How to Finance your Wood Company
Welcome back to a brand new episode of the Woodpreneur Podcast. I hope you’re doing well. This is the very first podcast episode of 2022. Now, I just got off a call with some of my Woodpreneur mentorship students and my Woodpreneur mastermind. It’s where we get together every week and we discuss their businesses and I give them strategies to help them improve their business, bring in more sales, help with operations, etc. I’m basically their coach.
The thing that I want to talk about, which came up today with two of my clients, was the whole idea about financing. As a Woodpreneur, you know how expensive it is to run your business and even just the startup costs alone. All the tools, land, everything, it takes up a lot of space, just a lot going on. So today I’m going to talk about some different strategies for you to finance and get funding for your business.
Multiple Ways to Finance
Before we get into that, why do you want money for your business? You can invest in a space and tools that make you more efficient, and when you’re more efficient, you’re more productive, when you’re more productive you are more profitable. The other thing is that you could probably do better higher-quality work if you invest in the right tools.
Lastly, you just need that infusion of cash, so that you can set up your business the right way, because otherwise, you’re just going to be grinding it out for as long as possible. So now I’m going to talk about three different ways to finance your wood company.
Saving Up the Money
The first part is just saving and scrapping for it. This could mean using money from your day job or using money from your side hustle job to invest in tools, that’s one way to look at it.
If you do it that way, it will definitely take a long time, but you won’t have any debt. And if you want to avoid debt, the best way for you to do that is to just save for it. This helps if you have a day job, and all of your money from your side hustles you can throw back into investing into tools, that’s definitely one way that you can look at it.
Financing your Equipment
The other way is, wherever possible, to finance equipment. If you’re gonna buy a mill, for example, some of these companies like my other client IDRY you can finance. So you can finance with a company, and some of these financing terms are so easy and so low cost, it just makes it a no brainer for you to do it.
If you’re bringing in some decent money, you can easily cover that. Especially if you’re not relying on your business as your main source of income, it’s easy to pay off. But only reserve those for the big ticket equipment that will definitely increase your productivity just don’t do it for small things. Save for those or use profits from your existing business.
Pre-selling and Collecting Deposits
The next way for you to get money I just told a client about today. He operates a sawmill, and it’s the middle of winter right now. He’s working on getting a loan and one of the things that I told him was to go out and aggressively start booking sawmill jobs. Because it’s a slowish time, and he’s not going to be really milling as much, he needs to go out and pre-sell even if it’s at a little bit of a discount.
Then you can start collecting deposits, you can use some of the deposits, in order to start financing equipment. Again it’s about going out and proactively marketing and selling your products and services in advance of your work, then turning those jobs, those deposits and some of that income into equipment investment.
Loans and Private Funding
The other way for you to get money is to ask for a bank loan or private funding. I’m not a financial person, you should talk to a financial advisor. But this is something that I’ve advised my clients on, and I’ve seen people sort of leverage good credit. There’s good credit, and there’s bad credit, don’t put stuff on your credit card at all. That’s bad credit.
There’s also private funding, there’s also investors. I have another client that uses investors, and their state grants, so I’ll go over a little bit of each. For private funding and bank loans, they’re often going to need you to put together a business plan. What goes into it is an overview of your business. They most likely want to see a website, they want to see Facebook, Google reviews, they want to see your projections, they want to see who your target audience is, they also want to see your mission, your vision, your values. These are all things that I teach my clients on how to do.
The Power of Intention
The other thing is they will want to see letters of intent. As I mentioned before, if you go out and you start pre selling services, pre-selling products, if you’re going to sell a bunch of tables, find a table person, find a company that will buy 20-30 tables from you. Sell at a discount. If you put together a letter of intent that says, “XYZ furniture company is going to buy 40-50 slabs of table tops from me.” Each of those table tops has a value, you can show that as pre-booked revenue.
For all those things, regardless of what types of funding you’re going to go for, you should put that together. You can put together a Google presentation or a PowerPoint presentation. Make sure you have your picture, you have your logo, your family history, why you got into the wood industry, what you’re passionate about, customer reviews. You want to make it so easy for somebody to say yes.
I have another client with a private investor that is invested in their company, who helps them finance some equipment, and they get some equity in their company. If you know some wealthy people or people in your community that have investment circles or investment groups they can definitely invest in your company.
State and Departmental Grants
The last thing, which is like the secret sauce, Josh Clarkweiss from Full Circle Forest Products and I talked about state and government grants. This is probably one of the most important parts. So every state has a Department of Environmental Conservation or a Department of Natural Resources (DNR).
What you need to do is look them up and form a relationship with them. Before you do that, I want you to join the Urban Wood Network and become part of the growing urban lumber movement. Once you’re part of the growing urban lumber movement, you can put that logo on your website and you become an advocate for salvaging and reclaiming trees only using wood from urban areas, and a lot of you do that already.
Not a lot of you are getting your lumber from Lowe’s or Home Depot, you’re getting it from local sawmills, lumber shops, and the like. If you fall within this camp, and you know where your wood is coming from, and I advise you to know where your wood is coming from, this is key. By plugging into something bigger than yourself it gives you validation, it gives you credibility.
So once you plug in with the local DNR, and state forest or the urban forest, start advocating for it and get them to know what you’re doing. A lot of these places have grants, and they can give enormous grants, depending on your state. Here’s the pitch.
Becoming Part of Something Bigger
The pitch is that you’re reclaiming wood and salvaging wood that would have otherwise ended up in a landfill as chipped up mulch. Now you’re repurposing this wood at its highest form, and creating jobs, creating economies, and creating timeless pieces that capture the carbon. You’re sequestering the carbon that if you were to throw it in a landfill or mulch it up whatever it would cause greenhouse gases.
What you’re doing is bigger than just making slabs and selling tables. You’re connecting to something that’s even bigger than yourself and that proposition has a value. That’s the pitch. You just need to become friendly with the state forester or the DNR and then look for Urban Wood Network. There’s a whole movement out there. And if you end up following through and you get some money, just let me know that. I don’t even want a cut, I just want to know that you took action on this. My clients have taken action and it’s paying off!
Tune in and join us for another great episode!