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During the past few years attention has been directed more 

 closely to business methods than ever before in the history of the 

 country. Not only has the federal government investigated organi- 

 zations of large interests with a view to preventing monopoly and 

 insuring competition, but there has even been some serious study 

 of the question of price regulation. While absolute regulation of 

 the price at which goods must be sold seems to be a good deal of a 

 chimera at present, there are some deep thinkers who believe that 

 in the years to come such a method will be worked out and put into 

 effect. 



Certain manufacturers in other lines, a well-known shoe com- 

 pany, for instance, has gone so far as to take the public into its 

 confidence, nominally at least, and has announced that its goods 

 are to be sold to the consumer at a profit of five per cent above 

 manufacturing and selling expenses. It may be noted in passing 

 that the shoe company has not featured this plan much of late, 

 though its failure as a publicity idea is said to have been due more 

 to the dislike of the public for the $3.60, $4.20 and other odd prices 

 attached to shoes as the result of the adoption of the five per cent 

 plan than to anything else. 



Lumbermen in many departments of the field, ranging from the 

 sawmill man to the wholesaler, broker and retailer, are complaining 

 of a shrinkage in profits. The cost of doing business is steadily 

 going up, and apparently it has not been possible to put all of the 

 increased expenses into the selling price, which, after all, is gov- 

 erned by business conditions and competition just as much as it is 

 by the necessities of the manufacturer and dealer. 



The question is naturally arising, "Am I making enough money 

 out of my business? Are my profits normal now, or were they too 

 large heretofore? Ought I get into the five per cent class, along 

 with the shoe manufacturer and others who are acknowledging a 

 willingness to let that increment represent the net profits of their 

 business?" 



In order to get a fair line on the correct basis for figuring profits 

 in any business, one must have some knowledge of the rapidity of 

 the turnover. That is the whole story, as far as determining a 

 correct amount for the profit account. Merely realizing this fact 

 at once puts the lumber manufacturer out of the class of the shoe 

 maker, the clothing manufacturer and others who need use no such 

 laborious and time-consuming processes as are required in the lum- 

 ber business. And the lumberman who forgets this in determining 

 what his profits should be is leaving out of consideration the vital 

 and conclusive factor. 



From the time the log is received at the mill until the lumber is 

 shipped out is supposed to be not more than six months. Taking 

 this as a basis, it is evident that the sawmill man who keeps his 

 stocks on sticks for six months can turn his capital over but twice 

 a year, at the maximum, not allowing for special conditions which 

 may enable him to ship certain kinds of stock green, because of 

 the pressing demand, or may compel him to hold certain other 

 lumber on his yard for two years or longer because of the poor call 

 for that particular item. 



And as a matter of fact it is not possible to turn his money over 

 twice a year, figuring a seasoning period of six months, for the 

 reason that the credits extended must be taken into account. If 

 the money represented in the lumber were to be paid as soon as it 

 is loaded into the ear, the idea would be carried out; but inasmuch 

 as at least thirty days' time is given, and frequently much more, 

 the period required from the time the board falls from the saw 

 until the money for it is credited to the account of the manufac- 

 turer at the bank is pretty close to eight months. 



The credit facilities of the lumber manufacturer of some size of 

 course enable him to do a larger volume of business than his actual 

 capital would indicate. Therefore the proportion of the volume of 

 business done to the capital invested is probably greater than 4:3, 

 as would be suggested by the foregoing. But, taking the sawmill 



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man as a general proposition, it is quite evident that a turnover of 

 the capital invested twice a year would be a good showing, in view 

 of the long period required for the seasoning of the lumber after it 

 is manufactured. 



The question is complicated, of course, by the fact that many 

 sawmill owners who have little capital are financed by wholesalers 

 and frequently get their money out of a lumber proposition before 

 the stock has been put on the sticks. But, on the other hand, the 

 financing of a sawmill necessarily involves a charge for the service, 

 the profits of the manufacturer being cut down by the necessity of 

 borrowing on the lumber that he is going to cut. He discounts his 

 prospective sales, and, like every banking operation involving a 

 discount, the man who furnishes the capital must make a charge 

 for it. 



However, assuming that the sawmill owner can turn Us money 

 over twice a year, and that he sold his output at a five per cent 

 margin, the figure suggested by manufacturers in the other field, 

 he would make a net profit ou his investment of ten per cent. How 

 would this compare with the shoe and clothing trades, to which 

 reference was made at the beginning? Here are some facts taken 

 from the experience of a clothing manufacturer, who is an acquaint- 

 ance of the writer. 



His capitalization is $100,000, and he does an annual business of 

 $350,000. He has two selling seasons, spring and fall, and owing to 

 the long datings given in that business it takes him six months, as 

 a rule, to realize on his output. But, in spite of this, by means of 

 the use of his capital and the money he can borrow from the banks, 

 he turns his resources over three and a half times a year. He gets 

 a minimum of five per cent net on this business, so that his minimum 

 earnings are seventeen and one-half per cent on his capital. If 

 the sawmill man earned but five per cent on his sales, the clothing 

 manufacturer would have done seventy-five per cent better as to 

 net profits than the lumber manufacturer. 



In order to equal the results made in the clothing business, the 

 lumberman would have to make at least eight and three-quarters 

 per cent on his sales. And if his turnover is accomplished only 

 once in eight months, a minimum of eleven and two-thirds per cent 

 would have to be realized in order to enable him to equal the show- 

 ing of the five per cent business of the clothing manufacturer. 



The wholesale lumberman is confronted with a good many of the 

 same problems as the sawmill man. He must yard and rehandle 

 his stock and hold it for a longer or shorter period, depending 

 partly upon the necessities of seasoning and partly on market con- 

 ditions. His turnover should be more rapid than that of the manu- 

 facturer, though it is not nearly so fast as it is in a number of 

 other businesses, where the jobber does a business six to eight times 

 as great as his capital. This is because profits in the wholesale 

 field in almost every branch of trade have diminished- steadily, and 

 increasing the volume of business has been the only solution of the 

 problem. 



Another fundamental consideration which affects the proposition 

 is vrith reference to the raw material. The lumberman manufac- 

 tures trees, which are produced slowly and which frequently are 

 held for a long time before being cut. The interest on the capital 

 tied up in this way must be considered, if the manufacturer owns 

 his own timber, as weU as the movement of the log from the stump 

 to the mill. Considering the fact that the sawmill man 's money is 

 put out practically as soon as the tree is felled, the period covered 

 by the development of that expenditure into profits resulting from 

 the sale of the lumber is very greatly increased, making additional 

 profits necessary in order to equalize the proposition. 



The manufacturer in most other lines pays for his material after 

 it is delivered to him, ready to use; and frequently has his own 

 product on the market and is realizing returns before it is necessary 

 for him to pay for the goods which he has consumed. This reduces 

 the outlay of capital necessary to produce a given volume of busi- 



