The Business of Wood: How to Establish a Lumber Yard

With tens of millions of people becoming unemployed due to COVID-19, America and the rest of the world are diving into the first major recession since 2008. While that is cause for alarm for many entrepreneurs, an opportunity may be the primary focus for others. Millionaires are made during recessions by capitalizing on lowered business startup costs and unique market opportunities. If you see an opportunity to open up a lumber yard during a time when a focus on home improvement projects may become pronounced, you’re certainly not alone.

But what does it take to start a lumber yard? Our team walks you through pragmatic steps to consider to answer that question as you move your idea from inception to realization.

1. Map Out Your Startup Costs

As with any business, you’ll need capital to open a lumber yard.

Lumber yards are cash-intensive because they require large spaces to store wood, heavy machinery, storefronts, delivery infrastructure, and more. All of this can easily set you back tens of thousands of dollars.

Talk to other yard owners to get a beat on what it costs them to get going. Then, take those numbers and use them to guide your estimates.

2. Understand Who Your Target Market Is

It’s always important to reflect on who your primary consumer is before starting a business. For lumber yard owners, you can expect general contractors and property managers to be your bread and butter. You’ll also get some traffic from homeowners looking to complete DIY projects.

Keep your primary consumers and their needs in mind as you make various decisions, including where your yard will be located and what products it will offer.

3. Draft a Business Plan

You should have enough information to start a business plan by now. A business plan is an exhaustive document that answers everything from how much money you need to raise to when you expect to be profitable. It may be integral when you look for funding.

Remember, the more detailed your business plan is, the better, as your plan will serve as a roadmap for your business.

4. Name and Register Your Business

Every great business needs a great name! So take a moment to come up with one and once you do, get your business registered with your state and the IRS.

Every state will have a different registration process, so head over to your state’s website to learn what steps need to be taken. Likewise, registering with the IRS will be a separate process that you may be able to accomplish through the IRS website, depending on your venture’s unique circumstances.

5. Access Funding

There are several means of funding that business owners tap into to get their ideas off the ground. A few of the most common funding methods include:

Banks/Credit Unions

This is the most traditional means of squiring startup cash. Head into a bank/credit union, fill out a business loan application, and wait to hear back.

Friends and Family

If you have a friend/family member you trust, you may want to ask them to invest in your business. However, mixing business with family isn’t always a great idea, as a bad deal can ruin relationships.

Crowdfunding

Popular crowdfunding websites like Upstart allow entrepreneurs to access their startup loans from pools of private investors that all chip in a portion of what’s being asked to mitigate risk. While these loans may have high-interest rates, in many cases, they’re on par with what banks offer and may be easier to get.

6. Acquire Necessary Permits

Lumber yards have heavy equipment and retail stores and tend to be spread out across at least an acre of space. All of that requires special permits from localities which you’ll need to obtain before opening.

Talk to your city council’s business point of contact to inquire what permits you’ll need to operate within city limits. They should be able to point you in the right direction.

7. Lease Your Space

One of the most pivotal decisions you’ll make when establishing your lumber yard is where you choose to open up. As we mentioned previously, your key customers need to be able to access your location if you want to drive consistent sales. So, consider where customers exist and where they’re willing to commute before locking down a place.

Offering delivery services can be a helpful means of extending your yard’s reach. However, know that drive-in traffic will almost certainly be your top means of earning.

8. Get Insured

Business insurance is required when operating a lumber yard. In some cases, you can get an umbrella policy that’s designed for lumber professionals. In other cases, you’ll need to shop insurance policies more granularly, purchasing things like business interruption insurance, portable sawmill insurance, etc., separately.

9. Start Operating and Marketing

With all the necessities in place, your last step will be opening up your lumber yard and starting marketing! As you market, you should notice that foot traffic starts to build.

Be sure to talk to your customers to understand how you can better serve them and implement learnings into your business to keep the momentum going.

Wrapping up Our Lumber Yard Startup Tips

Opening a lumber yard the right way could lead you to a place where you’re routinely turning 15% to 20%  worth of profit daily. If you’re doing large volumes of business, that could translate into millions of dollars per year.

We wish you the best as you get your lumber yard off the ground and welcome you to check out the newest business/lifestyle content we have featured in our digital publication.


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