Analyst recommends profits should be higher for silviculture businesses

Silviculture owners should be making as much as ten percent more profit in order to keep their businesses on a sound financial footing and make a reasonable return on their investments. Business analyst and advisor James Byrne of MNP came to this conclusion in a presentation to silviculture contractors at September’s silviculture sector Annual Pricing and Market Summit.

Byrne WCSA 2013.pdf

Dear foresters and forestry contractors:

Earlier this month the WSCA sent out reports making the case for a substantial rise in prices for silviculture work and describing the general data that supported that assertion. The response, so far, to this critical information can be best described as, well, polite. Or to put it more plainly, largely absent. Notwithstanding the possibility that the close to a thousand emails we sent out to foresters and contractors are all languishing in the dead letter office of the internet somewhere, I have to assume quite a few have actually read them.

Two things come to mind: either the conclusions and the data we presented to explain them are so far-fetched that no one has commented for fear of embarrassing the reports’ authors; or everyone has sharpened their pencils, and has been too busy to comment, as they revise their estimates upwards in price, and adjust their budgets to accommodate that rising tide. I would like to believe that latter.

That being said, here is the next in this series that comes from the WSCA September Pricing and Market Summit. This document is MNP’s Business Advisor James Byrne’s Summit presentation in which he lays out the fundamentals of a firm financial footing for any business and then applies that logic to what is a fair profit for silviculture contracting.

Some highlights include:

• A quick synopsis of the current profitability of the lumber manufacturing sector
• A plain language definition of profit and why it is good for businesses
• A startling analysis of the increase in profits available by increasing prices as opposed to increasing volume
• And a final conclusion around what is a reasonable profit for the kinds of risks typical of investing in a silviculture business.

I am hoping that both foresters and contractors will look at this presentation and think about and apply Mr. Byrne’s estimate for what is a fair profit for our sector.

John Betts
Executive Director