously at the height of my career when I retired so was making the most I ever did. I worked IT as a manager of a fairly good sized crew. Then there is the whole is your hobby a business. Do you have to pay taxes, unemployment insurance, etc. That would jack it up even more. Because of this I don't "contract" out my work (time). If it's a small job and we're friends I'll do it. If it's not I'd rather point them somewhere else than try to explain that my free time is worth more to me than they are willing to pay. Having said that I've had a few people who were persistent and didn't bat an eye at what I thought would be considered a high hourly rate, and they walked away happy.
Your time value depends on your work options where you live. I would take what you can sell the cord for and subtract the total cost for a cord to produce. Look at that difference divided by your work hours and ask yourself "is this a decent wage." You have also not added in any delivery costs or hours involved in the delivery or loading onto customers trailers.
Great video. I guess my question would be, how much time are you saving with the better equipment vs the additional cost of that equipment? How long would it take you to make a cord of wood with just a chainsaw and a wood splitter, and still buying the logs? Also, meeting supply and demand does come with a cost and sometimes you have to take a hit on ROI to do so if you plan to grow the business. So, my question would also be, hobby or business for you at this point.
Then there is the question if the teactor, the excavator and the teailer brings any other money? Four hours would be around 100$ without any taxes ("moonshining") if working for somone else. I would like to get at least 20$ every hour after all expences are paid. But that is over here in Finland, I don't know your rates and wages "over there"...
I work full time with the railroad. I also have a BBQ trailer I do part time. the trailer cost me 63k total furnished.
my product is not the cheapest by any .means. I use quality meats and sides. . I've heard I'm too expensive and thats ok. I say maybe. my bbq is not for everyone. but it's funny to me on holidays I sell out of ribs. July 4th I cooked 110 Boston butts. last Thanksgiving I pre-ordered turkeys and hams. and had to turn people away because I didn't have the room on the smoker to cook all the meat
Good exercise. What about knowing what the market will bear and how you sell it - bulk delivered, bundles, baskets. Delivery fee, yes or no?
Supply and demand will set your price. If you’re looking to become a business, you always have to look at future possible barriers and mitigation actions. For example investigate if cherry is more valuable as lumber vs firewood. This is my final thought, I’ll be here to watch your journey.
Dump trailer ,truck,chain saw,sharpeners.totes too.all the side stuff.guess your throwing all that in now.
It’s in the miscellaneous category
I started using my band saw mill instead of using my splitter! I Quarter the log, put it on my bucksaw and use chainsaw to cut to length, then stack!
I think you need to talk about how you sell your wood. For example you could just pile it on the groung and after it has seasoned use the bucket and fill your trailer and go dump a load at the costomer home. If you sell it in smaller quantities then there is more labor in stacking and filling the caddies and as you showed replitting oversized piecies. I've seen roadside stands that sell small bundles, they need more constant attention. I have also seen small bundles on specialized bags sold at retail stores. The amount of labor varies greatly depending on how you market your product. As stated by others you didnt mention taxes and financing cost if you borrowed to purchase you machines. You didnt say what you are selling your cords for. Kinda makes the whole excersize imcomplete. Still a good start at anylising basic cost of production.
Great info Adam.
Interesting video...
Good thing Doug wasn't helping 😄
Pete from Canada 🇨🇦
That was a very interisting video, im going to have to do the same thing and try to figure out about what it cost me,i may be charging a little bit to low im at 300 per cord picked up, i do also sell bags, i tried plastic streatch and sold very little until i went to bags ,i uped the price a bit to cover the bags, now i sell 20-25 bags a week ,i bought one of the ez baggers and that has cut my time in half ,with 2 people it goes realy fast ,thanks for the great cost video, take care
Great job love your videos thank you
It really depends on the type of wood as well, but $300 is Fair. I've seen as high as $450 and as low as $200. I love your breakdown of your cost. People need to understand that it's not just a piece of wood.
Processor is made in finland, great machine. But i make my firewood with palax combi tsw-e firewood processor.
Greetings from finland!
Interesting Vid, M8, My Father was an Accountant (and a good one!!) he would fret over his balance sheets being 3pence out , and yes im serious, all i can say being British, is i whish i could burn wood to heat my house as our bills for Electric and Gas, have tripled over the last few months , from £114 to £360 a month, because of some Looney in Russia,
114k in equipment isnt that bad considering what you have. Ive got almost that in one tractor. Like you I use it for other things not just getting wood.
I appreciate a number breakdown. I assume you have insurance policies on the excavator and tractor that are not factored in along with an overall larger policy for everything else.
You are correct. And I forgot to include the cost of insurance
Adam, I was a business major so... thanks for the refresher course (send me a bill for the educationO ) as for what is your time worth, you were having fun so that should factor in , there is only a time cost if it is an oppertunity loss (in other words, what else would you be doing and did during that time frame and did it cost you anything for not doing those tasks during that periond of time_great video, thanks what you did not do say was how much you would take in for that 1.33 chords of wood.
Another forgotten expense is delivery costs. That is, assuming most people that sell firewood also deliver it. The spreadsheet I made up also factors in 'rolling cost' per km (or mile). Rolling costs being fuel (based on fuel rates at time of delivery), tires, oil changes. A separate line included for repair expenses. Then there's labour wages for the driver as well. All of that mentioned has to be calculated for the distance traveled to and from the delivery location.
Also, there's the need to define a cord. If you get 16 cords of logs delivered and you sell 16 cords of logs, then you are selling a 'log cord'. But if you are stacking the split wood to a defined amount of 128 cu ft for a true cord, then you will only end up with approximately 14 to 14.5 true cords. So that 12-15% difference becomes an added expense.
Delivery would be a separate business. You’d have to calculate depreciation on the truck, and trailer, fuel, repairs on truck and trailer and your time to load and deliver. Then you can determine how much you should charge for delivery. Delivery is an add in service and should be accounted for separately from the production of the product. Some people come and pick up the wood so you can’t factor delivery depreciation into your cost of producing the wood if you’re not delivering to them
@@HometownAcres Correct. We advertise a 'yard price' where they can drive-thru to pick up, or they can have it delivered for an additional amount.