Insect Powder For That "Big Volume" Bu$

A letter by Mr. Sam T. Hayward, Vice-President and Creneral Manager of the Hayward Lumber & Investment Company, to their Yard Managers.

The idea that by increasing volume of business, profits can be increased proportionately, is all wrong. This might be true if there was no limit to the volume of business going around, but where the amount of business to be handled is limited, and you have competitors, it is never possible. Your competitors will never let you increase your business by taking business from them.

Any increase in your volume will meet with increasing resistance on their part. This increased resistance is always evidenced by price cutting, retaliation, and a g'eneral lowering of the average price all yards get for material. The yard which is crowding up their volume is by necessity the yard getting the lowest average prices.

We are all in business to make money, to make the best return we can on our investment. This is the chief aim in all business undertaking. However, by observation I would say that the yard doing the most business in a town is seldom the yard making the largest return on the invested capital. This largest yard is almost always the yard which is selling the cheap competitive business; is sometimes cutting the price and is spending lots of money on salesmen. Their average prices which they get are of necessity lower than their smaller competitors and the percentage of expense is usually higher. The more they crowd their sales the lower they force the average selling prices on material.

Supposing in a town Mr. A feels he should and can sell more lumber. Perhaps he belongs to the Rotary Club, is active in the Chamber of Commerce, and just naturally feels he can, should, and will do more business than B's yard. Can he do more business than B ? Yes, he can. But ian he crowd his volume to the maximum and make any larger return on his investment? I doubt it. Mr. B won't let him. In the struggle for business, either A or B will cut the price, probably both. They both are human. Suppose by an aggressive policy A succeeds in increasing his business, say from $6000 per month to $8000 per month, taking the $20CI increase off of what would ordinarily be

B's business, cutting B down from $6000 to $4000 per month.

What happens if B is like most of us? He will retaliate in the ohly way most of us lumbermen know how to retaliate. He wili endeavor to get some of A's best customers by a cut price. A will cut to meet the figure. B will cut on his own customers to hold them, and on all floating business. What happens to the average price at which lumber is sold as compared with where A and B get along? An average of 5 per cent lower price would be a very low estimate of what would result, I believe. Under the favorable conditions first outlined, we will suppose the following condition existed:

Sales Vo of. Actual net Probable Annual%o per mo. net profit profit per mo. Invest. on Invest.

Yard A. $tr00 lO% $600 $30,000 24%

Yard B. $6000 lO%' $600 $30,000 24%

If the highly competitive condition exists, wouldn't the following result ?

Sales

Vo of Actual net Probable Annual7o per mo. net profit profit per mo. Invest. on Invest.

Yard A. $8000 57a $400 $40,000 12%

Yard B. $4000 5% $200 $20,000 12%

Most lumbermen are darn fools. Whatever we cut the price, all of the cut comes off of Net Profit as long as there is any net profit. One lumberman the other day told me he never made any money in his life where or when conditions were highly competitive with every one aggressive to increase their business. Have any of us ? There is money to be made when lumbermen get along, but they make it only so long as they do get along. A spirit of give and take and the principle of live and let live are absohitely essential to this getting along together, which is so essential for profits.

Get acquainted with your competitor. You will find he is almost as human as you are. Too many feel their competitors have horns and a forked tail.