Masonry Magazine September 1964 Page. 12
Maximizing Profits
Ralph N. Schafer, Assistant Treasurer, Signal Mountain Cement Division, General Portland Cement Company, presented this address at the 12th Annual Convention of the Tennessee Chapters of the Mason Contractors Association of America held August 8th, Gatlinburg. Tenn.
About two and a half years ago, in December of 1961, I had the pleasure of speaking to this same group on the subject "Competition." I was very honored to have this article published in the January, 1962 issue of your magazine masonry. Reflecting on the situation at that time, you will recall that there was a mild dip in the national economy, causing a retraction in the amount of business available, and this reduction in jobs being bid, brought about a severe competitive situation. In the ten years prior to this time many newcomers had come into the masonry contracting business, and as you will recall, this was principally due to the relatively small investment necessary to become established, and such a large volume of work available that it offered good profits. Many of you here today started during this period. The masonry contracting business is one of relatively little investment but a great deal of know-how. Most of you are the same who were present at that meeting two and a half years ago, as there have been very few additional contractors entering the business during this period. Needless to say, competition is still very keen and the profit margins still very small. The masonry contractors in business today are stronger and more capable, and most have been operating at a small profit on a larger and larger volume of business.
In trying to determine a subject on which to speak today, I discussed with many masonry contractors what the current problems of the business were. The only answer that most of them would give was just "tell them to get their prices up." I can tell you this but I don't think it will change things. Prices will go up only when there is more work available than all of you can do with your present crews and capital. To return to this talk of two and a half years ago, we at that time discussed the ways in which to increase your profits. These were to increase sales, to cut costs, or invest your capital elsewhere. The last of these three we will not discuss further, since if this choice were taken you would no longer be in the masonry contracting business; so let us return to the first item increasing sales.
Obviously, you cannot increase the price of your product or your service as long as there is not enough business to go around. If you were in a different situation, where you had more work than you could handle, you would in turn increase your bid, as would your competitors. Therefore, due to this present situation, we can conclude that most of you cannot very well increase prices. You have competition from other contractors and from other materials, and later I would like to cover this area a little more in detail. Another way to increase your sales would be to increase the area in which you operate, as many of you have already done. And lastly, you can take on specialties, and again, this, many of you have done.
The second way to increase profits was to cut costs, and, in my opinion, today this has the most promise, especially on an increased volume of work. I think a good example of the effectiveness of cost controls can be pointed out by an article which appeared in the Wall Street Journal on April 22, 1964, called "Car Battle Abroad." This article discussed the spectacular increases in production of the five U. S. controlled subsidiaries doing business in the European area, and how they have boosted their production by a third. These would be such automobiles as Chrysler's Simca, GM's Opel, and the British Ford. In this article the foreign automobile manufacturers contributed this great success to these companies' ability to draw funds from home, but, as you might suspect, most of the competitors were supported by foreign governments. Therefore, in the final analysis, this extreme success was attributed to the American concepts being probably a bit more refined and cost controls somewhat more sophisticated. Even the Europeans admitted that the degree of cost analysis that went into the production of two of the