PROBLEMS OF THE HAULIER AND CARRIER.
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The Vital QUestiOn. of Profit—The P
rimary -Point in Planning a Business.
INVENTORS,-company promoters and woUld-be proprietors of. hauling or carrying businesseS, all start With visions of . affluence that shall directly yesailt from their ideas being, put into practical :ShaPe.. In Other words, satisfactory profits are the object of all Who have to earn 'their 'daily; bread in any walk of life.. Almost every man plays two parts—first, that of a business man; second, that of a private individual. Thin helps to define profit, which May be described-as the money yielded by a person's business efferti which is available for spending or saving for his private Or-. poses, according to taste. . The mere fact' that a man is engaged in business and • carries on for some coasideralble 'time does Tot mean that he is earning a profit. Even though •-eustomers, may be numerous, it does not .follow that the profit is large. The turnover may be great, hut the profit may be too small; high charges may be made, but the difference between income and outgoings may be insufficient. Upon what factor does this elusive thing called .profit depend? Lam sure few people will disagree with the statement that efficient management is the key to the situation.The object of any business concern is to earn as much as possible and to spend as little as pbssible; and this, in brief, outlines the work of a good manager.
However well a business may be staffed and equipped, its finished result will, be poor if it be controlled in An inefficient manner. Profit, therefore, is not a matter of luck, but of Management.
Foresight Will .Often Avoid Financial Loss. •
Asa bad workman generally blames his tools, so does the temptation arise for an unsuccessful business man to grouse about his bad luck. That genuine cases of misfortune occur is undoubtedly true, but an analysis of many complaints points to the fact that the use of a little foresight would, in many cases, avoid financial loss. AS an instance, let us consider a haulage job for which a quotation on a mileage basis only has been made and accepted; -a delay arises, due to no fault of the haulier, and the job becomes a two-day one instead of its being completed in one working clay. The result is a loss. It is no good cursing one's luck ; the proper course, in this instance, was to pay more attention to quoting and so to have arranged estimates that the risk of loss Was cut down to the vanishing point.
"What is a fair profit?" is a question which inquirers raise periodically, and almost without exception they omit to give any details of their business finances confining their attention merely to the number of vehicles which they 'run. The first consideration is the return_ on the capital invested ; thus, a real profit of £2.00_foi . year in the ease of a concern having a capital of f 1,000 is 20 Per cent; whereas if the capital be £5,000 and 'the, return is again £200, the result is only 4 per cent., _Which is a very different matter. It is of cora: paratively little importance. whether one or five vehicles be used; if all depemis..on the capital of the concern. There' can 'be no rule laid down as to what percentage conStitates a fair profit: Nowadays the practice Of alining 'at a large turnover and a small percentage of profit on each transaction is becoming more common than making a large profit out of each of a comparatively small number of jobs. This is principally because high ,charges are rarely practicable, for competition is far too keen. In inanytrades and industries, however, a sure 10 per cent. on capital is regarded as the ininimbm._ • • ' • • Bound up with the question of profit is the matter of provision for loss of interest on capital, which is 'classified as a standing charge." At the end of the year the total collected from customers under the head-.• ing " Loss of Interest on Capital" is available for distribution as dividends or. whatever you choose to call it This is additional to the sum which ranks as profit There is a difference between the two which 'needs to be understood, and it is best explained in detail by means of an -example..
Why a 5 •per cent. Return is Insufficient.
• 'A man has a certain sum left to him under a will, and he wisely decides not to spend the capital, but to live on the interest he 'gets from it. At the end of the year he has drawn, say, 5 per ,cent. dividend, and he finds that this is not sufficient to live upon in comfort. He.therefore decides _to start a business, with the object of turning the capital sum to better account ; in 'other words, he wants to get more out of it. At the end of his first business year his income represents 5 per cent. of the capital this, however, cannot be called a real profit. True it is a return of 5 per cent. on the capital, but what about the work which has been put in to obtain this result? That is unrewarded, and so far as the proprietor is concerned, he would have had just as big an income if he had stayed at home all the year and left his money soundly invested at 5 per cent., as in the first case.
Now, to early the example farther, let us take the /third year in the life history of our hero. the annual balance at the end of his second year in business reveals
a yield of 10 per cent.; this means a 5 per cent, that he could have got without working, plus 5 per cent, as a result of his year's labour, employing the capital for the purpose of the concern.
Let us hark back to the question of a fair profit. The foregoing will, I hope, suffice to show that a dividend not exceeding bank rate is not a genuine profit, as it means that the efforts of the manager of the concern, plus the use of the capital, have only resulted in the same financial return as sitting in an armchair for 305
days and sleeping for the same number of nights, thinking and dreaming of the capital sum being turned to good account by the bankers.
Working for the pleasure of work is a pastime which few can, or wish to, experience. To make a profit, therefore, at a fair rate, one has to exceed bank rate by a good margin, and it is with the hope of achieving this desirable result that capital is risked in business ; if no more than 5 per cent. is expected, it is safer and less strenuous to invest the money. S.T.R.