I was pleasantly surprised by the reaction I received to my October 2009 column dealing with the infamous “Nigerian scam.” As I noted in the column, until you’ve had a chance to thoroughly understand how the scam works, you think to yourself, “I can’t believe anyone would be so gullible as to fall for that.”
After the column appeared, I heard from a dozen or so printers who wanted to share their own stories, and others who called or wrote to say that they had heard of the scam, but candidly admitted they never fully understood how it worked.
One reader who wrote was Tom Stevens from K.K. Stevens Publishing, Astoria, IL. He wrote, “Thank you for, as Paul Harvey would say, ‘now for the rest of the story.’” Stevens mentioned that he was familiar with the scam and forwarded a letter he had received, and concluded that, “We realized it was a scam when we got the first email, but we were always curious how it worked. ”
Another email came from Steve Singer, president of Micro Format. Singer’s company produces security paper products. He wrote: “Thank you for your article, John…After 25+ years in business, we have seen our share of scams. But since September I have been exchanging messages with what I thought was a company in Japan. They wanted to purchase nine cartons of security paper. I knew something wasn’t right, but I just could not put my finger on it. In Japan they use A4 size paper (8.25x11.7"), not our American standard size 8.5x11", but this didn’t seem to matter to this customer.”
Singer went on to explain a series of email exchanges with the Japanese client, including, almost in passing, the request that his company use a specific freight company located in the U.K. The U.K. freight company provided three different quotes ranging from $500 to $1,600, depending upon delivery options. Checking further with his own freight company, Singer discovered the U.K. shipper was 50% higher. When he mentioned this to the scammers, they insisted they still wanted to use their U.K. shipper and, even more surprising, wanted the most expensive shipping option!
As Singer noted in his email, “This would be the end of the story to date, until I read your article in Quick Printing magazine. What they (the scam artists) didn’t know is that there was no way we would wire transfer money anywhere (to pay for the shipping) until we had full payment in our hands. Yet, even though I knew something might be wrong, it was a tempting order, even with my 25 years of experience!
“We never considered that the scam was the freight company. Unbelievable! I knew something wasn’t right, but I could not figure out the scam. It’s all in the freight. There was no way they would use our freight company, even at half the cost. And once we would send the payment, no one would have ever picked up the product. Unbelievable. So clever.”
Rest assured, these gentlemen are the fortunate ones. There are others, hopefully few in number, who have indeed been taken by this very scam. Once the wire transfer to cover shipping charges has been sent, you are out of luck—even though you feel you are completely protected, since the money sent by the wire transfer is in your bank account as the result of a credit card deposit.
Unfortunately, the credit card you used will turn out to be stolen, and your account will be debited. And worse, you will be blessed by having 42 cartons containing 105,000 11x17" flyers imprinted in reflex blue with some wonderful, inspirational message. Probably something like, “Blessed are the stupid, for they shall inherit Nigeria.”
A California Printer Retires
I received the following email from a fellow printer. While I never had the chance to meet this printer personally, I have known of him for many years, and know his story to be true. I have used a fictional name and locale, because I don’t think it is as important to the story as are the lessons he shares. With the exception of minor edits, you can assume that what appears below is a verbatim copy of his email:
Dear John, I have hesitated to share this story with you until now. However, I felt you might enjoy a quick print story with a happy ending. So here goes.
My name is Allen Bark and I owned and operated a small printing company for 20 years (1987 to 2006) in Northern California. Three years ago I sold my shop to another successful quick printer and retired. I am writing to you from my vacation home in Hawaii and looking forward to receiving the final payment this month from the sale of my company. I can now proudly state that I have exited the printing business and collected my reward for having spent 20 years in the industry.
In 1987, I decided to jettison my middle management career to start a business that would provide an income capable of supporting my existing lifestyle, and later allow for an early retirement. As my wife and I had accumulated significant assets up until then, my philosophy was that the new business should never jeopardize those assets, and hopefully enhance our net worth as well.
After researching several business opportunities, I chose quick printing. To minimize startup risk and compensate for my utter lack of print industry experience, I hired Kenny Fisher (industry consultant) to help start my printing firm. I leased 2,300 square feet of industrial space, purchased all new equipment, hired employees, and hung out my shingle.
It was not long before we had customers and a modest but growing cash flow. In spite of the hard work and financial commitment of opening the business, I felt confident of success. Six months later (Oct. 1987), the stock market crashed. This was some adventure I had signed on for! Utilizing direct mail marketing, joining and participating in NAQP events, networking with other owners, and rapidly learning the quick print business, my company began to profit.
Throughout 20 years operating my business, I always chose profitability over sales. When sales began to plateau in the mid-$300,000 range, I looked to increase my margins to the industry leader status. My company remained at that level for the next 15 years. Was I disappointed that I could not progress to a million dollar shop? Yes. Was I ever financially limited or compromised? No.
While away on vacation or business, my employees were trained to run the day to day operations of the shop. Another benefit I enjoyed from owning our own business was the time flexibility to continue investing and accumulating assets outside the business. Early on, the business started modestly funding tax advantaged retirement accounts to position me for early retirement.
By 2006, with my shop lease coming up for renewal and the company still showing healthy cash flow, I decided it was time to sell and retire. The success of my personal asset accumulation allowed me to realistically value my company. I also knew that a high margin shop like mine would be attractive to an existing print shop owner.
I priced my business, prepared an offering memorandum, and mailed a letter to every successful print shop in my area. I ended up with five offers (two I could accept and three trying to bottom feed).
My buyer checked out financially solid and was already successful as a shop owner in his nearby market. I prepared a sales contract, negotiated terms of sale, and cooperated with the buyer’s due diligence. An important aspect of the sale for me was that a key long term employee transfer along with the sale of the business. I financed the fixed price sale, secured by a deed of trust on real estate owned by the buyer.
We closed the sale in December 2006. After three years, the buyer is still satisfied and the transferred key employee is still working for the company.
Four Key Lessons Learned
I learned four key lessons from my 20 years in printing:
- It is fundamentally important to start with a goal(s) in mind. My goal was to own my own successful business then retire early. Business plans are nice as well.
- Always manage for profit first. Sounds simple, but many of the print owners I came into contact with over the years chased sales growth or acquisition of new machinery or technology at the expense of profit.
- Owners should continually save for retirement. Regardless of the ups and down of business cash flows, investing in yourself precedes reinvesting in the business. Some of my print colleagues still have this backward.
- Selling a business for profit is counterintuitive. You sell when business is good and you are making profits. Losing your biggest customer is not a very good reason to put your business up for sale. I was approached several times during my printing career to buy a troubled print shop. Typically, the desperate seller was not able to value his business rationally, with the net result of having to close the doors before any sale ever occurred.
Having reached my goal of retirement, what’s it like? I am truly enjoying myself and have not missed the printing business. My wife and I travel the world. We’ve been to Europe twice since selling the shop. We spend lots of time at our vacation homes in Hawaii and Colorado, as well as visiting with family in the Midwest.
I thank the quick printing industry for my new retirement lifestyle. I know I am fortunate to have reached this new stage of my life and I appreciate each new day.
Allan concluded his letter with, “Only in a place like America is this story even possible. I am a quick printer with a happy ending.”