How to start a sawmill business in any country
Thinking of how to start up a sawmill business or lumber company? Check out this special content, a summary of everything you need to know about the subject.
A sawmill makes the first industrial processing of wood, that is, right after the trees are cut and prepared in the shape of logs still in the forests. The final product of a sawmill can be both the manufacture of furniture and the construction material.
Products of forest origin are present in our daily lives and range from the most obvious, such as paper and furniture, to beauty products, medicines, food and clothing. Among the segments that use wood as the main raw material, we can mention cellulose and paper, wood panels, laminated floors, sawn and plywood, charcoal and energy steel. In the consumer goods sector, the printing, packaging, furniture, chemical.
What is a sawmill business or a lumber company?
The sawmill or the lumber company are responsible for the industrial processing of wooden pieces, but still in the stage they are in right after the cut, when they are still in the shape of logs. It is the first industrial contact of the material right after the extraction.
The company is usually composed of a log yard , a machine shed and a warehouse for the sawn wood to dry and be stored. Lumber is the final product, which is a basic industry. It sends this product to the processing, furniture and other industries , so that the wood is converted into other consumer products.
The raw material of a lumber company is logs, still raw. This material comes from planted or native forests. Regardless of the source of the wood, it is important that the company is located close to the area from which the trees are harvested, to facilitate the transport process.
In the Brazilian timber scenario, the vast majority of the market is made up of small companies that purchase wood from farmers in replanting forests or native forests. Large companies, which have their own areas for handling, planting and extracting wood, are a minority in the national market.
The classification of the sawmills and lumber market comprises three categories according to the size of the business: Small companies, whose production of logs split per day is up to 50 square meters. The medium, in which the production of split logs reaches an area of up to 100 square meters, while the large ones are those that exceed this daily production of split logs.
The sawmill business plan and its aspects
Actions cannot be taken instinctively or even spontaneously in your business. For all strategies, whether the initial ones or those that must remain in the long term, it is very important to study and plan each step taken so that the company’s growth and evolution are sustainable and regular.
A good business plan involves a lot. It involves study of location, audience, competition, goods, risks, threats, strengths and weaknesses ( SWOT Analysis ), financial analysis, working capital, personnel management, goods management, inventory management and etc.
Location of a sawmill business
The location is an essential factor for any business, and especially when talking about sawmills or lumber companies, the location of its facilities is very important. As a rule, with few exceptions, sawmills and lumber are located close to log suppliers. It is important to take into account that just over half of the raw log is used as sawn wood, so if the company is too far from suppliers, it is as if the enterprise devotes a considerable amount of resources to transport waste.
However, this proximity to the supplier is also not an inflexible rule. Depending on the context, it may be more advantageous to install the company close to the consumer market instead of the supplier. Everything will be conditioned by the circumstances of the place. Prefer to install your sawmill or lumber in a location with plenty of labor and in a place where employees can easily access.
The point of the business must have ample space, as it will be constantly visiting by trucks and must also have enough area to contain the stock of both raw material and sawn wood.
Take into account other additional or extraordinary factors, such as the conditions of access roads and indoor facilities for rainy days. The mud can significantly disrupt work logistics. See if the place has an adequate energy supply for the activities, as remember that much of the machinery uses electricity. If you are going to buy a property or even rent a spot, see if the situation of that property is really in order to avoid problems with the local authorities.
More so, with regard to Government structures, assess the local tax burden to see if the region is really profitable for investments.
Legal and industry specific requirements
Every company has some bureaucratic requirements to fulfill, both at the time of opening, and throughout its operation. The generic legal requirements will be demonstrated in this topic, but keep in mind that the activity of lumber and sawmills requires environmental licensing to be carried out. Assess the weight of this environmental licensing in the business viability.
Add to the environmental question a possible specific municipal legislation of the place where the project is to be installed. After all, it is important to remember that a sawmill or lumber company, however small, generates dust, noise and heavy vehicle traffic. Even if the municipality’s law allows the installation of this type of business, it is possible that it requires structural changes that can make installation very expensive, reducing the viability of the business. Analyze all these factors even before the acquisition of the property where the sawmill and lumber will operate.
Take care also when purchasing the raw material, that is, the logs. When the material comes from planting or reforestation, there are no major problems, but wood from extraction can be shot in the foot. Carefully analyze product certificates and invoices , as it is common for fraudsters to falsify these documents. Be wary of goods below the market price and always seek to negotiate with well-known farmers in the sector.
Pay attention to the legal obligations applied to the opening and operation of any company. It is necessary to register and regularize with the following bodies: regional commercial board, National Register of Legal Persons ( CNPJ ), State Finance Secretariat, Business Permit with the City Hall, Employer Union Entity, registration with the INSS / FGTS, and regulation of inspection by the Military Fire Brigade. For these activities, it is recommended to rely on the work of a suitably qualified accountant.
Physical structure of the business
A sawmill and lumber has the following structures, in most cases: a log yard, a drying section, a processing section, a deposit for products and another for waste, in addition to the administrative area.
The log yard is where raw material from suppliers is received and stored. This location is the company’s largest space, and even for small businesses, it must be at least 4,000 m².
The processing sector is the place where the logs are sawn. This space needs to be covered, and its measures vary according to the production you want to achieve and the level of automation of your company. The measurements can vary from 200 m² to 1000 m².
The drying sector is the place where the wood, already sawn, is left to dry. Not all lumber companies offer drying, however it improves quality and increases the value of the product for sale. Whether or not to cover this space will depend on the type of wood that is dried there. Eucalyptus trees usually dry in the open air, while hardwoods must be dried in sheds. Measures vary from 100m² to 500 m².
In the product area is where your stock for sales is stored. These are the already processed wood (sawn and dried), ready for sale and the respective dispatch to the buyer. The space should vary between 100 m² and 500 m², depending on your stock, and must be covered. Some goods, more resistant, can do without coverage if they are under tarpaulins.
In the waste deposit are barks, sawdust and other wood residues that are not useful for sale or processing. It can have an average of 200 m². The wood industry generates a high level of waste, as just over half of the raw material ends up becoming a final product. That is why it is very important to make good use of these residues and use them in favor of your company.
For this, one of the options is to manufacture briquettes from this waste. The briquettes are small pieces of compressed wood waste, combustion of which can be used for power generation. It is one of the smartest ways to reuse waste, in addition to preserving the environment.
The administrative area is where the company’s management and commercial department is located. There are also facilities such as changing rooms, bathrooms and cafeteria. Its area may change according to the number of employees, but it usually has around 100m².
Company employees are one of the keys to the success of the enterprise. For this, it is important to hire qualified and preferably experienced people in carrying out the services to which they will be admitted. For a company with monthly revenues between $ 50 thousand and $ 100 thousand and with a low level of automation, between 5 to 10 employees should be sufficient to keep the business up and running at cruising speed.
For the administrative and commercial sector, it is possible to employ one or two employees. Three to six can do production services, like operating equipment and sawing wood. One or two more are in charge of assisting in general services such as cleaning the rooms, loading and unloading. Each of these employees will charge the company in an amount ranging between $ 1,200 and $ 1,600.
For this business, pay special attention to employees who will be in the industrial area of the enterprise. They are exposed to risks and working conditions that can harm their health if done improperly. Train them to always use safety devices and procedures. Also prefer a partnership or hire a supervisor who understands timber services. It can help with the job security part.
Equipment and machinery of a sawmill business
The machinery part of your enterprise will be responsible for a large part of the investment made on the business at first. In total, up to $ 120,000 reais can be spent between machines used for cutting, storage, drying and for the administrative sector. See below for details of these machines.
For the production part, you will need a mechanical shovel, a log forklift, an unblocking machine, a conveyor belt, a planer, a vertical band saw, a log holder, a circular saw and two manual carts for transportation. The other equipment is office furniture in general. Tables, chairs, computers, cabinets and other utensils common to any administrative sector.
The raw material of sawmills and lumber companies can be divided into three major groups: pine, eucalyptus and native wood. Pines are the most common wood in the south of the country, are light in color and have a wide range of uses, from resin extraction to use in the furniture industry. Eucalyptus, in turn, is more common in the southeastern region. Its wood is resistant, but it can be difficult to saw and dry. The native woods come from the Amazon, and can be of different plant species. They are noble and are usually used by the furniture industry. They require special care of drying, cutting and storage.
Remember that the correct planning of the forestry / sawmill business is the key to increasing production through productivity gains!