Building a Business That Lasts

An oddress' bt Mr- 8..1. Williams of the Paraffine Companies Inc., deliaered at the re- cent Annual .Meeiing gf thi Weiler; rtti;il'tumbernren's Association at Seattle. It is commended to the tumbermey of the state ot on, of tni *oii-iiiiiriiui aiiiiiit, ii ;1, hind, full of, highly..instructiae merchandising tioughts ,ii-iaiiii.'''-""'" r nc dddress 7r)til aDp?ar tn luil in tltese columns, the major portion in this issue, and tke balancc in tlxe Alrit'first nu'mb,er.

. If I were a lumberman I should probablv hesitate to face such a gatherinf of ;y ;;- sociates. to advise them in " ,u"bj."t *hi& many, if not atl of them, havs spent years

In stu(tylng and to which, in manv iases. they have devoted the major portion-of theii active business tives. Bui not beins a ium_ lslrn2n-ne1 the son of a tu;b-e;;;_ indeed, never having been connected with tJle lumber business either directly or in_ directly, and scarcety being "Uii'toal._ ungursh between a 2 x 4 and a I x 12. I approach the subject with confiden." ind wlth nothlng akin to fear of miseivinq: tor rs rt not a fact that the men outside 6f any.business know vastly -o.. about-hoi., it should !e conducted ihan th;-;;; ";;: gag,ed in it? I am sure that any o". of * could conduct our home tov,rn newsDaDer better than the editor does. H""; ;;-;;t so stat.ed many times?-and if given "n orl portunity we could prove it. \o* iJ uJ, could o.perate a newspaper better than the man whose business it is to run it, whv should not a paint, roofing, ,na n.or''.o""r'_ lng man know more about the lumber busi_ ness you fellows do ?-and that's that ! .,_M.y_.subject nright better have been_ "Building a lumbei business tt "t i"rt.]'"i", while all business "built to last" is l"il,a "" certain fundamental principles, so far as oos- sible I shall deal with the problems of 'the bu_siness. in which you are ing"g"d. - - -

I shall not attempt to eulogize lumbermen tn general or this group in particular. Eulo_ gres are for the dead and my experience with. and tnowledge of lumbeimen, has tauehi me th.at.they_are very much alive-so much artve tndeed that some of them are with dif- ficulty kept on the reservation.

It goes without saying that you are en- gaged in an honorable business. and render a great service to society, but this is true of any legitimate businesj'which contiibut;s to individual or public welfare and adds to the J9Y and comfort of living. As I see it therefore, you are not entitlid to anv soe_ cial credit for being a lumberman. But vou are entitled to a lot of credit if you are-an honest, enterprising lumberman-jif vou aie 1 .clean, upstanding business man, ani a use- ful, high-minded, unselfish citizen. Now. if you qualify under this classification vou are entitled_ to_ a bouquet, and if you wiil come lorwa-rd the secretary will hand it to you, Du!. lt yo.u.are only a lumberman, there is nothrng dorng..

Just why I have been invited to address this gathering, I do not know, nor do I know who is responsibte altho some of you may wish to know before I get thru. Speak- ing seriously, however, I elteem it a-very great honor to have a place on this program. I have many good friends among the lumbermen of the Pacific Coast; also I have watched closely the work of this associa- tion during the more than a dozen years that I have been in contact with the tumber industry, and I desire to say to you that in my judgment no similar associaiion in the count_ry_ has been more unselfishly or more ably led, nor is there any that his accomplished_more in proportion to its opportuni- ties. The men who have been the backbone of this organization-and you know who they are-are entitled to every honor y.ou can afford them and every considera- tion you can give them. In view of these facts,. therefore, it has been my desire to bring to you, if I may, some conitructive tho",gh_t or suggestion that will enable you, as individuals, and as an associatiorr lto place your industry on a higher plane and on a more-profitable basis; because, mark you, no business is "built to last" that is not established and maintained on a high plane and that does not pay a faii mirgin of profit.

Indeed, it rs my conviction that in anv business that is successful-and no busines-s can last that is not successful-there must be iwo orofits-a P-R-O-F-I-T and a P-R-OP-H--E-T. and the latter is the more important of thi two. Barring accidents, it has been mv observation that no business attains to laige proportions or to a position of commandins influence, that does not have a rroohet in*it. A man of far-seeing vision foreiasting the future. Of high and undaunted courage to meet the many vexatrous proDlems incident to any business under pre-s-ent hiehtv competitive -conditions. Of sublime fai-th -in his iellowmen, his country, and himself and possessing an iron will so that once havine ditermined what is right in matters of pr-inciple and policy, he will stay put, regardless of opposition or consequences.

As I see it. the most important factor in the building of any "business that lasts," is the human factoi-the men and women .associated with you, but I shall discuss this 1ater.

In view of my very limited knowledge of the lumber business and the troubles and evils incident thereto, I wrote a number of friends and acquaintances activety engag-ed and prominent in the lumber industry for their anatyses of conditions, and their suggestions for improvement. Much of what flllows is taken from the letters received and represents in a way of speaking, a cross section of the mind of ihe trade. If you find something of value, therefore, the credit is not due me but some of your own associates. Likewise, if there are some things to which vou take exception-the blame attaches elseinh.r.. So fai as this feature of the address is concerned, I am the mouthpiece of many men who have not been invited to this platform, and who, in many cases. could not have been pulled here with a tractor, but who, in their respective communities, have a reputation for integrity and sound judgment, and whose words of suggestion and counsel should have weight with and be highly valued by this audience, and by all the lumbermen of the States represented in this association, as I believe they will.

Many Evils in Rstait Lumber Bupinets

If these men are to be believed, there are many evils connected with the retail lumber business, some of which could be eliminated very easily, with open, frank, and fair dealing between the local dealers concerned. Others, more serious, have their roots deep- ly grounded in the systems emptoyed by iobbers and manufacturers and cannot be removed without the assistance and co-operation of the agencies mentioned. There seems to be a concensus of opinion, however, that the major evils affecting the business are as follows, and about in the order named: l. Widety fluctuating wholesale prices, which in turn, naturally afiect retail selting prices. Lack of a definite one price system rigidty adhered to in both the wholesate and retail ends of the business.

2. Entire lack of, or inadequate cost accounting systems, with the result that many dealers improperly price their merchandise and therefore not onlv do business without adequate margin to cover their overhead and investment, but force their fellow merchants to the same low level

3. Lack of open, frank, and friendly dealing between competitors, with distrust, suspition, and demoralization the inevitable outcome.

4. Extending credits unduly-in fact, in many cases, the competition is as strong' or stronger on credits than it is on sales.

5. Substitution of lower grades.

I shall take these up in the order named and follow with others not mentioned above.

Lack of Stable, One-Price System

In discussing the lumber industry with one of the leading business men of the Northwest recently, he said:

"My observation of the lumber business in the Pacific Northwest, is that it is either a feast or a famine. When business is good thev all Dut on two or three shifts and product eveiv foot of lumber they possibly can' which so6n fills their yards and buyers besin to see there is a heavy over-production' Alone with this over-production, when the markit is good, they raise their prices- by leaps and bounds, tiying to get back in a few months what they have lost in six or eight months. This soon discourages buyeri, who are fully aware of the over-production. and the market breaks, mills stop, prices go down, and another famine develops in Ihe tumber industry. This procedure has been repeated year after year, but all seem to work on the principle of 'get all you can white the getting is good'. What should be done is to stabilize prices, and keep production within the limits of consumption with only a fair surplus ahead'"

Anothir-and this from one of the most capable and experienced lumbermen on the Pacific Coast:

"In my opinion, the weak spot of the Retail Lumber Dealers is their policy of not maintaining a firm, stable price list. As you wetl know, most other lines of merchandise are sold on a one price system and a good merchant in his line stands by his one price idea firmly. In the lumber business, I am sorry to say, the lumberman has educated his customers to shop around, and the result is that usually the customer buys his bill of lumber at a low price, Ieaving no margin of profit to the dealer. The dealer's anxiety for volume robs him of his profit and profit is a very substantial item in 'building a business that lasts'. If you can impress this fact on the lumber dealer's mind and induce him to put out a price list which is both fair to himself and his customer, and maintain it, regardless of prices quoted by others, I believe you will have accomplished the greatest good to the business."

Stitl others: t'The evil exacting the greatest toll among retail lumbermen is price deviation."

"The greatest evil is price cutting."

"The thing that is fundamental to the success of the business is a one price policy rigidty adhered to."

And this, from one of the teading hardware jobbers in the West who does a large business with retail lumber yards:

"Price cutting' is another important feature. I have never yet seen a firm build up a big business and a great organization, enjoying stability and confidence, by price cutting. Firms that work on a rigid price policy enjoy the confidence of their customers and their competitors and develop the highest financial stability."

My own observation and experienc€ confirms all that has been said and I am prepared to state most emphatically that the more nearly any line of merchandise is sold on a rigid one price basis, the more satisfactory the results from every angle. I realize that I am scarcely competent to pass upon this matter as affecting the lumber business, but I believe it is practicable, and I know of some retailers and jobbers who are nor,v operating on this basis very successfully. An interesting side-light on this matter is that a larger number of the letters I received stressed this matter of "stabilized prices" more than any other feature of the lumber business. If I were a retail lumberman, and especially if located in a city, even though a small one, I would certainty givs it a trial. There is much to commend it from an advertising and merchandising standpoint-not to speak of its value otherwise. Nothing would induce me to attempt to operate the business of the company with which I am connected, on any other than a rigid one price system, and I hope to see the day when this will be the standard practice irr the lumber business. In an address delivered before the Crlifornia Retail Hard*ir. ."d Implement Association Convenii""-tt"ta in San Francisco last year, I made the statement that the practrce ot cuttlng orices was unsound ethically, economically, and commercially, and so objectionable and demoralizing in its efrects that .-any salesman, jobber or manulacturer-gutlty ot tnls ot"ciii" shoutd not rcceive the support of ihe trade. Later this statement was reoi"t.d b.fot. the National Retail llardware bealers Convention, and in both cases was applauded.

Cost Accounting

I am informed that your association has recommended a very fine system of cost accountins. but that the retailers have been slow to*'take it up. Most dealers who cut orlces Ao so from a mistaken idea of their costs. which would be obviated by the use of a broper "cost" system. A very capable rtrJ successful lumberman of my acquaintance. said to me recentlY:

"Everv lumberman should know his costs' The cosi of conducting a retail lumber busines is hieher than a man would believe unless he -has made a study of it. It is obvious that a man must make a profit to stav in business."

Nobody can dispute that, .so check up on yonr cosir and fii your selling price-s with due regard to the complete cost of your merchandise.

Lack of Open and Frank Dealing Betwcen ComPCditors

Here is where we come into contact with two of the most important factors in aly business-the human and the ethical. No business can be' successful that does not take into account the plain, fundamental facts of human nature. In the ordinary everv dav relations of life we must have due regard for the feelings,-the convictions -even the idosyncracies of each other. We cannot get along with folks unless we respect their opinions and give them cr-edit for honesty and sincerity of purpose. Hp.* then can you expect to get along peaceably with a man engaged in the same line of business-a competitor, unless you show the same consideration that is expected and civen bv men to each other in the everyday iontacti of life? Frankty now, is it reasonabte to expect a competitor to be friendly if you speak slightingly of his business. abilitv. on the one hand, or accuse hlm ol belng a-"crook," on the other? Again, how can you expect a man to play the -game- with you if you are not open and above board in yout- dealings with him? There can be no harmonv or concert of efiort where there is secrecy,- trickery, and evasiveness. In dealing with your competitor, who, as .one prominent lumberman puts it, is your friend -vou should be frank and friendty and trtithful.

How many times have you broken Your word with a competitor? How often have vou told less than the whole truth when iiscussing a business matter of mutual interest? How often have you made mental reservations under the same conditions? There can be no confidence between comoetitors where there is not honesty, truthiulness, and fair dealing. If, therefore you wish to avoid distrust, suspicion, and demoralization in your business, be friendty and play the game straight. Don't believe all fou- hear -about the other fellow and especially don't believe all that your salesmen teli you. I have known, and so have you, of many cases where salesmen were deliberately misled by their customers for the express purpose of making trouble or with the hope of gaining a price, or other advantage.

May I quote from a man connected with (Continued on Page 36)

(Continued from Page 35) one of the largest retail lumber concerns on this coast:

'One of the greatest weaknesses that exists -amon-g_ retait lumber dealers, is the .tack-o.!.confidence they have in each other; by. failin_g_ to maintain the policy of fair prices. Under existing condilions- thev are allow-ing buyers of Suilding materiais to practically.make their own prices, I hope thetime is not far away when all retiit lurnber dealers will realiie the importance of confiding in each other, and of buildins up a policy of fair prices."

Again, as bearing upon the matter of confidence between competitors,-this statement from one of the most respected and success- ful men engaged in the retail lumber business, will interest you: and character of the men who denounce the practice, it is evidently an evil of sreat macnitude and extended ramificationi and on'e that demands serious consideration.

A representative of one of the largest retail distributors in the West. savs:

"In order to make the business jermanent it is necessary to maintain your slandard of grade_ and fight shy of the practice of sub- stitution. In other words, I would apply the pure food law to our own businesi- in making it imperativs to sell our customers just what they buy. In our own case, a customer gets just what he buys and we would prefer to lose a sale rather than resort to substitution."

Another writes: afford a l€gitimate margin of profit. They reter to such items as Builders' Hardware. Paint_s, etc,, The result being that pricej on these lines become demoralized - with friction and hard feelings; resulting. In the smaller towns this brings about a bad situa- tion. I have been asked by some repie- sentative lfardware men to siy to the memb-ers of this convention that they have no objection to them taking on lines-heritofori handled more or less exclusively by the hardware trade, but that if, and whire this is done, they should be sold on a basis that will aftord a legi:imate margin of profit.

The Requistion Evll

"Each sale should be made on such a basis that the salesman or merchant woutd be oer- fectly willing for both his competitor and hts customer to know as much about the transaction as he himself 'does. I believe that if lumbermen would make their sales and conduct their business on this basis it would greatly improve the industrv.';

_

Another high class lumber merchint savs:

"I think a lumberman should co-operite with his competitors."

Extending Credits Unduly

Credits are -a very important factor in any bustness,.for no enterprise can run in_ d.ennrtely if the money is not received for the merchandise sold and within a reason_ able time- It is very evident that credits are ^ unduly extended in the retail lumber business-, if the emphasis placed upon this reature. by my correspondents is to be taken serlously. wttness:

"Credits should be limited.,'

"Collections and credits are verv imoort- alt. An organization may be evir so- effi- crent at all other points and fail because of Iaxrless in this reqard."

"Too free in gianting credit. Before de- Irvering material, dealers should know not -only the general reputation of the buver but actuat conditions covering the real es_ tate_ on which material is delivered. The banker will not toan money without .."uritrri why should lumbermen furnish material?n'

"Undue extension of credit, particulariy in cor,r.n_ection wiih repairing or'rimodeling"oid buildings."

"Closer co-operation among retail lumber_ men rn matters of credit. Credits are reallv one of the chief worries of the average yiif manager. Where cut-throat co-peiition ii transferred from the selling end to tf,i credit de.partment, the situation t ". "oi le.i greatly improved."

Substitution of Lower Grades

While this is listed as number five, or the last of the major evils,-from ttre "u*tei