Economic Feasibility Analyses 3501 



28-2 $120,000— AN 80-ACRE SOLUTION* 



The objectives of the 80-acre solution are as follows: 



• Provide a rural home and a quality of life for the enterprise owners that 

 is difficult to match in an urban setting. 



• Provide a small-scale, low-investment enterprise that will challenge the 

 full range of creative abilities of a hard-working team comprised of wife 

 and husband. 



• Provide responsible, careful, and intensive stewardship of their 80-acre 

 forest; provide the enterprise with an assured source of wood. 



• Provide the owner-operator couple with an annual combined salary and 

 investment profit, before interest and loan payment and income taxes of 

 $66,000, i.e., $36,000 profit + 2 x $15,000 salary. 



Eighty acres of upland forest stocked with small hickories and oaks constitute 

 the sustained-yield land base for this two-person enterprise to make high quality 

 furniture on a very small scale. The proprietors are husband and wife; they 

 execute all aspects of the operation — from woodland management through man- 

 ufacture and direct-mail marketing to the customer. Key statistics describing the 

 enterprise are as follows: 



Capital investment (including land) $120,000 



Operating cost, annual $158,000 



Sales, annual $194,000 



Net profit, annual (before income tax) $ 36,000 



Return on sales 19 percent 



Return on investment 30 percent 



Employees (i.e., the husband and wife owners) 2 



Energy requirement, annual 



Electrical 60,000 kWh 



Gasoline 700 gallons 



Wood residues (to heat shop and home) 10 cords 



Illustrative of the class of furniture to be manufactured are the chair and 

 ottoman shown in figure 28-1 (top). This chair and ottoman are manufactured by 

 Vatne Lenestobfabrikk A/S in Norway, and the design simply serves for illustra- 

 tive purposes. The structural skeletons of both chair and ottoman are constructed 

 of bent and glue-laminated veneer. Cushions are supported on canvas slings and 

 upholstered with high quality leather over synthetic stuffing formed to contour. 

 Net annual sales are projected at 400 chairs at $400 each and 200 ottomans at 

 $160 each. Forty cords of oak and hickory are harvested annually with raw- 

 material flow as shown in figure 28-1 (bottom). Not depicted here, but described 

 in the source article, are data on fabrication of the metal hardware, canvas slings, 

 and upholstered leather cushions, as well as the manufacture and finishing of the 

 wood parts, which are simply designed for easy purchaser assembly after 

 shipment. 



'^Abstracted from Koch (1981). 



