VARDAMAN VIRTUAL FORESTRY COMPANY

The Most Direct Link to Knowledge Workers in the Southeast Forest Economy

Recent advances in the technology of site preparation, seedling morphology, and competition control have demonstrated that spending additional dollars on them increases the rate of return (IRR) on the entire timber-growing venture. If, however, you don't get the maximum dollar for the original crop that you tended for years, you will lose much of the profit that you planned to make by converting to a modern plantation.

Acting on her own, one of our Georgia clients recently solicited offers on her timber and obtained a high of $85,000. We told her that we thought the price was too low and offered to conduct the sale free of charge if we did not get more net to her. We measured each pine tree with a steel tape, sent out over 100 invitations to bid, and guaranteed the number of trees by DBH classes.

On bid morning, we received the following bids by fax:

1. $134,019

2. 128,252

3. 118,007

4. 115,686

5. 115,398

6. 112,992

7. 112,238

8. 109,320

9. 108,000

10. 107,551 (the buyer who offered her $85,000)

11. 102,260

12. 94,682

If we had done nothing more than raise Bidder 10's confidence by the guaranteed tree count, we would have raised the price by 27%. On the other hand, by finding Bidder 1, we raised the price by 58%. After paying our commission of 7%, she netted $124,638, 47% more than the best offer she got on her own.

In making the management plan for the new plantation, a landowner will ordinarily use present-day prices to estimate the dollar yields from future crops. Had our client done so with her original $85,000 offer, not only would she have been almost $40,000 poorer to start with, but also she would never have invested in high-yield regeneration. In a very real sense, proper management starts with timber profits.