My business partner and I decided to invest in a project that would provide cash flow, profitability, and ultimately an asset in the end. We decided to buy a 115 year old bourbon barn, dismantle it, and sell the material that was dismantled. We had no prior experience in the salvage, demolition, or logging industry. The purpose of this article is to share our experiences. Let’s hope the reader learns from our (bad) adventures. The article is organized into sections titled Business Model, Sales and Marketing, and Operations. In addition, a history of our barn is included.
Business model – 6 ideas
1. There is no trade association or certified agents in the reclaimed wood market. In general, the reclaimed wood industry is a fragmented market with dozens of local or regional intermediaries and manufacturers.
2. The buying and selling of the wood product involves at least one, often two, intermediaries. As a seller, brokers are not working for you. Usually the buyer pays them and then they take their fees or percentages and then pay the seller. There is a natural conflict of interest with only one broker involved.
3. Buyers of reclaimed lumber do not always perform a site inspection of the material prior to purchase. Photos and digital samples along with broker advice or inspection are part of the deal. Unfortunately, buyers may not know what they’ve received until they download or add value to the material at a later date.
4. The parties involved often feel positive about business deals: buyer, seller, and broker/s. In none of the seven different sales transactions with different buyers and brokers did we feel the deal was executed as agreed (loading, final count, species, grading).
5. Part of the reason players get frustrated is that the terms are often not put in writing. Without contracts, deals kept changing (put it in writing). Sometimes the players send it via email, but most of the time it’s over the phone.
6. Fuel increases and poor economics hurt our company’s profitability. Because reclaimed wood is typically used for homes (flooring was the biggest demand), a downturn in the housing market hurt our plan. Also, as the commodity wood became pulped, many potential customers were looking for new wood instead of our aged wood.
Sales and Marketing – 7 points
1. One of the mistakes we made in the project was not selling the material ahead of time. In hindsight, we should have marketed the material early to build relationships and find channels to sell our product. We waited until all the wood was on the ground and in a pile, which hurt our cash flow. Also, it takes time to meet new buyers and develop networks (if it’s your first time). Another mistake we made was not stacking, aka sticker stacking, our lumber while we were dismantling it. We learned that a best practice is to purchase “sticks” such as tobacco sticks before picking them up. The sticks are placed between the rows of boards to allow the wood to breathe and prevent it from rotting. Stacking the wood also makes loading the wood easier. Our recommendation is not to wait to get the clubs. Unfortunately, we had to buy them at a sawmill and overpay.
2. The more value you can add, the more revenue you will earn and the more risk you will take. Value-added activities could be sorting, cutting, drying, delivery, and finishing. We found that it is really worth the investment to count each stack and mark each package with type, headers, and location. If you don’t, then you are setting yourself up for downsizing issues, loss of income, disputes, etc. It is imperative, as basic as it may seem, to define the terms of the sale.
3. Species seemed to be important to potential buyers, but it seemed that every broker and potential buyer was saying that the wood was a different species than it was or what another expert said. Furthermore, the species rarely brought us a higher price. More important than the species, the dimensions were what brought a higher price. The longer and wider the material, the more demand we find for our product, always at a higher price.
4. The uses of our material varied. We sold to buyers and brokers who worked in flooring, cabinetry, home improvement, and furniture. If the wood has blemishes, such as worm holes or bolt holes, it still has value (often more value).
5. Diligently screen prospective buyers and brokers. It was usually unproductive to meet buyers on site unless they were serious, established, and trading material as a full-time occupation. It’s important to align with a broker that works for you. Runners can bring multiple parties to purchase their material. There may also be a broker for the buyer and a broker for the seller.
6. The intranet is a good place to start to generate interest in your material. Wood Planet.com, Craigslist and Google searches for “Reclaimed Wood” generated good leads.
7. It helps to have a great story to tell about the barn you reclaimed (see “Our Bourbon Barn”).
Operations – 9 tips
1. Count the board feet of your material after stacking to check for shrinkage and show the buyer that you’re organized. It helps to put a sign on each pile identifying the amount, type, etc.
2. Train your crew on species types so they don’t mix oak with cottonwood or pine. A knife cut to show the grain, a simple map board, or a scale can indicate the different grades and species of wood.
3. Make sure there is room for flatbed semi-trailers to be easily loaded and maneuvered.
4. Safety and security – Make sure you are diligent in how you secure wood and equipment. Unfortunately, we have encountered multiple thefts of material and tools. Make sure the project has safety equipment, processes, and training.
5. Capital goods: we should have bought a long forklift. If you make the capital investment, you can sell it after the project is complete. It is an opportunity to reduce labor costs.
6. Get organized before tearing down the barn. We should have planned better where we would put the woodpiles.
7. Don’t make your crew work in bad conditions. W spent hundreds of hours working with our equipment in wet and muddy conditions where productivity was poor.
8. Make sure you have licenses, insurance, permits, and cash. It is important to have insurance for your crew and to have the funds to pay the crew. Several of our crew to include one of the starts stepped on nails.
9. Take lots of photos of all phases of the project, even before the project. Have samples ready to ship.
Summary
My partner says he would never tear down another barn. I do not agree. If I landed a really good deal, I think the lessons we learned would make the next project much more profitable and satisfying.
Our Bourbon Barn: A Rich Kentucky History of Its Owners and Descendants
Mr. Wertheimer, of Little Rock, had planned to go into the restaurant business. He invites the Ripey’s to a party and they go into the liquor business together. Mr. Wertheimer became a co-owner of the Hoffman Distillery Company with the Ripey family (of Lawrenceburg, KY) in the 1940’s (shortly before World War II). Mr. Wertheimer’s grandson, Edward, was born in 1933 and said the distillery and warehouse were built between 50 and 65 years before he was born and the barn dates from the 1880s. Our barrel barn was the warehouse oldest on distillery property. There were a total of three warehouses at one time. The other two were erected after his grandfather gained co-ownership. Edward spent much of his youth enjoying himself at Lawrenceburg Creek. Edward Wertheimer of Cincinnati later sold the property to Julian Van Winkle III in 1981. It was renamed the Commonwealth Distillery Company, where the bourbon was labeled Old Rip Van Winkle. Julian (of Louisville) sold it to the owner (in 2000) who we bought it from in 2007. Unfortunately, much of this history has been lost (unrecorded), which is one of the purposes of the article’s author.
Before World War II, bourbon barrels floated down the creek, which feeds into the Salt River, which connects the bourbon distillery to its original warehouse. Barrel handlers manually lifted the barrels from the creek and placed them in the warehouse. The barrels were full and waterproof. After trucks were commonplace in this region of Kentucky, barrels no longer floated down the river. Another interesting fact was that there is a shed across the road where a government caliber lived. The shed still exists. Each barrel was taxed and had to be stamped by the government employee.
