With the right kind of understanding and cooperation, such a company could prove to be an excellent resource. It is even possible that you may be in a position to reciprocate by doing work for them that they can't produce in-house. The key phrase is "with the right kind of understanding." You want to be certain that they will not try to take away your customer, or even just the portion of your customer's work that you are outsourcing. They would need the same kind of assurance from you if your companies work out a reciprocal arrangement.
As much as this may sound like a recipe for trouble, there are many companies around the country that have worked together in just such a way for many years. QP even carried an article a few years ago about a pair of companies that planned their equipment acquisitions together in order to maximize their investments without duplicating capabilities or capacity. Together they are stronger and more profitable than either would be without the other. This symbiotic arrangement may sound idealistic, but it works for them and can serve as an example to others.
Whether you choose to keep the work local or to outsource to a firm that specializes in a particular type of work, the principle is the same. When you send work out, you become a print buyer. Like any other customer, you need a provider that can produce what you want, when you want it, at a price you are willing to pay. When using a supplier for the first time, it is advisable to send a non-critical job, perhaps even one that you have already produced in-house, to evaluate their service, turnaround time, and quality.
Once you find a supplier that you are satisfied with, stay with them. Just as you would tell your own customers, it's better and easier to do business with someone you have a relationship with than with a company that doesn't understand your requirements.
You might think that making money on brokered jobs is a simple matter. Yes and no. There is a very simple formula for marking up the jobs so that you realize the profit you desire. The trick is that you have to understand the real cost of the job before you can determine the starting point.
QP senior contributing columnist John Stewart explains the mark up formula this way:
The basic formula is you divide your costs by the reciprocal of the desired profit percent. So, to markup any cost to produce a desired profit, take the profit percent (20% = .2), subtract it from one (1-.2 = .8), and divide your costs by the resulting number ($100/.8 = $125). In this example, you would charge $125 in order to make a 20% profit.
Job costs $100
Desired profit percent is 20%
Divide $100 by .80 ($100/.8 = $125)
Remember, though, that just because you are not producing the job in-house doesn't mean that it hasn't incurred costs other than the price charged by the brokering firm. Someone had to take the order and enter it into your system. That automatically adds labor and overhead costs. If your company does design or prepress work before sending the job out, that is another cost associated with the job. Before you determine the mark up, just be sure you have included your total cost for the job. Not doing so can turn money found into money lost.
By working with professionals that you can trust and following a few common sense guidelines, brokering can become your secret weapon for weathering the recession. In fact, it can prove to be very good business no matter what state the economy is in.
Brokering Evaluation Guidelines
A potential brokering partner should:
- Guarantee the protection of your customer relationship
- Provide complete pricing and payment information up front
- Deliver jobs on time
- Deliver quality equal to or better than what you could produce in-house
- Notify you immediately if an order will be delayed or if there is any kind of problem
- Provide a clearly stated guarantee
- Have an excellent customer service department and be willing to work through any issues that might arise
- Ask for and respect your feedback