Managing Lumber Yard Business: Our guide on starting a lumber yard covers all the essential information
To help you decide if this business is a good match for you.
Learn about the day-to-day activities of a lumber yard owner
The typical target market, growth potential, startup costs, legal considerations, and more!
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http://www.mtewood.com/
BUSINESS OVERVIEW
A lumber yard sells construction materials to building contractors
And property owners for renovations or new building structures.
As the owner of a lumber yard you will stock a wide variety of wood
Cut down into popular sizes. Other materials you may stock include wallboard,
Hardware, roofing materials, and fencing.
You will likely offer services to cut wood down to required lengths
For your customers and make deliveries to job sites.
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Managing Lumber Yard Business
1. Who is this business right for?
An individual with solid business knowledge and skills will do well managing
A lumber yard business. Knowledge and experience of building materials, procedures,
And operations will allow you to anticipate the needs of your target customer base.
Managing Lumber Yard Business
2. What happens during a typical day at a lumber yard?
- Placing orders to keep all varieties/sizes and accessories for lumber stock on hand
- Filling orders placed by customers
- Assisting customers in selecting the right materials for their projects
- Taking orders over the phone for clients
- Delivering orders to large job sites as scheduled
- Answering questions on practical applications of your different available materials
- Maintaining and training staff to work in the lumber yard
- Maintaining a safe working environment/ensure inspections are completed of lifting and cutting equipment per OSHA standards
- Balancing your books
- Completing all payroll responsibilities
- Learning about new products
- Maintaining active marketing campaign to attract new customers and clients
Managing Lumber Yard Business
3. What is the target market?
Busy general contractors will be the meat and potatoes of your business,
Buying large quantities of materials from the yard on a consistent basis.
You may offer them a wholesale discount price for their continued business.
Homeowners and property managers will provide the more consistent business that helps
To attract more customers, but they will not be spending as much as the contractors.
Managing Lumber Yard Business
4. How does a lumber yard make money?
The more lumber you sell, the more money your business will bring in.
For a lumber yard, numbers and volume will drive the bottom line.
If you stock a greater variety of products, you will build larger sales
As contractors use you as a one-stop shop for all their building supply needs.
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Managing Lumber Yard Business
5. What is the growth potential for a lumber yard?
Communities that are actively expanding offer the greatest opportunity for a new lumber yard business.
This is one industry where starting small is the short line to failure.
Once your yard is well-established with contractors stating that they wished
You were located closer to their sites is an indication
That you would profit by expanding to multiple locations.
If you are looking at a small store front in an urban setting,
A hardware store might work better as lumber
Inventory requires massive amounts of cubic footage for storage and sales.
Managing Lumber Yard Business
GETTING STARTED
6. What are some skills and experiences that will help you build a successful lumber yard?
- Knowledge of popular building materials, sizes, accessories, and their application
- Solid understanding of business management
- Good personal skills
- Ability to establish positive relationships with contractors and DIYers
- Good ability to geographically dissect demographics to be able to respond to changes in the local market
- Knowledge of OSHA standards to provide safe work environment and training for your staff
- Basic knowledge of construction techniques–although not necessarily required
Managing Lumber Yard Business
7. What are the costs involved in opening a lumber yard?
This project requires a sizable upfront investment.
You will need to purchase or lease a warehouse/store situated on at least an acre of land,
Although more space will permit you to stock a greater variety of lumber.
Heavy-duty equipment needed will include forklifts, commercially sized saws, storage racks, pallet jacks
And a complete retail store setup. There are also the initial orders to fill your shelves
With lumber, hardware, and assorted supplies. If you offer delivery services, vans
And trucks will also be part of the initial investment.
Start-up will require capital from 500,000 to a million dollars.
Managing Lumber Yard Business
8. What are some insider tips for jump starting a lumber yard?
Choose your location wisely by completing an in-depth survey of local construction,
Average household income, and other competition in the area.
Establish a relationship with local lumber mills to determine what products you might be able to offer
To your customers that cannot be found at other yards.
This might include rare lumber, custom millwork, or flooring.
Work some home shows in order to kick start your relationships
With a variety of contractors who might need to use your yard on a regular basis.
Personal interactions will be far more beneficial than ads on the local media.
See also: The top 10 fast growing businesses in Nigeria.
Managing Lumber Yard Business
GROWING YOUR BUSINESS
9. How to promote & market a lumber yard
Your reputation for providing quality products, punctual deliveries,
And reasonable prices will do the most for building your business.
Local homeowners enjoy seeing ads on television and in their mail box
With discounts, coupons, and ads promoting seasonal products.
Don’t lose sight of the fact that you will sell a truckload of lumber to a contractor
And a few pieces to the homeowner.
With that in mind, a sales force that personally visits large construction sites
And handles large orders will do much of your regular promotion for your lumber yard business.
Managing Lumber Yard Business
10. How to keep customers coming back
For a grand opening, you will need to create a massive promotional presence
In the neighborhood taking advantage of radio, television, print, social media,
And local appearances. Billboards are a cost effective option for announcing your lumber yard’s arrival.
Offering steep discounts for a short time on common lumber sizes
And limited products helps to generate curiosity.
Remember that standing behind excellent quality and service will keep them coming back.
Managing Lumber Yard Business
11. How and when to build a team
As soon as your funding is in place, you’ll need to start building your team.
You will need a person responsible for preparing the physical lumber yard,
One for maintaining inventory, another for hiring and training staff, and
At least a fourth to begin your marketing campaign.
On opening day, you will have a staff between 30 and 100 people ready to service your neighborhood.
Managing Lumber Yard Business
LEGAL CONSIDERATIONS
12. State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a lumber yard.
Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide.
To learn more about how sales tax will affect your business,
Check out our informative guide, Sales Tax for Small Businesses.
Certificate of Occupancy
A lumber yard is generally run out of a large indoor or outdoor space.
Businesses operating out of a physical location typically require a Certificate of Occupancy(CO).
A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a lumber yard.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
If you plan to purchase or build a location:
-
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your lumber yard will be in compliance and able to obtain a CO.
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Reduce Personal Liability
Structuring your business as a limited liability company (LLC) ensures your personal
Assets are protected in the event your business is sued.
Managing Lumber Yard Business
EARNING POTENTIAL
13. How much can you charge customers?
A single nail can be sold for just a few pennies,
While selling enough lumber to build a house will cost thousands.
Your retail manager will constantly compare prices among your competition.
To ensure you are not pricing yourself out of business.
Managing Lumber Yard Business
14. What are the ongoing expenses for a lumber yard?
Your largest regular expenses will be payroll and maintaining inventory.
Building maintenance, licensing, safety inspections,
And marketing are other costs associated with doing business.
You’ll need to keep your vehicles maintained and safe.
Business insurance should also be kept updated.
Managing Lumber Yard Business
15. How much profit can a lumber yard make?
You can expect to see a profit margin for much of your lumber stock in the 15 to 20% range.
Hardware and accessories have a much higher margin and require less manpower to stock.
A small lumber yard can see a net profit of $50,000 to $100,000
While a large yard in a busy area can see a million dollar annual profit.
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Managing Lumber Yard Business
16. How can you make your business more profitable?
Careful management of your inventory will help to raise your profit margin.
If a product does not sell and spends time taking up space on the shelf,
Remove it from your regular inventory. Make sure you don’t run out of popular
Products during the busy building seasons, and add new
Products on a regular basis to keep your customers interested and involved.