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 dismantled material. We had no prior experience in salvage, demolition or the lumber industry. The purpose of this article is to share our experiences. Hopefully, the reader will learn from our (mis) adventures. The article is organized into sections titled Business Model, Sales and Marketing, and Operations. Also, a history of our barn is included.
Business model: 6 perspectives
1. There are no trade associations 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 purchase and sale of the wood product involves at least one, often two intermediaries. As a salesperson, brokers do not work for you. Usually the buyer pays them and then they take their rates or percentages and then pay the seller. There is a natural conflict of interest with only one broker involved.
3. Reclaimed wood buyers do not always conduct a site inspection of the material prior to purchase. Digital photos and samples along with broker’s advice or inspection are part of the deal. Unfortunately, buyers may not know what they have received until they download or add value to the material at a later date.
4. The parties involved often feel positive about the trade agreements: buyer, seller, and broker (s). In none of the seven different sales transactions with different buyers and brokers did we feel that the deal was executed as agreed (load, final count, species, classification).
5. Part of the reason players feel abused is that terms are often not put in writing. Without contracts, the deals kept changing (put it in writing). Sometimes players email it, but it’s mostly over the phone.
6. Fuel increases and poor economy hurt the profitability of our business. Because reclaimed lumber is typically used for homes (flooring was the biggest demand), a downturn in the housing market affected our plan. Also, as the wood was pulped, many potential customers were looking for new wood rather than our aged wood.
Sales and Marketing – 7 points
1. One of the mistakes we made on the project was not selling the material ahead of time. In hindsight, we should have commercialized the material early to form relationships and find channels to sell our product. We waited until all the lumber was on the ground and packed, which hurt our cash flow. Also, it takes time to meet new buyers and develop networks (if this is your first time participating). Another mistake we made was not stacking, also known as sticker stacking, our wood while we dismantled. We learned that a best practice is to acquire “sticks”, such as tobacco sticks, before removing them. The sticks are placed between the rows of boards so that the wood breathes and prevents 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 from a sawmill and overpaid.
2. The more value you can add, the more income you get and the more risk you take. Value-added activities could be grading, cutting, drying, delivery, and finishing. We found that it is really worth the investment to count each stack and mark each package with type, table feet, and location. If you don’t, you are setting yourself up for loss issues, lost income, disputes, etc. It is imperative, as basic as it may seem, to define the terms of the sale.
3. Species would appear to be important to potential buyers, but each potential buyer and broker seemed to claim that the wood was a different species than it was or what another expert said. Also, the species rarely brought us a higher price. More important than the species, the dimensions were the ones that brought a higher price. The longer and wider the material, the more demand we find for our product at an ever higher price.
4. The uses of our material were varied. We sold to buyers and brokers who worked on flooring, cabinetry, home improvement, and furniture. If the wood has defects, such as wormholes or bolt holes, it still has value (often more value).
5. Diligently screen potential buyers and brokers. It was generally unproductive to find buyers on site unless they were serious, established, and negotiating material as a full-time occupation. It’s important to align yourself with a broker you work for. Runners can bring various parties to purchase their equipment. There may also be a broker for the buyer and a broker for the seller.
6. The intranet is a good place to start generating 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 recovered (see “Our Bourbon Barn”).
Operations – 9 tips
1. Count the board feet of your material after stacking, so you know if there is shrinkage and show the buyer that you are organized. It helps to put a sign on each pile that identifies the amount, type, etc.
2. Train your crew on species types so they don’t mix oak with poplar 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 semitrailers to be easily loaded and maneuvered.
4. Safety and Security – Make sure you are diligent in the way you secure wood and equipment. Unfortunately, we come across multiple thefts or materials and tools. Make sure the project has security teams, processes and training.
5. Capital equipment: We should have bought a long forklift. If you make the equity investment, you can sell it after the project is finished. It is an opportunity to reduce labor costs.
6. Get organized before you tear down the barn. We should have planned better where we would put the woodpiles.
7. Do not work your crew in bad conditions. We spent hundreds of hours working with our equipment in muddy and wet conditions where productivity was poor.
8. Make sure you have licenses, insurance, permits, and cash. Having insurance for your crew and having the funds to pay it is important. Several of our crew members to include one of the principles stepped on nails.
9. Take lots of photos of all phases of the project, even before the project. Have the samples ready to ship.
Summary
My partner says he would never tear down another barn. I do not agree. If I got a 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 enter the restaurant business. He met the Ripeys at a party and they got into the liquor business together. Mr. Wertheimer became the co-owner of the Hoffman Distillery Company with the Ripey family (of Lawrenceburg, KY) in the 1940s (shortly before WWII). Wertheimer’s grandson, Edward, was born in 1933 and said that the distillery and warehouse were erected 50-65 years before he was born, and that the barn dates back to the 1880s. Our barrel barn was the oldest warehouse formerly owned by the distillery. There were a total of three warehouses at one time. The other two were erected after his grandfather obtained co-ownership. Edward spent much of his youth hanging out at Lawrenceburg Creek. Later, Edward Wertheimer of Cincinnati 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 (from Louisville) sold it to the owner (in 2000) and we bought it in 2007. Sadly, much of this history is lost (not recorded), which is one of the purposes of the author of the article.
Before WWII, bourbon barrels floated down the creek, which feeds the Salt River, connecting the bourbon distillery to its original warehouse. The 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 downstream. Another interesting fact was that there is a shed across the street where a government meter lived. The shed still exists. Each barrel was taxable and had to be stamped by the government employee.
