For Sale: A Tale of Two Printing Firms

It's a Great Time to Buy a Competitor was the subject line I used recently in an email blast sent to printers, and it's a theme I want to continue in this month's column. While the email was meant to promote "Print Shop For Sale," a book written by Larry Hunt and me, that is not the purpose of this column. Rather, I would really like to expand on the basic premise that this may be a great time for buying and selling printing businesses.

Based upon phone calls and emails I receive almost daily, I am convinced that there are probably more print shops, large and small, profitable and unprofitable, in the process of being bought or sold than at any time in recent memory. I believe there are two primary reasons driving the increase in the number of formal and informal "listings" and sales.

First, the more obvious reason: The current recession is clearly placing great pressure on many printing firms, especially smaller ones, and even more so upon those firms with weak balance sheets and even weaker profit and loss statements. Because cash flow is poor, and because they never achieved the kind of "current ratios" they should, many of these troubled companies now find themselves faced with enormous challenges in keeping payables current and making those weekly and biweekly payrolls. What about upgrading equipment? Forget about it, at least for these companies. They can't afford it and they can't get loans.

Second, like most industries, the quick printing industry has undergone various stages of growth in the past 35-40 years. One of the earliest stages, what some refer to as the heyday or growth segment in our industry, occurred in the very late 1960's, throughout the 1970's, and into the early 1980's. It is during this 15-20 year period of time that a majority of printing firms, both franchises and independents, came into existence. Many franchises can trace their roots back to this period, and many independents started during this time frame as well.

The combination of these two factors, the current recession combined with the number of individuals who are in their late 50's or early 60's (those who entered the industry in the 1970's and 1980's) has resulted in a large body of owners who are ripe to sell their businesses, despite the lagging economy. Fortunately, there appears to be an equal number of buyers willing and able to take their place.

Finding Opportunities

Suffice it to say, I strongly believe there are more opportunities for sellers to sell and buyers to buy than ever before. But if you aren't proactive, the only activity you will hear about is when your local paper sales rep asks, "Hey, did you hear about the Sir Speedy over in Glenmont? They just bought out two small competitors and are combining all their operations under one roof."

Here's a suggestion that sounds almost too obvious: Do something as simple as write your competitors a letter. That's right—send your competitors a non-threatening, confidential letter that tells them you are interested in acquiring other printing businesses and that you would love to meet with them privately if they have any interest, now or later. If you need a nudge on how to write this letter, visit my website (www.quickconsultant.com) and go to "downloads" where I offer a sample inquiry letter.

Better yet, you can even offer to share with them your general ideas on how firms should be valued and the price range various printing firms are selling for these days. In any event, sending out 15-20 personally addressed and signed letters is, of course, the easy part.

The Real Challenge in Buying & Selling

The real challenge in buying (or selling) a printing firm is in doing your homework and being fully prepared to discuss how you might calculate the value of a typical printing firm. Whether it is valuing your own firm or valuing a competitor, "pie in the sky" numbers will not work.