Spencer Heath Archive

Item 507.

No date

 

Original is in item 505

In any legitimate business organization its owners (directly or by agents under their direction) buy services and sell services.

The services they buy include:

Services of Materials – For which they pay purchase prices,

Services of Labor, Direct and Indirect – For which they pay wages and salaries or other contract prices,

Capital Services – For which they pay interest as a share in the advantages coming from the employment of physical facilities in the conduct of the business, and

Public Services – For which they pay location rent (after due deduction, automatically, for rates, charges, taxes and other impositions and restrictions by the agencies and officers of public service and authority).

The services they sell include:

All of the Above Services – For which they receive their “cost of production” as one part of their total sales return, and

Their Own Services – For which they receive profit by the amount of the remaining part of their total sales returns. This profit is their earnings created by their own services in administering the capital and supervising the personnel employed in the business. It is contingent upon the services, and will be negative (loss) if the services are negative.

Where an owner (or part owner) performs non-owner services and receives a wage or salary comparable to the pay of non-owners doing similar work, this wage or salary is part of the cost of production. Profits are the returns for strictly administrative and supervisory services performed by owners, as distinguished from subordinate services for which wages and salaries are paid. Their profits are what they receive as owner-administrators, under no superior supervision or authority, acting upon their own judgment, and responsible out of their own present-existing properties for all obliga­tions.

The owners act as joint administrators of their united properties and receive administrative earnings or suffer losses in proportion to their respective owner-interests.

Where there are many co-owners of the same business, their common judgment is ascertained by parliamentary procedure, as in stockholders’ meetings.

Profit is a pure residue. All of the other services are purchased and paid for at stipulated prices. Profit for admin­istrative services arises only as gross returns exceed all con­tractual costs. It is pure residue.