When to call a yard on defect boards

[Woodenskye]

Sounds like your trying to absorb the price of walnut for your customers. If they want a premium hardwood than you need to charge them premium prices. By buying commons to try and save money you are actually producing more waste and taking more time to figure out all your cuts. 

Mike, I agree.  More waste and time to mill, may make the difference in price easier to swallow not only for you, but also for your clients.  For FAS what would your supplier charge per board foot for 8/4 walnut?

 

Edited August 3, 2015 by Woodenskye

[estesbubba]

Mike, I agree.  More waste and time to mill, may make the difference in price easier to swallow not only for you, but also for your clients.  For FAS what would your supplier charge per board foot for 8/4 walnut?

 

Here is one of my local places

http://www.dunham-hardwoods.com/retailprices.asp

[Woodenskye]

Here is one of my local places

http://www.dunham-hardwoods.com/retailprices.asp

Sorry Mike, I was actually asking the OP about what he pays from his supplier.  Should have separated my question. 

[Pwk5017]

Sounds like your trying to absorb the price of walnut for your customers. If they want a premium hardwood than you need to charge them premium prices. By buying commons to try and save money you are actually producing more waste and taking more time to figure out all your cuts.

Absolutely. I am lowering the cost of the end product by using cheaper(lower quality) materials. I agree with both of you that using FAS would save me some head scratchin' and time selecting boards/milling. However, where I disagree with you is your over simplification of pricing and getting jobs. Ask a bunch of out of business woodworkers how educating the public on "premium hardwood for premium prices" went. It's a similar conversation as time tested joinery techniques versus pocket screws etc. I can tell you that 80-90% of the public doesn't give a flying you-know-what about your M&T joint with FAS lumber. Some do, and they are a blessing from above, but most don't. I thank God that I don't make my living doing this, because the attempt at changing the general public's perception would drive me mad. I think it does drive some men mad.

 

My prices look real similar to the link bubba provided. $4.50 for 1com. about $8 for FAS. Doing the math, that's a 78% increase in material cost, which would equate to a 24% increase in my final cost to cover that increase. It is an interesting proposal to try--raise the price 20%+ and see if the market pays it and how much faster I am with the build. It might make sense, it might fall flat on its face. I went back and recalculated the job im finishing right now using those numbers, and it's the exact price I was initially at with this client. They were slightly shocked by that initial price, and we worked through a few things to "value engineer" out. In this particular case, that price hike would have lost me the job.

No waste, my man. Im like the native americans with a buffalo; every damn part of that animal is getting used. I sell the small scraps to local turners/crafts people, and I use a lot of the stuff that's 12"+ to make cutting boards and other small stuff to sell. I only throw away sawdust and the most unusable garbage cut offs. Too expensive to throw usable hardwood away, and with enough creativity, no hardwood is unusable.

[Vyrolan]

My prices look real similar to the link bubba provided. $4.50 for 1com. about $8 for FAS. Doing the math, that's a 78% increase in material cost, which would equate to a 24% increase in my final cost to cover that increase.

It may not be that much of an increase when you account for the differences in the quality.

Let's ay your project needs 100 usable board feet... 

• At FAS standards of 83.33% clear, you need 100 / 0.8333 ~ 120 board feet at the $8 FAS price...so it's $8 x 120 = $960.
• At 1C standards of 66.67% clear, you need 100 / 0.6667 ~ 150 board feet at the $4.50 price...so it's $4.50 x 150 = $675.

So even there it's only a ~42% increase to get FAS...maybe less depending on how much their lowering the percentages for their Walnut grading.   Beyond the raw "percentage of the board that's clear" though, the FAS clear sections must be wider and longer....with 1C, you can get pathetic "clear sections" that are only 3" wide and 3' long or only 4" wide and 2' long....I mean really....2' long?   Therefore most likely your usability of the clear sections is lower (potentially much lower depending on the project) with 1C.   This means you're going to have to buy more extra boards than FAS which further negates the price advantage of 1C.

No waste, my man. Im like the native americans with a buffalo; every damn part of that animal is getting used. I sell the small scraps to local turners/crafts people, and I use a lot of the stuff that's 12"+ to make cutting boards and other small stuff to sell. I only throw away sawdust and the most unusable garbage cut offs. Too expensive to throw usable hardwood away, and with enough creativity, no hardwood is unusable.

That all said, I really admire this approach...well done sir.

 

Edited August 3, 2015 by Vyrolan

[Eric.]

If you can get 8/4 FAS walnut for $8.00/bf, then honestly you don't have much to complain about.  It's at $10.75 at my place.  4/4 S3S is $7.90, so you'd be right in the ballpark if you were talking 4/4.

Absolutely. I am lowering the cost of the end product by using cheaper(lower quality) materials. I agree with both of you that using FAS would save me some head scratchin' and time selecting boards/milling. However, where I disagree with you is your over simplification of pricing and getting jobs. Ask a bunch of out of business woodworkers how educating the public on "premium hardwood for premium prices" went.

Maybe you should take people to the lumberyard to show them their options.  If that's what it takes for them to realize that premium materials come with a premium price tag, then so be it.  I'm sorry, but I'd just have a real hard time eating the cost when some know-nothing insists on walnut but then scoffs at the price.  That's entitlement mentality.  "I want this and I wanna pay that."  Well TOO BAD.

I'm finishing my basement at the moment.  Here's what I expect...

I want quartz countertops for the price of melamine.

I want Brazilian cherry hardwood floors for the price of laminate.

I want travertine backsplash for the price of ceramic.

I want custom cabinets for the price of particle board BORG cabinets.

 

But guess what?  TOO BAD for me!  Because that's not what those things cost.  You want quality, get out the check book...and that's exactly what I would tell my customers, in so many words.  Offer them alternatives, obviously, but stand your ground.  Ultimately, losing a customer is better than working for minimum wage.  Plenty of burgers to be flipped if that's what you want.

[Llama]

Eric hit it right on the head.

When I quote a job, I am very clear about materials and the effect they have on the final price. If a client wants wenge and padauk on the project, I let them know the price will be higher than if they choose oak or maple... Just how it is.

Many people have no idea about wood prices. It is up to us as to inform them. The padauk and ebony recipe box is a prime example of this. The client wanted padauk and ebony.. But had the budget for padauk and pine... No way was there money for a board foot of ebony in the project. I let the client know this, and she upped the budget a bit. I did get lucky in finding a suitable piece that was in the short pile for a reasonable amount. In the end, I'm the hero.

Back to the walnut... If you are finding that you are getting usable pieces out of the common stock you are receiving, but want better pieces for show sides, or something with more visual presence, then spring for 100bf of the good stuff on the same order. I wish I had the room to store that amount of lumber. Then you won't have any problems. 

Another thought, is to find someone that mills and dries their own lumber for sale. There are at least three guys around me that do it. It is more cost effective to buy a 8/4 slab and cut it down to what I need than it is to go to my local lumber yard. I often go to both to get what I need.

 

 

[wdwerker]

This has been an interesting read ! My grandfather taught me how to pick lumber when I was 15 and always put the pile back neater than it was when I got there. I guess that's why 41 years later the same hardwood lumber yard only lets me and a very few others hand select our wood. Everyone else gets to work out of the top 2 or 3 layers (which seems generous compared to some of the comments I have read.) #1 common is usually only going to yield short or narrow useable pieces, especially in walnut ! You pay for what you get. The time and agony of trying to get all your parts out of questionable boards is why FAS costs more.

I also will pick narrow boards that are straight depending on my cut list and leave wider boards for someone else. If you go ripping a wide board chances are some of the pieces will warp, twist or move in some way as to be un-useable.

Almost every large order to be delivered is not going to be picked carefully. So buyer be aware of what you are going to get.  The guys in the yard are loading this many bd ft of this wood for several stops of a delivery truck. So your order is just one of many. If I order premium quality they will replace the rejected boards if I bring them back. # 1 common is a crap shoot, that's why it's cheaper,

You could  split the order and buy enough FAS for the most critical parts , then buy enough common to finish the project.  I usually buy 20 to 30 percent extra to cover waste. Make that around 1.75 to twice as much for #1 common in walnut.

[Janello]

Absolutely. I am lowering the cost of the end product by using cheaper (lower quality) materials.

But you're not, if those cheaper lower quality materials yield an unfinished product. Your taking it on the chin, the same as you would charging for 4 hours labor for a job that took you eight. Personally, I'd rather eat the labor than the material. You need to charge full price or better yet, a mark up for material or you are in the hole before you break out a pencil and tape. At least  your material is covered. If your time goes over the expectation, you've at least covered your out of pocket, and may even have material left over for the next customer.

Edited August 4, 2015 by Janello

[Pwk5017]

It may not be that much of an increase when you account for the differences in the quality.

Let's ay your project needs 100 usable board feet...

• At FAS standards of 83.33% clear, you need 100 / 0.8333 ~ 120 board feet at the $8 FAS price...so it's $8 x 120 = $960.
• At 1C standards of 66.67% clear, you need 100 / 0.6667 ~ 150 board feet at the $4.50 price...so it's $4.50 x 150 = $675.

So even there it's only a ~42% increase to get FAS...maybe less depending on how much their lowering the percentages for their Walnut grading.   Beyond the raw "percentage of the board that's clear" though, the FAS clear sections must be wider and longer....with 1C, you can get pathetic "clear sections" that are only 3" wide and 3' long or only 4" wide and 2' long....I mean really....2' long?   Therefore most likely your usability of the clear sections is lower (potentially much lower depending on the project) with 1C.   This means you're going to have to buy more extra boards than FAS which further negates the price advantage of 1C.

That all said, I really admire this approach...well done sir.

 

hahaha, yes! This is honestly the kind of stuff I do from time to time. Sit down and obsess about the details of a project and how that correlated to profitability. As you just proved though, in most situations 1com is the more profitable wood to use. ESPECIALLY, if I am using 80-90% of the board and not 66%(goes back to using those 2' pieces at some point). I would estimate I achieve that 80% mark. Ultimately, this is why I buy 1com. It is more difficult to deal with, but it's more profitable. The only way FAS beats 1com in profit margin is if I need long clear sections in a project. 1com would give me fits if I needed 6-8' of a board shown in a project. It seems so obvious and simple, but I had not considered buying some FAS.... call it nearsightedness.

[Tpt life]

Yeah, you just said your labor is free. You place far too little value on your time. That works for hobby. That kills business. You have to value your time if you run business and have a family. If you do not, the business consumes all of your time. I am a little concerned by the path of this thread anyway. In the OP it seemed you were open to the idea that you got what you paid for. When this is what the experienced guys said, many posts were exchanged combatting that view point. You can make great things with #1 Common, but at a loss of waste (even if you sort it for another project) and at a loss of time. Losing the time is a loss of other profit you could be making doing other profitable labor. It is the cost of lost opportunity. Again, I do the same in my hobby, it is not wrong. It could be bad business though. 

[Pwk5017]

I guess it is more profitable if you put $0 value on your labor.  That is fine as long as this is a side job/hobby business.  But if it ever becomes a full time job, the labor savings might push you toward FAS.  

Profit = margin * volume.   Right now you have a good margin on your projects, but your scope for volume is limited because you are spending a lot of time milling and cutting.   If business picks up, it might be worth it to take a hit on your margin in order to increase your volume.  

FWIW, I get 8/4 select and better walnut for $7.5 bd ft.  Select and better might be more of a regional grade, but it basically means one face is FAS.  I have been happy with that lumber.   Often times the boards are above grade.  The mill I buy from is a small operation and he doesn't go through the trouble of sorting out boards that are FAS on both sides.  I think it is more of a grade of convenience.  

Yeah, I don't really charge an hourly rate. I have a general idea of how long each project will take me, but I price things on through a different means. I typically make about $50 an hour when its all said and done. This particular project yielded $64 an hour. Typically, you would consider your margin to be the net profit after labor and materials, but I kind of consider labor/profit to be one in the same. If I charged a fixed $50/hr labor rate, then my margin would suck. I agree, I could probably shave an hour off this project just buy using select and better or FAS. To be honest, I cant really tell face and better/select and better apart from FAS most times. Even if I save two hours labor, the time savings do not justify the expense. In other species, it is a no brainer, because you can go from 1com being $2.90ish to select and better being $3.90. The 30% increase is worth it for the reduction in labor down the road. Its just unfortunate that walnut is a 70% price jump between grades. One last comment about your strategy. I work a 9-5 office job. Add in 1.5 hours of commuting a day, and you know how much time I have doing the week to work. I am somewhat fortunate that my fiancé works evenings and Saturdays. I get in about 15-20 hours of labor a week in the shop. For my situation, it's the exact opposite of what you say. I need to be chasing margin and only margin. Im maxed out on volume already. Unless God decides to slow the earth's rotation so each day is 28 hours, I really cant squeeze anymore labor out of myself. For a one man outfit, I would always suggest they value margins above all else.

 

Also, another note. You guys have been woodworking a lot more than me, but I don't want everyone reading this and saying "oh, only FAS is good enough for projects". I think plenty can be done with the lesser grades. Mike and I just called out the best bargain in the biz, the face and better/select and better grade. 1com is crap, but its usable crap for most people and projects.

[Brendon_t]

Well sounds like like you've got the answers. 

As a successful business owner,  the time value of money is way higher than widening margins in my book.   Just me though. 

Edited August 4, 2015 by Brendon_t

[Eric.]

Out of the scope of this thread, but FYI...

Labor is not calculated into profit margin.  Profit margin is net profit/revenue.

If you wanna spend your time delving into numbers, you should be looking at operating margin, which factors in all the costs of doing business including labor.  But since your labor costs you nothing but time, you can't even calculate operating margin accurately.

But none of that matters...all that matters is that you're being paid what you consider a fair price for an hour of labor...net profit divided by hours worked.  If you're really making $50-65 per hour NET, then you're doing pretty good...and I wouldn't waste my time worrying about the cost of materials.

[Pwk5017]

Some, but you can never have enough answers. I feel like you and eric are about to school me in business nomenclature.

Out of the scope of this thread, but FYI...

Labor is not calculated into profit margin.  Profit margin is net profit/revenue.

If you wanna spend your time delving into numbers, you should be looking at operating margin, which factors in all the costs of doing business including labor.  But since your labor costs you nothing but time, you can't even calculate operating margin accurately.

But none of that matters...all that matters is that you're being paid what you consider a fair price for an hour of labor...net profit divided by hours worked.  If you're really making $50-65 per hour NET, then you're doing pretty good...and I wouldn't waste my time worrying about the cost of materials.

Im not in retail, I am in construction and development. My knowledge of retail finance is cursory at best. Thank you for clarifying, but you got at the heart of what I was saying. It doesn't make a lot of sense to price things according to an hourly rate as a one man shop. ALL the net proceeds go to you.

I do ok. Always room for improvement. Honestly, this discussion has been helpful towards that improvement. One, you slapped my expectations back down to earth on 1com walnut(I still need to measure that damn board, no time!!), and it has generated some thought into the associated efficiencies with higher grade lumber. What I need to do is time myself on two similar projects using FAS cherry/maple and using 1com walnut.

[Brendon_t]

One of the greatest things about being a business owner (in this case,  a hobbyist that sells their product) is that NOBODY can tell you how to run your business. It is your baby and if it flies or if it fails,  you only answer to you.  

You seem to have come up with a way to make 1comm work for you.  By scavenging cutoffs for other small parts, you're just dealing with the shortcomings of lower grade.

Going back to your OP, I think that has been clarified that you have no cause to return the boards you received.  They appear to be in grade you purchased.  

This thread has migrated in a different direction but I think the purpose has been fulfilled.

[tcarswell]

If you have an old unisaw around I can hook you up with a stupid good deal  

[Brendon_t]

If you have an old unisaw around I can hook you up with a stupid good deal  

SILENCE YOU..

 

my trip last weekend to the wood shop closest to me got me very discouraged and I thought about this thread.  They had 2 lots to choose from.  FAS 4/4, #1 common 4/4. The fas was absolute crap and I have no damn clue how it EVER got a FAS grade.  The 1comm was quite pretty, being that it was so fill of knots and swirls. I couldn't find one worth a crap. Out of 50 or 60 boards, not one could I find a strip 3" wide 36"long. 

[tcarswell]

The fas is looking awful here too. It's remarkable what I've tolerated for 8 to 10 a bd ft for 4/4 and 8/4

[Brendon_t]

That's what kicks my butt. I can go two rows over and get beautiful H. Mahogany for $8.50 bf. Why am I going to pay 8.90 for crap walnut. .

 

The answer,  I'm not. 

[Eric.]

We've covered this.  Between the fact that walnut is naturally defect-riddled and knotty and gnarly to begin with, and the fact that most of the clear logs get sent to China before we even get a chance to set eyes on them...NHLA allows a lower grading scale for walnut.

It is what it is.  No point in getting all whiny about it.  Unless you have an old Unisaw to trade, you're just gonna have to hold your nose and accept it as part of life.

Here's a great article that Shannon wrote on the subject.  Let's call it case closed, shall we?

http://www.mcilvain.com/walnut-grades-explained/

 

[Coop]

Let's don't close it yet. There's still room for a DA question. The two places I go to here, have racks of rough sawn and racks of milled, neither of which have a grade associated with them. You just go to the bin of walnut, hard maple, etc., and do your selection. And it's sold by the bf or lf.  Apparently this is not the norm? I've never seen a grade.

[Eric.]

Well I'm not a CPA so I'm sure I'm wrong, but I don't understand where labor factors into profit margin.

If profit margin is net profit over revenue...

Say you spend $100 on materials and sell a piece for $400, your net profit is $300 and profit margin is 75%.

Once you add in all your overhead including labor, let's say another $200, the percentage would be 25%...and wouldn't that now be operating margin?  If not, how do the two differ?

 

Edit...rereading your post...you're right, I'm thinking of gross margin.

I dropped out of college...forgive me.

In my defense, none of it makes any sense.

[Coop]

Well I'm not a CPA so I'm sure I'm wrong, but I don't understand where labor factors into profit margin.

If profit margin is net profit over revenue...

Say you spend $100 on materials and sell a piece for $400, your net profit is $300 and profit margin is 75%.

Once you add in all your overhead including labor, let's say another $200, the percentage would be 25%...and wouldn't that now be operating margin?  If not, how do the two differ?

Your net is not determined by materials alone. It includes your overhead as well. And it also depends on whether you are the company or own a company. If you are the company and don't have employees, you can include your salary (self determined) and what is left, if any, is net and it stays in the company. If you own a company and have employees, all of the salaries come out, along with all other expenses, and what is left, if any, is net.

Hopefully, for my sake, as a business owner, this is correct ?

Edited August 13, 2015 by K COOPER

[Eric.]

Net profit = Revenue - COGS - SG&A - taxes - depreciation - interest - everything else.  Basically it is what you have left at the end of the year after paying for everything. 

Gross profit - Revenue - COGS.  In your example, you are talking about gross profit margin, not net profit margin.  When people say "profit margin" they usually mean net profit margin.  

In a retail business, very little to no labor would be in your COGS.  If you buy S2S lumber and then dimension it to S4S, the labor for the guy running the molder should probably be included in COGS (and therefore reduce your gross margin).  But the labor for the smart ass clerk that just works saturdays will be in SG&A (and will reduce operating income and as a consequent, net income and net profit margin).

If a furniture making business, all the labor used to make the piece you are selling should go into COGS.  But the time you spend paying bills, screwing around on woodtalk, looking for customers, etc, should go into SG&A.

Thanks for clarifying, Mike.  My business model is a little less complex...buy for a dollar, sell for two.