How can I tell if a logging business is actually profitable?

A logging contractor can show a busy year and still earn little, because the costs that matter are spread across fuel, repairs, trucking and machine replacement. Reported profit also depends on choices the owner made about repairs and pay. So look past the bottom line. Ask for the numbers behind it, contract by contract, and have an accountant help you read them.

Contract rates against the cost of doing the work

Ask for each contract and a cost breakdown for the work done under it. Compare what the contract pays with fuel, repairs, hauling and crew for the same stretch. A contract that looks busy may carry long hauls or difficult ground that eat the rate. Ask which contracts the owner would happily lose, and why. The answer often shows where the money is made.

One customer, many customers

Many logging contractors work for one mill or one licence holder. That is not a flaw in itself, but it means the business rests on a relationship. Ask how long the contractor has worked for each customer, how the work is renewed and whether the customer has been told about the sale. Your lawyer should read the terms on ending or assigning each contract.

What the statements may not show

Look at the age and condition of every machine and truck. If repairs have been patched along for years, a large replacement bill may be waiting for you. Ask what the owner does personally, such as running a machine, scheduling or bidding, and whether that work is on the payroll. If it is not, you will need to pay someone to do it. Check how many days the crews actually worked through wet or frozen stretches.