UNTYING SOME TANGLES
On Tuesday I received a request for "immediate payment" of a demand note
for $3,500.00, through some shyster lawyer in New York.
I took it up to Barrington and asked him what to do about it. He gave me
a paper to sign, and I put my name to it without bothering to read it.
He then spoke sharply to me, and said:
"For heaven's sake, lad, haven't you learned better than to sign your
name to a paper without reading it?"
"B-but," I said, stammering, "it's different with you!"
"Different be damned!" he exclaimed petulantly. Then, "Excuse me, young
man, but really, for a man in business you are acting very childishly.
You thought Jim Simpson was your friend and trusted him. Now, even after
the mess you got into, you haven't learned your lesson, and you sign
anything I ask you to, without looking at it!"
I read it through, and it was something about giving him full power to
act for me in the matter of the note.
"Now," said he, "this is going to cost you some money"--I winced at
this--"but I'll see if I can't save you something."
He got the New York lawyer on the long distance and offered him a
thousand dollars cash in full settlement of the claim, or else
threatened to contest the legality of the note. The upshot of it was
that Barrington made a trip to New York to see him, and they compromised
on $1,250.00.
When Barrington returned from New York he came around to the house to
see me.
"Well," he said, "I think I've saved you some money this time. I've
settled that claim for $1,250.00 cash, which I have paid."
He gave me also the bill of expenses which he had incurred. I put the
figures on a bit of paper and twisted it nervously, wondering how I was
going to pay that sum of money; for I remembered I had only $1,500.00 in
the bank, and I had those bills to pay that Jim left behind and which I
had unknowingly agreed to assume. Barrington and the accountant between
them compromised on those, by the way, at seventy-five cents on the
dollar, but there was nearly $400.00 to pay there, and if I paid that
$1,250.00 with the expenses it would wipe out my bank account
completely.
Barrington looked at me quizzically, and asked:
"What's worrying you now, young man?"
I told him. He laughed, and then remarked:
"That needn't worry you at all. You have your farm clear now and I'll
take a mortgage on it for $1,500.00, and that will enable you to pay
this bill up right away and still hold your farm. I was just looking for
an investment of about that size. You are no worse off than before, and
I will simply have a lien on the farm for $1,500.00 instead of Simpson
having one for $3,500.00; and really, in this case, I think you will be
much safer."
The next morning we fixed up the mortgage.
I hoped then that I was through with the troubles of getting the
business from Simpson. But when I reviewed what it had cost me I
wondered why I ever gave up my safe, easy job with Barlow! I think the
trouble with me was that I didn't realize that, while I wasn't making
much money, I certainly wasn't taking any risk and was learning a good
business. I realized then how stupidly I used to fool away a lot of time
that I was paid for. When I thought of the hours I often shirked and the
jobs I used to leave undone, I wondered that Barlow didn't fire me and
the other fellows long ago. I wondered if other bosses had just the same
trouble? I wondered if I was just an average store clerk?
What a different view you take of things when you become a boss
yourself! Already I felt that the people working for me should consider
my interests, and not hesitate to work hard for me; and yet when I was a
clerk only two weeks before I used to begrudge doing the least thing
more than my bare duties called for, and I had always felt I ought to
get an immediate cash return for anything extra I did. For the first
time I realized that I used to panhandle along through the week just
working for the pay envelope without much thought of Barlow's welfare at
all.
Well, I had surely learned a lesson. I was a wiser man than I had been
two weeks before. In that brief time more things had happened to me than
had ever happened before, I guess. I had inherited $8,000.00 cash and a
farm worth $8,500.00; I had bought out Jim Simpson, and then found only
$8,100.00 worth of stock when I thought I was getting $9,460.00; I had
given him a demand note for $3,500.00 which I thought was for twelve
months; I had assumed over $400.00 worth of bills of which I didn't know
anything at all; and, finally, I had found that the business amounted to
only $22,000.00 a year instead of $28,000.00.
I was reciting this tale of woe to Betty when she remarked:
"Well, you can't do anything else wrong just yet, can you?"
"I don't know," I declared. "It seems to me that I can't do anything
right!"
I promised Betty to follow the accountant's advice and set a deadline of
expenses.
He and I had worked that out. It seemed that my expenses were far too
high for the business I was doing. Said he:
"Ye are doing noo only aboot $22,000.00 a year. Ye hae a stock of
approximately $8,000.00, and ye really should be doing $42,000.00 a year
wi' it."
"How do you figure that out?" I asked.
"That's on the tur-rn-over."
"Turn-over?"
"Yes, ye ought to tur-rn over your investment in goods three and a half
times a year--that is, ye ought to sell out your $8,000.00 stock that
number of times; and as ye plan to add aboot 50 per cent. for the
pr-rofit, ye should sell aboot $42,000.00 worth of goods within the
peeriod of a year."
"And I am selling only $22,000.00? Then you mean to say that I am
selling only about half as much hardware as I ought to with my present
stock?"
"That statement of yours is just aboot correct," said he with a nod.
"Wait a minute!" I cried excitedly. "You've made a mistake. I don't make
50 per cent. profit. I make only 33 1-3 per cent., all around!"
"Ye mean," he declared quietly, "that ye make only 33 1-3 per cent. _on
sales_. To get that percentage ye hae to add 50 per cent. onto your
cost. Your percentage of profit on sales is verra deefferent frae your
percentage o' profit on cost. Bide a wee," said he, and he did some
rapid figuring on a slip of paper. "This will perhaps make it clearer to
ye," and he handed it to me.
I never realized, until he worked it out, just the difference between
profit on cost and profit on sales. Here it is:
20% added to cost = 16â
% profit on selling price
25% added to cost = 20% profit on selling price
30% added to cost = 23+% profit on selling price
33â
% added to cost = 25% profit on selling price
40% added to cost = 28+% profit on selling price
50% added to cost = 33â
% profit on selling price
60% added to cost = 37+% profit on selling price
75% added to cost = 42+% profit on selling price
80% added to cost = 44+% profit on selling price
90% added to cost = 47+% profit on selling price
100% added to cost = 50% profit on selling price
I thought the whole thing over carefully, and it seemed to me that what
I had to do was, first of all, to analyze my stock and see if there were
any items in which I was too heavily stocked, and if so to reduce that
stock as soon as possible, and then put the money realized in other
goods that would turn over quickly. I could see that that would increase
the entire stock turn-over, at the same time increasing total sales by
substituting new, fast-turning, stock for the excess stock in the lines
I then had, and this would mean reducing my percentage of expense.
The accountant had remarked that increasing the turn-over was the big
secret of meeting rising costs, and I would see that he was right. My
head was in a whirl with percentages, costs, selling prices, gross and
net profits, turn-over, increased cost of goods, higher prices of labor
and a lot of other things going through it like a merry-go-round.
I decided that the next step was to arrange a definite system of keeping
track of expenses. I would divide the expenses into different classes
and see that no single class of expense exceeded a certain limit which I
would set for it.
Next, I would build up a logical advertising campaign. Talking with
Fellows had converted me to the value of advertising. I had asked him if
there was ever a time when a man could afford to stop advertising. He
replied, "Yep, a man can afford to stop advertising when he can afford
to be forgotten!"
Then I would find some way of getting my help--I had five people at the
time--to work better for me than they seemed to have been doing. They
seemed to look upon me as a joke. I didn't know that I could blame them,
for I certainly felt like several kinds of joke myself.
The accountant on looking over my expenses had thought that my salary
roll was too high. I told him that in that case I would cut salaries all
round. His reply was, "I wouldna do that if I were ye. A more deesirable
plan would be to see if ye canna adjust your affairs to give them more
money"--I gasped at this--"and reduce the number o' your employees."
I hope I never have to go through another two weeks like the first two
after I bought the store. I was only a boy when Aunt Emma died and left
me the money, but I think I grew up quickly--at least Betty said so. She
thought it did me good.
When she told me that, I cried with amazement:
"Doing me good?--to lose all that money in two weeks!"
"Yes, indeed," she declared, "you're just beginning to realize that
you've a lot to learn, and you're much nicer to be with than you were
before." She gave a funny little smile, as she continued, "You know,
boy, you were awfully conceited--you're awfully conceited now; but I'm
glad to notice that you're not so dead sure of everything as you used to
be!"
"Betty!" said I . . . But what happened then is nobody's business but
mine--and Betty's.