Music Trade Review -- © mbsi.org, arcade-museum.com -- digitized with support from namm.org
THE
REVIEW
flUJIC TIRADE
VOL.
LXXVIII. No. 13 Piblished Every Satirday. Edward Lyman Bill, Inc., 383 Madison Ave., New York, N.Y.
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Mar. 29, 1924 SIn *i2
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The Real Measure of Dealers 9 Success
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T
H E measure of a successful music business is not entirely a matter of turnover or sales volume, but
depends rather upon the amount of money that the dealer has realized from that business during the
year and what proportion of that money represents net profit. In other words, the big factor in the
merchant's success is one of credit, the ability to sell on reasonable terms, and to get in the money
promptly for what he sells.
There are still too many music merchants who figure their business on the basis of gross sales without
taking,into due consideration the various elements that enter into handling the business and which represent
overhead expense. In casting up his instalment paper, for instance, the merchant will often pay more atten-
tion to the quantity than to the quality, neglecting to take into consideration the fact that some of that
paper may represent contracts which mean actual loss on the business handled or that some of it is overdue and
actually constitutes a bad credit list.
The main thought is that collections should be watched rigidly, if possible by the merchant himself as a
final checkoff, and most certainly by some one with intelligent interest in the business and its success and who
has power for final decision.
It is prompt collecting that makes piano paper valuable to the dealer both as a direct asset and as col-
lateral in the negotiation of the necessary loans, for up-to-the-minute paper, even though it is written on a two
year basis, has a self-liquidating value that is being generally recognized.
This prompt collecting and the insistence upon the payment of an adequate rate of interest by the cus-
tomer, such interest either being charged as a separate item, as is being done successfully, or embodied in the
regular monthly payments, represent the dealer's salvation from the financial point of view for it keeps his
assets reasonably liquid.
It is significant that even the largest music merchants of the country are not too big to keep in close
contact with their collection departments with a view to knowing at all times just how closely the accounts are
watched and just how their paper stands. If one method of collecting does not produce results, other methods
are tried until some successful scheme is hit upon. The problem is one that cannot be neglected, except to
the disadvantage of the business as a whole.
Any number of merchants have, through careful attention, kept their overdue paper down to a point
where it represents less than 5 per cent of the total and, taking into consideration the various elements that
enter into an instalment account, this proportion is considered very satisfactory.
One merchant has even gone so far as to figure closely the proportion of outstanding paper that is
liquidated each month, it being his contention that on paper running on an average of two years the monthly
liquidation should average between 6 and 8 per cent of the total.
There is a great deal of talk about the over extension of retail credits at present, but that talk need not
worry the retail merchant who sees to it that his own individual credit risks are carefully selected and carefully
checked up. This all means that collections must be made regularly so that the paper will remain month after
month in the best possible shape.
Careful and persistent collecting has another angle of direct interest to the merchants' business, for it
means that there is built up by that means larger equities for the customer in the instruments he purchases and
larger equities mean fewer repossessions.
Conditions make it absolutely necessary for the retail merchant to keep his credits in good shape. In
the first place there is not a sufficient profit margin to warrant taking any great risks and in the second place
borrowing money on paper presents a cost that is worth while avoiding if possible. When the goods are well
sold and the collections well made the whole financing problem is simplified.