There could be no result of such a combination except the final resignation of the old general manager. This was only too gladly accepted, and the young man who had come in as advertising manager was placed in full charge. Following his appointment there was a period of rapid expansion. Many new lines were added; the concern rented two more floors in the building where it was located, and eventually purchased ground and built a fine new building. The payroll doubled, then trebled, then quadrupled. All these things, of course, took more capital, and the owner was compelled to add many thousands of dollars to his original investment, first, for permanent improvement; then, from time to time, for working capital. He was glad to do this, because the business was growing. There seemed to be every prospect that in the near future there would be profits far in excess of anything the owner had ever dreamed of under the old management.
SUPERSTRUCTURE WITHOUT FOUNDATION
Then came a time when other ventures of the owner compelled the use of all of his spare capital. He could no longer add to the funds invested in his mail-order business. He called his new general manager in and said: “I have put a great deal of money into this mail-order business. You have your beautiful new building; you have a goodly amount of working capital; you have expanded and added new lines; and I think the time has come when you ought to be able not only to run along without any more investment on my part, but very soon to show me a nice little profit. I assure you that it will come in exceedingly handy in the new venture which I have undertaken.”
“Oh, certainly,” the young man said, “there is no doubt that we shall soon be paying you larger profits than any other enterprise you control, with the new business we have secured and the splendid profits on all lines we are now handling. There is no reason why we should need any more capital, and I do not think it will be very long before we will have repaid you in dividends for every penny of money you have recently put into the business.”
And so the owner turned his back on his mail-order business and gave his time, thought, and energy to his other ventures. Reports, of course, reached him regularly, but he had full confidence in the manager, and he was very busy, so he paid but little attention to them.
THE INEVITABLE COLLAPSE
A little more than a year had passed when the capitalist was profoundly astonished and dismayed to have one of his best business friends call upon him and request: “Charlie, I wish you could do something for me on that account. It’s long past due and it’s getting altogether too large for me to carry as business is now.”
“Why, what account is that? I didn’t know I owed you a cent.”
“Why, for that mail-order business of yours. They’ve been ordering goods from me for over a year now, and what they have ordered during the last six months has not been paid for. I knew that you were good, of course, and so was perfectly willing to extend the credit. But you know, as a businessman, that there is a limit to such things, and I think it has about been reached. I hope you can take care of it immediately, as I can very readily use the funds.”