Creating a Business Without Capital

To prove that nothing is impossible, this returned man, formerly an English engineering apprentice, created out of free air a business which each year is becoming larger and more profitable—and it cost him nothing to start it. His secret?. “Use the other man's property as your stock in trade.”

BYRON BURTON June 15 1925

Creating a Business Without Capital

To prove that nothing is impossible, this returned man, formerly an English engineering apprentice, created out of free air a business which each year is becoming larger and more profitable—and it cost him nothing to start it. His secret?. “Use the other man's property as your stock in trade.”

BYRON BURTON June 15 1925

Creating a Business Without Capital

To prove that nothing is impossible, this returned man, formerly an English engineering apprentice, created out of free air a business which each year is becoming larger and more profitable—and it cost him nothing to start it. His secret?. “Use the other man's property as your stock in trade.”

BYRON BURTON

MY ATTENTION recently was arrested by a magazine article which pointed out that while the returns accruing to men in the straight selling end of a business generally are high, the salaries paid to trained mechanical engineers and technical men are not, as a rule, commensurate with the length of preparation, and the degree of fine, technical skill necessary, before they can qualify in their professions. In modern business the superior knowledge and training of a technical man is discounted by limitation of the market in which he can offer his talents, whereas the field of the salesman is world-wide and sky-high. As this condition has a direct bearing on my subject I will touch briefly upon it before describing my own experiences.

In most engineering works the mechanic usually is paid better than the young draftsman, and when such is the case there is little incentive for the engineering apprentice to qualify himself in the technical side of his calling. With the college-trained student, the situation is even worse, as he generally faces the world equipped with theoretical knowledge only, his practical training in the college workshops being of less practical value than that of the apprentice in commercial works.

While deploring the inadequate salaries paid to technical men, we can take comfort from the knowledge that there is one branch of engineering work in which those who have aptitude for it can earn adequate returns, and that is in the sales end of the business. The “Sales Engineer” of to-day is distinctly a product of modern times and conditions. A generation ago he hardly existed, but now the man who combines a thorough practical and technical training with selling ability holds a very important position in the engineering world.

By way of specific illustration I can now turn to my own experience.

A Personal Experience

AT THE age of sixteen I entered a large Old Country locomotive works as an apprentice, for which privilege my father paid a premium of one hundred pounds. Taking the usual subjects at the evening classes of the technical school, I graduated into the drafting office of the works before my apprenticeship was completed, and remained for about a year thereafter as a qualified draftsman on a salary equal to that paid to unskilled laborers in the shops. I then secured a position as draftsman with a smaller company at a much higher salary, which I held for several years.

It was at this period that I fortunately found an opening with a large engineering company which made a practice of engaging young engineers and training them thoroughly in the selling end of their business. Within a few years my earning capacity had more than trebled, and I was steadily assuming more responsible duties. I soon realized that the engineering salesman can earn three or four times as much as the average draftsman or technical man employed in any other branch of the profession. There are exceptions, but it remains a fact that the highly paid purely technical men are sadly in the minority.

As an engineer, I find the greatest satisfaction in the creative side of my work. It is fascinating, for example, to design an intricate piece of machinery, to put one’s brains on paper and then supervise the construction of the machine itself, until the product of one’s imagination becomes almost a living thing in its finished form. But, as stated above, this side of the engineering profession is horribly underpaid.

A World of Salesmen

WHEN all is said and done, we all have to sell something, for, consciously or unconsciously, we sell our services in some form or other. The university professor is selling his specialized knowledge and his ability to impart it to the rising generation, though I fear he might not take it as a compliment if he were told that he was a first-class salesman! Some men have not the ability or the desire to become “conscious” salesmen, and will fulfil their destiny by the “unconscious” method.

To those imbued with direct selling instinct, there is a fascination in the selling game very much akin to that in hunting. This is particularly so when selling articles like machinery, where exact technical knowledge is required to drive home the telling argument that will clinch the deal. There is solid satisfaction in landing an order that has called for real brain work against keen competition.

These reflections led me, a few years late, to form a partnership with another engineer and to launch my own business in a western city, where we opened offices, secured agencies for several lines of machinery and built up a successful business during the two years prior to the war. Our capital was limited but sufficient, and if there had been no war we should probably have prospered unimpeded for many years. Trade was already quiet in our territory in the summer of 1914, and when war broke out the machinery business collapsed, and did not recover for more than a year. We closed our offices and enlisted for military service. I never saw my partner again.

Back from the Front

AFTER five years of activity as a flying officer I returned to the Pacific Coast in the fall of 1919. I was one of the last men to return, and although trade conditions were still fairly good I found it impossible to secure a position in any, branch of engineering work at a reasonable salary. VThe situations were all filled. Furthermore, I had gone overseas a single man but had returned with a wife and child, which made my problem even more difficult.

Under normal conditions it should have been a fairly simple matter for a man of my training and experience to find suitable employment in my own line, but conditions were far from normal, and were destined to

become much worse. After several months of fruitless effort I viewed my position with some misgiving, especially as I found that there were many other technical men in the city on the unemployed list. Having been in business for myself previously, I knew what would be necessary in order to get re-established on the same lines, and the first requisite was a few thousand dollars of capital. It would inevitably take some months of hard work to secure suitable agencies, establish credit rebuild a connection and place the business upon a paying basis. I was prepared for the hard work, but, as to capital my resources were reduced to a few hundred dollars a sum insufficient even for domestic needs.

Then again, the ways of commerce seemed very strange after five years of military life. I rather rebelled at having to abandon the exhilarating game of flying in favor of the tamer pursuits of civilian life. I was sorely tempted to try for a commercial flying situation, and as my last two years in the Service had been spent as a flying instructor, I felt that I should not have much difficulty in obtaining remunerative employment in a similar capacity. But this suggestion was absolutely vetoed by my wife, who declared that she preferred a live laborer to a dead aviator; so the claims of family prevailed, and I resigned myself to taking whatever position I could find.

The Genesis of Success

IT WAS at this juncture that a chance occurrence furnished me with a nucleus around which I have built up a successful and rapidly growing business. I dropped in, one day, to see one of my old friends, a consulting engineer who mentioned, casually, that one of his clients was in the market for some good used wood-working machinery. An idea flashed to me. “What’s his name, Jim?” I asked.

He told me.

“I’ll find it for you,” I promised, and without loss of time toured the used-machinery dealers’ warehouses, and also advertised in the papers.

Within three days I had a list of some thirty machines. Then I got in touch with the prospective customer, who went with me to inspect them, bought and paid for three that were suitable, and enabled me to pocket a commission of sixty dollars—the first money I had earned since returning to civilian life.

In the course of my enquiries I had been struck by the large quantity of used machinery there was for sale, not only in the dealers’ warehouses but also in the hands of private owners, who wished to dispose of it but lacked the necessary energy to get out and sell it. Then the idea crystallized in my brain that here was a ready-made business. The short list already in my hands formed the nucleus of a useful catalogue of available wood-working machinery. Why not extend the idea, and compile other lists embracing every kind: of machinery, all properly classified and indexed for ready reference? At the start I doubted whether the; results would compensate me for the labor involved, and1. I was not particularly attracted by the prospect of becoming a second-hand dealer, but I could not deny that I had been well paid for my services up to date, and here was an opportunity to sell other people’s merchandise without investing any of my own money and with low overhead expense. The real estate man makes a living by listing houses and lots and selling them on commission; then why should not an engineer do the same with machinery?

The Preliminary Steps

HAVING decided to give the scheme a trial I rented an office in one of the large buildings, en suite with that of a public stenographer, who attended to my telephone calls when I was out, and then started a systematic canvass of the industrial plants throughout the city and district. I called on them in my old capacity as a sales engineer soliciting enquiries for new machinery, and then casually swung the conversation onto the subject I was after.

“Have you any old or surplus equipment that you would like to get rid of?” I would ask. The result was surprising.

“Old equipment? We’ve had a lot of old junk hanging around for long enough, and don’t know what to with it!” many would answer.

My lists grew rapidly, and in the course of my travels and enquiries I unearthed many old pieces of machinery still in good condition that had been lying idle for yearsContinued on page 71

Continued on page 30

Each item considered saleable was carefully inspected, necessary repairs noted, and a selling price arranged that covered my commission. I was anxious to give expert advice to both buyer and seller, and by making a careful inspection I was enabled to furnish a true and unbiassed report on a machine’s condition and value when offering it for sale, which policy proved to be very sound and profitable.

During the first few weeks I received enquiries for several pieces of machinery already listed, and sales were made with very little trouble. I worked on a set scale of commissions, ranging from 2 %

to 10% according to the value. Within a few months I had some thousands of items on my lists, all classified and priced, and each day saw the number increased. Each item was numbered and the owner’s name indexed under this number in a private list.

By this time I was becoming fairly well known, and enquiries came in more frequently on the telephone instead of my having to drum them up by personal calls. I also did a good deal of advertising in the classified sections of papers and magazines, which produced excellent results in procuring both listings and customers.

Developing the Business

AT THE end of six months I always - had enough business in hand to keep me in the office most of the day, and I went out only to attend to definite deals —either to inspect some special equipment that had been offered, or to accompany a prospective customer on such a mission. In some cases even this was not necessary, and I have put through many transactions entirely by telephone, bringing buyer and seller together and leaving them to close the deal, my commission being sent to me later. This generally applied to cases where I referred a customer to one of the dealers whose stock was included in my lists, and in course of time I found myself acting as a sort of outside salesman for nearly every machinery firm in the city.

In several instances, strange as it may seem, I actually conducted sales between old established dealers. One of them would ring up and ask whether I could quote upon a certain machine for which they had an enquiry but which they did not handle themselves. My lists would show me that there was such a machine in stock at so-and-so’s warehouse, and that piece of information was worth a commission to me if the sale was effected. The bulk of my business, however, consisted in selling surplus machinery still in the hands of private owners to other users. In response to my advertisements many listings came in by mail, and I have often sold by correspondence equipment that I have never seen, to a customer whom I have never met. I once sold a large boiler in this way that yielded a commission of $200.

As the business grew I extended my enquiries for listings right across the continent, and many of the large machinery firms in the east put me on their mailing lists, and sent me their monthly bulletins of equipment in stock. These lists have been the means of my securing much profitable business. On one occasion an important company was calling for tenders on two large machine tools. It surprised me a little to find that they would consider used machines, and I accordingly quoted on two suitable items on my lists that were located on the other side of the continent. I landed that order, amounting to over $2,000, in competition with a dozen other firms, and have since had a fair share of business from the same quarter.

Business Psychology

IT IS a curious fact that the larger orders are always obtained more easily than the small ones. For a while I did not approach the more important concerns, thinking that they would only purchase new equipment, but after making the last mentioned sale I decided to call on everybody, large and small. I was agreeably surprised by some of the resulting business with several of the

largest industrial corporations in the Province.

Several deals occur to me that still cause me a little quiet amusement when I think of them. One of these was when I got an urgent enquiry from a friend running an auto repair shop for a motor truck engine, to replace one that had been hopelessly damaged. Not having one on my lists, I advertised for it in the “Want”' column of the daily paper. I got an immediate response from a man who had a new engine for sale at about half-price,, that exactly filled the requirements. It formed the power plant of a tractor that had been purchased some time previously, but had never been used. The owner had failed to sell the tractor complete, and needing cash at the moment was ready to sacrifice the engine. I clapped $100 on to his price, and quickly made the sale.

The business up to this point had been transacted entirely over the telephone, and I had not personally met either of the principals, or seen the engine, my customer waiving inspection on the assurance that it was brand new. I arranged for the buyer and seller to meet at my office to close the deal. When they arrived it transpired that they were life-long friends, and that the disabled truck had but recently completed a hauling contract for the very man who had the engine for sale. But the truck owner had no idea that his friend and customer had an engine for sale—and neither had I until I spent 25 cents to find it out! Of course that was an exceptional case, and I have rarely picked up so substantial a commission with such ease. But both parties were quite satisfied with the deal, and warmly thanked me f-or my services.

Taking a Long Chance

PERHAPS the best deal I ever put over was when I bought up $1,200 worth of steel bars for spot cash with something under $400 in the bank, and sold the bulk of the shipment in time to make my payment. An industrial concern had gone into liquidation and had been placed in the hands of a receiver, who was a chartered accountant. I received exclusive information that several car loads of machinery and one of steel bars were due to arrive in town from this plant on a certain day. Steel was then selling at about $80 a ton.

I got in touch with the receiver. “How many tons are in that carload of steel bars?” I asked.

“About forty tons,” he replied.

“Is there a schedule of size« available?” “No.”

“I’ll give you thirty dollars a ton for the carload,” I offered.

He thought for a moment, then:

“All right. I’ll accept—provided the steel is paid for before it leaves the wharf where it is to be unloaded.”

My offer then was made and accepted subject to inspection on arrival. The cars came in by water on a transfer barge, and chartering a small launch I went out to meet the flotilla, boarded the barge, made a hasty check-up of the shipment, and got back to town on my launch in ample time to place a good part of the cargo before it reached port.

I offered it at $45 a ton for spot cash at the wharf. The receiver sent one of his clerks down to attend to the business, and I handed him a check for each batch as I sold it and received my payment. By the end of the day I had sold about 30 tons, and taken in rather more than I required to pay for the whole shipment. The balance I sold at a higher price on ordinary thirty-day terms, and cleaned up over $700 on the deal.

The Value of Nerve

THAT deal required a little nerve, as I might have got left in a very tight corner if I had not been able to unload the steel fast enough, but I took a small chance, and had the luck to win out. This was during my first year, and it was the first occasion on which I departed from my usual custom of simply selling on commission. The profits from this deal, however, went far to consolidate my position, and enable me to resume the selling of new machinery.

Another lucky deal was when a very

large corporation asked me if I could locate about $3,000 worth of iron pipe below market price. I had it right on my lists, new pipe, that had become surplus stock after the armistice, and forthwith quoted a very attractive price. A few days later the official order came through for it in the mail. I went round personally to place my order with the owners, and when I told them my customer’s name, the corpulent old president of the company nearly rolled out of his chair with laughter, remarking that he had sent them a complete schedule of all the pipe in their yards several months before, and had quoted them a lower price than he had given me. “Well, my boy,” he added, “if you can catch them asleep like that and make a profit out of them, good luck to you,”

Turning Slack Times Into Cash

ANOTHER piece of business worth ■ mentioning occurred in the early days. Two of my friends running a machine shop used to have a slack time each winter during the off season, when there was not any demand for the special equipment they manufactured. One day, when I was discussing this phase of their business with one of them, I made a suggestion.

“Why don’t you look around for suitable used machinery and employ your men in re-building it? Then, perhaps, I can handle the sales end, and place it for you.”

As they were excellent mechanics, but had not much experience as salesmen we worked together on this project, and did considerable business.

One day they advised me that they had bought about $2,000 worth of almost new conveyor chain at a very low price, but had failed to sell any of it. They offered me a twenty-per-cent, commission for quick action.

I knew every sawmill in the district, so I sat at my desk and telephoned every one. It took me a solid morning. Several said that they would look into it and let me know, and by the middle of the afternoon the orders began to come in. By the end of the day I had sold the whole shipment.

At the close of the first year my accounts showed a substantial surplus, of which a thousand dollars was represented by cash in hand. The business has now been running for five years. With the steady increase in cash reserve I have taken up agencies again for new machinery. Conditions now are somewhat different from those prevailing five years ago. Then, there was an immense quantity of used equipment for sale from the_ munition plants and similar undertakings, and a dearth of new machinery, whereas now much of the used equipment has been absorbed and some of it worn out, which latter is being replaced with new.

During the last two years business in general has been depressed, and sales have not been made so frequently or so easily. It is, therefore, doubtful whether the same scheme could be launched successfully at the present time in exactly the same way. Much patience and faith are required in compiling the first few thousand items.

An Unexpected Order

AS EXAMPLES of the reverses encountered I recall cases in which I would consider a machine not worth listing, only to have a call for the identical article some time later, when I would well-nigh exhaust myself in a vain effort to remember where I had seen it. Thus I eventually decided that everything in the way of mechanical equipment that I could find must be included, as long as its sale value would yield an adequate commission. Furthermore the lists had to be kept up to date by adding all the used equipment that came on to the market, which process entailed an enormous amount of detail work. A business of this kind, however, depends for success upon its thoroughness, and. during my first year I was already beginning to be regarded as a kind of

last resort in our community by people who had hunted in vain for some particular piece of equipment.

And that reminds me of another incident. A good custbmer asked what lines I handled.

“Anything mechanical from mousetraps to battleships,” I replied, jocularly.

The following day a long distance phone call came in from a lady unknown to me.

“Please send me a large size, secondhand parrot cage,” she requested.

“I am sorry—this is a machinery business,” I explained, in amused surprise.

The lady was mildly indignant.

“Why, I was told that you handled everything,” she said. “I have been trying to get a suitable cage for so long— so will you kindly send it out at once, C.O.D.?”

I got one and sent it. I felt I just had to, to live up to my reputation.

I have recounted a few of the “lucky strikes,”'but I could cite many incidents that were very much the reverse. In the early days, when business was brisker, the disappointments did not seem to hurt so much as they did later, when each deal took on a greater importance. Many times I have lost a good sale, through the customer hesitating so long that when he eventually placed his order we found that the equipment had been sold elsewhere. That generally applied to cases where I was quoting on machinery listed from distant points.

The worst feature of the business was the uncertainty. During the early days there were many times when my very economic existence depended on swinging a certain deal within a specified period. It is not the kind of business that I would recommend to any man with a family dependent on him. The mental strain is apt to be too great. I embarked on the enterprise because there appeared to be nothing else in sight, and when once committed to it and a few successes had been scored I held on with a bull-dog tenacity, although my better judgment often urged me to try for some less strenuous occupation.

Old Friends That Stick

THERE are some articles on my lists that I have tried many times to sell —hoary old friends that look like remaining with us forever. There are other items that have never been called for at all throughout the years, although sometimes we have a pleasant surprise. I recently sold a tractor for $700, in response to an advertisement calling for such a machine, which had been on my lists for four years without a previous bid. This one sale eventually covered the expense involved in getting hundreds of listings, and it illustrates the advantage of including every possible machine— some day there may be a call for it.

Of course much of one’s labor is lost, as many machines are sold by the owners themselves, and occasionally I have made a sale, and failed to collect my commission. Some buyers make use of me to locate the required equipment and then deliberately “double-cross” me, the favourite method being to pretend that they are not going to purchase, then to send someone else to conclude the deal with the owner, generally at a slightly lower price if possible. Fortunately such cases are rare, and my faith in human nature is still unshaken.

As stated above, I have been gradually getting back to the selling of new machinery, as in pre-war days—perhaps a more dignified and satisfactory business to handle, but one which I could not possibly have started on slender resources five years ago. By using other people’s property as my stock in trade for a few years, and with systematic and persistent endeavor, I now have a firmly established business with sufficient accumulated capital for its own needs. I have managed to run it single-handed, though it is now getting a little beyond that stage. On the whole it has been an interesting experiment and has afforded me much diversion as well as the wherewithal for my growing family.