What should I check before buying a sawmill business?
Check where the logs come from and whether that supply continues after a sale, the condition and maintenance history of the mill equipment, who buys the lumber and by-products, the terms of any yard or site lease, and whether the sawyer, filer and other key staff will stay. Ask separately about environmental and permit questions.
Buying a sawmill business is not the same as buying a used sawmill machine. The business is a flow: logs in, lumber and by-products out, with people and a site in between. A break at either end can stop the whole operation. Check each link, and ask the seller to show you records, not just explain.
Where the logs come from
Ask who supplies the mill, how long each supplier has been delivering and what the arrangement is. Some mills buy from many small suppliers; others depend on one or two. Ask whether any supply agreement carries over to a new owner, or needs the supplier’s consent. Ask where the mill’s logs come from.
Equipment and the site
Ask for maintenance records on the saws, the carriage, the edger and the loaders, and for a list of what has been replaced lately. Consider an independent inspection. Then read the lease on the yard or site, if there is one: how long it runs, whether the landlord must consent to a new tenant, and whether there is room to store logs and lumber.
Customers and people
Find out who buys the lumber, the chips and the sawdust, and whether any buyer takes a large share. By-product sales can matter more than they look. Then meet the sawyer, the filer and the yard foreman. These roles hold know-how that is hard to replace, and the owner’s own role in buying logs and selling lumber should be clear before you close.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
- 02Business Development Bank of CanadaGovernmentEquipment valuation: How to do it
- 03Business Development Bank of CanadaGovernment13 terms you need to understand before signing your commercial real estate lease
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