That inexperienced persons frequently undertake to begin business with insufficient capital is of course a well-known fact. But such a condition is generally discovered at once by the credit man who is called upon to analyze such a man's financial statement, and he accordingly grants credit with greater care. More frequently, however, it is only after a firm appears to have become established, as when it has done sev eral years of apparently successful business, .that its lack of available capital becomes manifest thru its in ability to meet its merchandise payments. Upon ex amination it will generally be found that this lack of funds has been brought about either by too liberal buying of goods for which there was no present sale or by a lax collection policy.
The factors of location and accounting play an im portant part also in the longevity of manufacturing enterprises. It is observed that a common cause of early failure among such is found in wrong location. Frequently a plant is too far removed from the nat ural market for its product, or it may be that freight tariffs place it at a disadvantage in competition with plants more favorably located. When, however, fail ure appears later in the history of a manufacturing business, the cause may frequently be traced to faulty accounting. The neglect to figure adequate deprecia tion of equipment, or ignorance of the importance of an exact cost system, creates a false situation with regard to earnings. The vitality of the enterprise may gradually be sapped, until a sudden strain upon its resources reveals a condition of hopeless insolvency.
4. Lack of shows that lack of enterprise is a common cause of failure in busi ness, so common, in fact, as to be a contributing cause in the greater number of such failures. Inertia, lazi ness, "dry rot"—various names may be given it, but it all amounts to the same thing, namely, failure to take advantage of new conditions or opportunities, and persistence in doing things in the old way, when better, easier and cheaper ways arc available. Many merchants apparently do not realize that the world is constantly moving onward and that they must move with it or stagnation will result.
5. Lack of provision for way in which "dry rot" frequently manifests itself in a manu facturing business is in the management's reluctance to instal modern and time-saving equipment or to spend the necessary amount of money in order to keep the old equipment in first-class order. In certain
classes of machinery, inventions follow one another in such rapid succession that a machine that was new only a year or two ago may now be obsolete. In competition with plants having modern equipment, the manufacturer who is "trying to get along with what he has" frequently discovers when it is too late, that he has been pursuing a "penny-wise and pound foolish" policy.
6. Poor display of goods.—Reference has already been made to poor location as a contributing cause in the failure of manufacturing enterprises and retail stores. Wrong location is necessarily a handicap to any store that depends for success upon its ability to induce passers-by to enter its doors. Where, there fore, the location or the construction of the store is such as to prevent a favorable window display and store arrangement of the goods carried, the proprietor is deprived of a valuable aid, and may find the addi tional handicap too strong to overcome. He may seek to convince himself that Emerson's adage about the public making a beaten path to the door of the man who makes the best mousetrap, will surely apply to him and to his merchandise; but if so, his successful competitor is either not aware of that adage, or he prefers to rely upon suitable business premises as the best means of attracting and holding trade.
7. Incompetent clerks.—Of late years strong ef forts are being made by the large retail, department and specialty stores to increase the efficiency of their salespeople. Not only are study classes being main tained for the purpose of making the clerks familiar with the goods carried in their departments and with the best methods of displaying and selling them, but such matters as the clerks' personal appear ance, their intelligence, cheerfulness, courtesy to ward customers, tactful handling of those wait ing to be served, etc., are also being thoroly studied. This is the natural result of the discovery that competent and obliging clerks are among the chief factors of increasing the volume of business and of establishing the reputation of the store. The dealer who, with cheap, incompetent and indifferent clerks, endeavors to compete for business with stores that employ truly efficient salespeople, has laid the foundation for ultimate failure.