
7 minute read
The Importance of Costing Tickets in the Retail Lumber Business
By Paal R. HOLLENBECK Lamb2r Seraice Company Burbank, California
If a retail lumber yard operator knew beyond any question of doubt what his percentage of gross profit was yesterday, and this month to-date, he would make more profit. The principal need of the retail lumber industry today is better profits. It is very difficult to meet this problem without realizing the need for taking definite action that will rectify improper pricing practices.
The old concept of doing business was to cut overhead if profits were not satisfactory. No longer does this seem to be a practical approach. Generally speaking, operators today are facing increasing costs with little, if an5 opportunity of decreasing them.
Under the old concept of doing business, prices were generally stable. Therefore, it followed that the only way a profit could be made was to operate a yard at some point below its operating margin percentage, thus leaving a margin of profit.
Today .retailers are operating in various kinds of businesses with various kinds of overheads and gross margins. We no longer operate in a stable price market. If 2x4's are selling for $120.00 per thousand board feet in a given market to contractors, it is conceivable that they could be profitably sold for as little as $110.00 per thousand board feet under one set of conditions, and they might have to be sold for $200.00 per thousand board feet under another set of circumstances in order to afford a profit.
The old idea of using the average percentage ratio of net profit to sales is no longer a satisfactory way of measuring a yard's performance. Such a ratio applied to a given lumber yard operation is an average percentage, applied against average overhead.
Today's operations require accurate knowledge of the cost of doing business for a specific type of sale, and the mark-up necessary on merchandise in order to afford a satisfactory profit for that specific type of sale.
In ot[& words, as a measurement of profit, it is not sound to compare the gross profit of a specific item to average overhead.
Prior to World War II, a 5/o net profit to sales was a satisfactory goal. Today, there is considerable thinking about a 10/o net profit being a satisfactory margin. This may or may not be true, depending on the kind of operation in which you are engag'ed. Net profit to sales can aftord a satisfactory return on investment on a percentage of from 3/o to 20/o, depending entirely on the kind of business you are in, the conditions of the sale, and the amount of investment necessary in order to acquire that business.
As an industry, we face a problem of two parts. First, we do not know our true cost of doing business in the various categories of business in which we are engaged.
Secondly, we do not know our gross margin in-tliese various categories of business. In fact, as an industry, we do not know what our actual gross margin is, even on an average basis. The first step toward better accounting and profit control is accurate knowledge of gross margin. The easiest manner in which to acquire this information is to cost all sales tickets all of the time.
The majority of our dealers today believe that this would be valuable information to have, but that it is too costly to acquire. Until three years ago, I was guilty of the same belief. My opinion was changed rvhen I had an opportunity'to investigate the cost of costing tickets with many dealers successfully engaged in this activity.
In each and every case, dealers who cost all of their tickets all of the time make the fat statement that there is no cost involved. Their contention is that there are enough errors picked up in pricing to more than off-set the actual expense of costing the tickets.
In addition, there are other factors which are conducive to better profits when this work is properly done. The first readily recognizable advantage in the costing of tickets is that it will result in better profits because it vividly points out to Management the unsatisfactory gross margin involved in many of its selling crices. When Management has costed tickets daily placed on its desk which afford less than an established percentage of profit, immediate decisions can be made correcting unprofitable pricing practices. This, according to all dealers contacted, does not result in decreased sales. The difficulty is not with the consumer's price-consciousness. It is with our own lack of awareness of up-to-date pricing methods.
Here's How to Cost Tickets
The most satisfactory method of costing tickets so far knov;n is to have invoices printed with trvo extra columns added to the ofifice copy, one column for unit cost, the other for its extension. On the other copies of the invoice, a message can be inserted in this space, such as "Thank you for your business," etc.
Whoever does the regular pricing of tickets should also do the costing of them and, at the same time, indicate the percentage of gross profit at the bottom of the page. If this is done rvith a red pencil, it is always readily noticeable. Indications are, depending on the kind of business engaged in, that the average man can cost from 50 to 75 tickets per hour.
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Thus spoke a philosopher by the name of Rochefoucald. No, he was not reporting the recent national political conventions. He came and wrote a long time ago. But his words, above quoted, come in mighty handy when reviewing the speech-making at*the*big conventions.
There wer€, to be sure, some very good, very interesting, very useful speeches at those two conventions. True, there were none who soared oratorically like the American eagle whose shadow falls upon the highest peaks; but ttrere were a number of highly intelligent jobs of speech-making that got the job done that the *"O.;O.J" were aiming at.
A few of the speeches delivered during those two successive weeks of political adventuring and conventioning were well worth hearing and mulling over. Of course, the great majority of people who were introduced, and had their say before the mike, were just making vocal noises. They weren't saying a thing. But, as has always been the case, of such are political conventions composed to a very large extent. ***
Records were made on those programs. For example, it is more than likely that the word "great" was spoken into those microphones more thousands of times than ever before in the history of government. No matter who or what was being discussed, it was dubbed "great"-in various instances the same man getting that title over and over. Fortunately, it costs nothing to say "gr€at;" else had those been most expensive conventions.

Of course, political oratory has no great need for sticking to facts. I heard a speaker introduced in thunderous tones as a "great orator." And after the speaker had gone on for an interminable time, repeating over and over agai,n the same things, and overlooking many splendid opportunities to stop talking, I said to myself: "So THfS is oratory! Wonder what Patrjck*H;nry would call it?"
Ilowever, we have no Patrick lfenrys nowadays and, since there must be conventions and the choosing of the political candidates provided for in our form of government, we use what we have. Long ago I heard some men discussing the oratorical qualities of a certain man given to public speaking. One said he. had heard the man make
BY JACK DIONNE
a number of good speeches. Said another: "He only makes one speech. He just hollers foufer in different places."
But in these two big political conventions I heard several men who did fine jobs of talking. No orators, no Ciceros or Patrick Henrys, but smooth, pleasant, punchful, convincing talkers-some of whom uttered keen and impressive jobs of word-wrangling that were remembered when the speaking was over. fn these days of microphones, orators haven't the chance to sway a crowd the way they used to when they walked a platform as they orated. Straight men are the order of the day.
I would like to pay a small tribute here to one of the speakers at one of the conventions. He was an 82-yearold-man, whose face, whose manner and whose words reflected the fine soul that shone within. In his remarks there was no word, no barb to hurt anyone; no studied unkindness. FIe was a gifted, kindly gentleman-a gentle rrlan-anfl his address to the convention was such as only that kind of a man could utter.
As I listened to the kindly wisdom and advice of Herbert Iloover, it made me prouder than ever to be an American. There was little of political partisanship in his remarks. He spoke from the reservoir of deep affection which he feels for his country, his pride in its accomplishments, his hopes and ambitions for its future. A wise, kindln gifted American gentleman, just talking wisely to his fellow Americans. He could well have been the man O. Henry was describing when he said that "he went to and fro in the world, and walked up and down in it, and what he saw, he liked." Herbert Hoover likes the world, and the world which likes good men likes Herbert Ffoover. I enjoyed him immensely. No orator, just a fine, honest, patriotic American, speaking his mind.
He uttered such. thoughts as this: "A splendid storehouse of integrity and freedom has been bequeathed to us by our forefathers. In this day of confusion, of peril to our liberty, our high duty is to see that this storehouse is not robbed of its content."
Someone asked Woodrow Wilson once how long it took him to prepar€ a public address. He said it depended on the length of the speech. For a l0-minute speech, he took two weeks; for a Z0-minute speech, he required one week, but for a two-hour speech, "f'm reedy right now." The point is practical. A short speech can be remembered and quoted by its hearers, and must therefore be carefully done; a longer speech carries the same necessity; but a