Our economy is in a financial crisis brought about by reasons that will be dissected and debated for years to come. What's important to us is what effect it will have on our business. While I certainly don't have all the answers, I do think I have some, based on years of staving off regional recessions in West Virginia while the rest of the nation prospered in the 1970s and 80s. We discussed a few of them during the Quick Printing panel discussion at Graph Expo in Chicago a few weeks ago, and I thought I would repeat them for you. In short, while there are certainly challenges during a recession, there's also money to be made; so it's not all doom and gloom. We just can't expect to do nothing and have good things happen.
"What can a print shop do to grow sales and profits during uncertain economic times?" was one question. There were a number of answers presented, but I observed that, as an industry, most won't really do that much about it anyway—recession or not. It's not that we are not concerned, but many just refuse to get involved, regardless of the consequences. There are three major groups of printers in this category.
The first group is comprised of printers with other money, or who will inherit other money, or even who think they will inherit other money. The biggest cause of underperformance is a safety net, so the company's performance really isn't that material. It's the bacon and egg type of involvement. The chicken was involved in breakfast, but the pig was fully committed.
Our second group are folks who aren't motivated. They won't take action. And if they won't, they can't be motivated, since motivation means thoughts, feelings, and actions. These ought to look for their passion in life.
The third group are folks who have an identifiable mental block about selling. I wrote extensively about reluctance in sales and its causes and effects in previous issues of QP. Fortunately, there's real help for this.
The folks I have described here are the ones who come to a session hoping to find a silver bullet, but are going to be disappointed, for there is none.
How do you grow and maintain sales during uncertain times? You do exactly what you do in prosperous times. You take it away from someone else. For the most part, 25 customers comprise 50-75% of a shop's total business. That's a state of nature and nothing to be afraid of. We just need to be engaged in activities that will bring to us one or two or three top accounts each year to ensure the loss of a top account won't kill us. Realize it takes some time to develop these accounts, so waiting until you lose one of yours is a bad strategy. It's an especially bad strategy if you are in a weak financial position (low current ratio and cash on hand), and have relied upon word of mouth to get you business (even if it has always worked in the past) because your time will be short.
There is essentially nothing one should do differently to grow sales and profitability during a recession than at any other time. The plan is the same. The emphasis, however, is on doing and not talking. Work with a cash flow budget and then find, attract, and keep customers. And do it again and again. If you are fortunate, you won't have a large drop in sales.
Okay, so you know all of that. Here's what you might not know. During a recession, large corporations downsize. Many upper and middle management personnel who are displaced have some sort of severance, even if it isn't a golden parachute. Many of these see the futility of getting a comparable job at another large company, which has also downsized, so they frequently open their own businesses. This creates demand for printing.
Existing printing companies that are not proactive in selling will miss these business formations and ride their legacy top 25 into oblivion. The nimble selling shop will work hard to substitute up and comers for down and outers and live to prosper again.
Unfortunately, some of these displaced workers will open printing or digital printing shops in direct competition with you. More bad news here is that new shops frequently are better equipped because they have newer equipment. The good news, however, is that there is no evidence owners of these shops will be any more proactive in selling than we were, so they can be outsold. But we can't just stand there.
The recession also opens up opportunities among customers. Most printers spend too much time bemoaning the fact that their customers' business is slow, while few use the opportunity to dislodge prospects from their current printing vendors. How? Same as you would any other time. Removing cost through automation and creating seamless integration of purchasing through the use of the Internet are examples. After all, during a recession there is a lot of pressure on customers to challenge the way they do business. As a result, they are more open to considering new vendors with new ideas.
There are an amazing number of printers out there who are doing nothing more than standing in the middle of the road. Find one and dislodge them. And remember, other printers are trying to find and dislodge you. So get going.
What About Quitting?
Is this a good time to sell your print shop and retire? Well, the actual price of shops shouldn't decline, for most valuation methods are based on earnings. Keep the earnings up and you will get the same price or perhaps even a better one. Why better? Well, real estate and the stock market are less attractive investments right now, so alternatives such as small business may be more appealing to many. I didn't say it was logical; rather you could benefit from an emotional response to the market. Nevertheless, the valuation method should not be a hindrance to selling.
The pool of business buyers should also increase during the recession as the displaced middle and upper management people with cash will generate a surge of lookers. What about financing? Many have severance packages that frequently will be large enough to provide a purchase price and working capital without borrowing.
The biggest hindrance to selling your business during the recession is frequently your own situation. If you have a nest egg in stocks or real estate and the topper for retiring is the price you receive for the business, you could be working longer until you feel secure enough to let it go. On the upside of this, it could be good news, for the number of income producing businesses for sale will quite possibly decrease as owners have to work longer in order to retire.
Printing is needed, recession or not. Customers are under pressure to find even better value, which can be provided by printers who rely on more automation in their processes and interactions with customers. While most printers will stand in the middle of the highway hoping something good will happen, the nimble printer who is willing to compete will do fine. And, after all, whether any of these optimistic scenarios play out or not, it's still a fact of life that we have to play the hand we are dealt. Might as well make the most out of it.