Sawmills are an important cog in the forestry trade wheel of South Africa.
While this industry has seen many challenges brought on by COVID-19 and a turbulent economy, the forest product industry still makes up 5% of South Africa's manufacturing GDP. The sawmill sector contributes significantly to this.
South Africa's forest production sector is currently being prioritised by investors, where both President Cyril Ramaphosa and Minister of Finance Enoch Godongwana are playing a role.
While this is a difficult industry to grow in, it is not impossible. If you refine your strategies, conduct research and implement strategic financial objectives, your sawmill business can grow into a major, competitive player.
Improving your business
Computer sawmill simulation models can be used to increase lumber yield and improve your management control. These are being used by many saw millers globally to accurately model the breakdown of logs in a sawmill, evaluate sawmill design, modifications you want to make and even what impact new equipment would have within the business.
A great idea to reduce waste and increase profits would be to sell offcuts as fire wood. You could either package this yourself or find buyers. Alternatively you can sell the offcuts to a firewood business. If you have enough sawdust, you could also sell it to various companies including businesses that make particleboard, other composite wood products, or even companies who use saw dust for isolation oil and water solutions.
Multi-saw optimised log bucking is a new technology that many sawmills have not adopted. It comes with computer optimization technology which improves your lumber yield.
While it will cost a significant amount, smaller mills can use this technology to decrease the amount of time it takes to deliver a large yield. It would increase overall operational timing which can also assist you in taking on new clients.
Strategies to reinvent the business
Making sustainability a key concern
Increasing your profitability in an environmental way can be challenging. Think about ways you can manage your business's reputation by adopting environmental responsibility objectives.
Partnerships are a great way to leverage the efforts and support of others to improve your own business. Structure deals with other firms to sell or promote each other's products and services.
Improving inventory management
If you aren't using inventory control and production control software in 2022, your competition would have an advantage over you, and you are being less productive than you could be. There are even companies who specialise in software specifically for sawmill business, like softwareketan.
If you are managing your inventory and production controls correctly, then you can implement a lean inventory strategy. This can save initial costs, and avoid waste down the line, as sometimes the lumber you use can get damaged over time.
Analysing competition and doing on-going market research
With any business, creating a diagnostic of your competition is imperative. Some competitors you may want to analyse are Nukor, Rhino Sawmills, White River, and Merensky.
Ask yourself the following questions:
What are their core products?
Who are their main clients?
How are they reaching their potential clients?
Likewise, conducting surveys to find out what your customers want is always a useful way to familiarise yourself with markets.This will give you a well-rounded view of customer expectations, painpoints and possible niche segments to tap in to.
Sawmill industry facts in South Africa
- Sappi Lomati is the longest running sawmill in South Africa, which recently celebrated its 50th Anniversary.
- The South African forestry industry plants about 360 000 trees, five days a week.
- South Africa produces an estimate of approximately 16 million metric tonnes of timber each year.
- Mpumalanga has the largest share of South Africa's forestry resources - approximately 40%
Innovative ideas to market the business
In order to survive in business in 2022, you need a social media presence. However having a presence isn't enough anymore. First, you need to improve your page for SEO purposes. A good way to do this would be to search for the correct keywords and terms to use to get picked up by a Google search. You can use Semrush to do this.
Writing your articles and posting them on all your platforms is always a great idea. Make them relevant to what your business is currently doing, and ensure they are high-quality and authoritative.
You need to create content that will attract potential customers, such as images that show your products with a smart caption or a discount mentioned. You could also create video adverts that are no longer than one minute - show your workspace, your employees, your products, interesting facts, or other material that people will find interesting.
Of course, email marketing is an effective method to sustain your brand and retain customers. Think about monthly newsletters, industry updates, specials for the month, or new articles up on your blog.
Financing your business to grow
If you have some form of collateral such as a property, you could get a loan from the bank to fund the growth of your business.
Getting funding from banks is difficult in South Africa without collateral, and funding from government institutions can take a long time. The alternative is finding an angel investor, an individual who wants to invest in a business with their money.
Preparing to exit your business
You may want to sell your business because you want to build another business, retire, or perhaps a competitor wants to acquire you.
A good business strategy is to grow your business with the intention of selling it (even if you don't actually want to).
Whilst you're running your business, find ways to increase its value, and consider these unqiue elements when conducting the valuation.