Music Trade Review -- © mbsi.org, arcade-museum.com -- digitized with support from namm.org
flUJIC TIRADE 1 ^ WA % / I WA \ l \ l
• I V L J 1 LI T
VOL. LXXVI. No. 26. Published Every Saturday. Edward Lyman Bill, Inc., at 383 Madison Ave., New York, N.Y. June 30,1923 ""'goo*? 1 "
^;IIIWIII«III^
Overhead and t h e Gross Volume of Sales
IIKIIIKIIIHIliHU
F
OR many years music merchants as well as retail business men in other lines have been urged to keep
close tabs on the cost of doing business, this being one of the essentials to building up a successful
business institution.
The trouble has been, and in a great many cases continues to be, that the retailer gauges his busi-
ness success by his gross profits, and neglects to compile accurate figures showing just what charges are to be
made against those profits before he can realize the net profit to which he is entitled as a result of his efforts.
The Government has kindly, or unkindly, assisted in developing cost accounting by imposing income
and excess profits taxes which compel the retailer to make fairly accurate analyses of his business for the
purpose of making a proper tax report. But even under these conditions he often fails to take proper cog-
nizance of the amount spent in doing business, or ways and means for reducing that amount without at the
same time reducing sales volume.
Instances have come to light where piano dealers who are rated as successful and as enjoying very
substantial annual turnovers, have built up that turnover at a cost little short of startling, and as a result
obtain a net profit wholly out of keeping with the efforts put forth or the amount of capital involved.
It is significant that one of the largest and most successful dealers in reproducing pianos in the coun-
try is said to have realized something less than 5 per cent net profit upon his gross sales during 1922, and that
gross incidentally ran well into seven figures. That particular dealer is not going bankrupt by any means, as
the profit he realized was substantial, but it did not compare at all with the amount that would have accrued
to him on the strength ol the same investment and the same selling and exploitation effort put into other lines.
The condition seems to hinge largely upon exploitation work. Some years ago considerable attention
was paid to the player-piano along this line. Not only were the instruments advertised liberally, but concerts
and recitals were given and every effort made to put the public in touch with what those instruments accom-
plished. With the coming of the reproducing piano, the work of exploitation became an even more im-
portant factor, for not only was it necessary to show the public what the reproducing piano could actually
accomplish in a musical way, but it had to be convinced of the supremacy of the reproducer over the ordinary
type of player. This exploitation has many times been carried along upon an extravagant basis for several
vears. Of course it has been necessary for dealers interested in its handling to do much of this work at their
own expense for the purpose of supplementing the efforts of the manufacturers.
There is no question that this work of exploitation is both necessary and desirable, but there must be
determined a definite line of demarcation between that exploitation which brings quick results in the matter
of sales and that part which represents a surplus or temporary waste.
In the better known lines of reproducing pianos a more or less serious shortage has existed at most
times during the year and the retailer was limited in the amount of business he handled to the amount of stock
he received from the factory. The result was that where exploitation work has been carried on without cur-
tailment in the face of this situation it served to pile up an increasing charge against each instrument that it
was possible to secure and sell.
It rests with the dealer to determine just how much of the selling cost of the instrument can be devoted
properly to exploitation work. If it costs 25 or 30 per cent to exploit an instrument upon which the gross
profit figured on the selling price is 50 per cent, then that dealer is losing money. Just as a retailer can get
into trouble by being too prosperous and endeavoring to handle too great a volume of business on a limited
capital, so is it also possible for him to get into trouble by being too energetic in the matter of exploitation.
Cases which have come to light recently have indicated that this question of bringing operating and
exploitation costs within reasonable limits is a very live one and one that needs solution.