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THE
APRIL 14, 1923
MUSIC TRADE
REVIEW
The Cost of Carrying Retail Leases
Few Dealers Who Carry Their Own Paper Figure the Proper Cost Involved in This Practice—A Reply to a
Dealer Who Considers This the One Best Method of Financing a Retail Piano Business—
Improper Utilization of Capital at the Base of Most Retail Failures
Diversity of opinion leads to clarity of ideas.
Especially is this true when such an important
subject as that of retail piano finances is given
consideration. Unquestionably many dealers,
guided largely by their own experiences, con-
sider the subject of financing from widely vary-
ing angles and, as a result, arrive at different
conclusions. A man is prone to believe in a
method which has brought him a measure of
success and to react almost automatically
against a different standpoint.
However, among the many letters which The
Review has received regarding its recent series
of articles, "Financing a Retail Piano Business,"
few have taken issue with the fundamentals of
successful financing as they were outlined there.
What few have disagreed seem to have based
their opposition on the point which is well
summed up in the following letter from Wilbur
Templin, of Elkhart, Ind.:
"Elkhart, Ind., April 2, 1923.
"Editor, The Music Trade Review:
"I have been in the piano and general music
business for eighteen years. Never before have
I read in any trade paper that it is poor busi-
ness for a dealer to carry his own paper.
"You would have a hard time telling me that
it does not pay for the dealer to carry his own
paper. On the other hand, I can bring you
proof in abundance that it is the only thing
that does pay.
"The number or percentage of dealers who
ever made any money for themselves after get-
ting into the hands of the consignment manu-
facturer or discount companies is mighty small.
Hundreds have gone broke trying it.
"It costs about 20 per cent to sell contracts
to the discount companies and not much less
to consign. That is all the profit there is in the
game and that is the answer.
"I admit freely that many dealers have to ask
help from some source. However, to advocate
that, after a dealer has worked hard and brought
his business to the point where he can carry
his paper, is not good business— ; well, I don't
believe you think that.
"Fully half of the traveling men on the road
arc fellows who went broke trying to let some-
one else finance for them. Sincerely,
"WILBUR TEMPI.IN."
A Common Attitude in the Trade
Mr. Templin's letter represents an attitude
that is common enough in the retail piano trade.
It is based on the conception that outside capi-
tal brought into a retail business must be paid
for at such an unreasonable figure that it is im-
possible to make money by its use. This atti-
tude has largely grown up because of the fact
that many dealers who have financed through
outside agencies have been so lax in their own
methods of conducting business, and so una-
ware of the responsibilities they incur in direct-
ing a business enterprise, that they have failed.
The fundamental reason for failure has not been
the expense they incurred in using outside capi-
tal, but the way in which they have used it.
There is a world of difference between these
two things.
The Review believes in its statement that "for
a dealer to endeavor to carry his own paper in-
volves such a large investment of capital that
the profits he makes thereon do not represent
a fair and adequate return." In reiterating that
statement it wonders whether Mr. Templin has
ever stopped to consider what it costs the deal-
er to carry his own paper. Nothing will prob-
ably be his answer, or rather he will declare that
he is collecting interest on the paper in his safe.
But let him give this statement a little further
thought. Let him go into it a little deeper. Let cannot obtain cash at a price which will per-
mit him to make a profit on its utilization in
him consider every element in it.
his business should not enter such a deal. But
Turnover and Profit
Every dealer who has ever made a success that is not the case. Cash can be obtained to-
in business is wise enough to know that the day on clean paper which will permit the dealer
profit comes from rapid turnover. If he can to make money, and when that is the case, if
he ties up his capital by carrying his own pa-
turn over his capital twice a year, instead of
once, he is going to increase his profit just so per in his safe and refuses to take advantage of
much. If he can turn it over three times he is this means, it is poor business.
just so much the better off. Now, piano turn-
The Review does not presume to estimate the
over is notoriously slow, due to the instalment number of traveling men who have failed in retail
nature of the business. And the dealer who enterprises, but it does know that there is no
carries his paper in the safe makes it just so need of failing simply because cash is obtained
much the slower. In other words, he sacrifices from outside sources. And the sooner the trade
cumulative profit which comes from increased as a whole realizes that, and begins to take the
turnover to finance himself completely. If this proper advantage of the methods of financing
is his aim in business he had better put what which have been outlined by The Review, the
capital he possesses out on mortgages, for he sooner will the trade as a whole possess ade-
will make just as much money on it, and with quate capital resources to meet its needs, and
much less risk.
thus be able to grow in accordance with the
There is another side to this picture. We won- growth of the country in wealth and popula-
der how many dealers there are who declare tion, something which it is not doing at the
they carry their own paper, but who at the same present time.
time buy on long time, which is nothing more
or less than borrowing money from their man-
ufacturers. The Review here has no specific
figures and refuses to estimate. But it knows Large Newspaper Advertisements Offer New
that they are quite a good many, and it says
1923 Chickering Grand in Exchange for Old-
directly that the dealer who follows this method
est Instrument Privately Owned
of business does not carry his own paper at
all—the manufacturer carries it for him.
As a part of the Chickering Centennial cele-
Now, we might take up the statement regard- bration Chickering & Sons have been advertis-
ing the dealers who have started on the con- ing in newspapers throughout the country in an
signment or discount company basis and their effort to locate the oldest Chickering piano pri-
eventual success. If Mr. Templin will think a vately owned and the assistance of the com-
little closely regarding the early history of
pany's dealers has been enlisted in the search.
some of the best-known and most substantial
The advertisements, which call attention to the
retail houses in the trade to-day he will find Centennial Celebration, offer a new Chickering
that a surprisingly large number started exactly grand of 1923 in exchange for the old instru-
on these bases. And, within recent years, some ment. As a result of the advertising several
of the houses which have come into prominence old pianos have been registered with Chicker-
have used just these methods, and in many ing & Son and it is expected that the publicity
cases still continue to use at least one of them.
will bring to light some interesting old pianos.
The Basis of the Question
SEEKING THE OLDEST CHICKERING
The whole question comes down to this: The
method used by a dealer in financing is not so
important as the way in which he uses' it. If
a dealer finances through the discount plan and
meets his maturities, if he pays no penalties
through failing to meet his monthly payments,
he will find he is getting cash at a reasonable
cost, at a cost at which he can use it in his busi-
ness at a profit. If he finances through a manu-
facturer and follows the same methods of con-
ducting his business the same holds true. And
if he carries hfs own paper—that is, really car-
ries it and is able at the same time to buy his
pianos for cash from the manufacturer—he is
safe also. But safety is not the only thing in
business. Expansion and progress are factors
also.
A dealer located in a good piano territory
cannot afford to stand still. If his volume does
not increase he is going back and his competi-
tors arc growing at his expense. Now, if he
ties his capital up in his safe where is he going
to get the additional capital needed to finance
a growing business? It costs more to finance
a retail business to-day than it did ten or twen-
ty years ago. The unit value of the sale is
much greater. And that is a tendency which is
likely to continue, as the average customer tends
to demand better and better instruments, and
the proportion of reproducing instruments and
grands continues to grow.
As has been pointed out before by The Re-
view, most businesses fail, not because of a lack
of capital, but from improper handling of the
capital they have. Of course, the dealer who
CHARACTER
"Admirable Quality; Acknowledged Reputation"
—(Standard Dictionary)
PIANOS
Manufactured by
Smith, Barnes
and
Strohber Co.
have for 33 years
justified their right
to be called
Pianos of Character
FACTORIES
North Milwaukee, Wis.
Chicago, III.
OFFICE
1872 Clybourn Avenue
Chicago, 111.