To state the obvious: Times are tough. Those who purport to understand economic indicators and the like tell us that things will probably get worse before they get better. But, all things being cyclical, the economy will improve eventually. The job of every printing company owner is to see to it that their business remains viable enough to survive until the turnaround actually happens.
The strategy most often recommended by print industry consultants is, essentially, get out there and sell something to somebody. At one time or another, every columnist who writes for this magazine has offered that advice, as have association leaders, conference speakers, and heads of franchises.
Even if you have already adopted that strategy, you might be looking for that little extra something that can put you over the top on sales. That's where brokering enters the picture. Offering products or services that you can't fulfill in-house just might help bring in new clients or allow you to increase your sales to existing clients.
The subject is especially pertinent in light of the current recession because print owners are shepherding their budgets even more closely than usual. For this reason, it might be more attractive to outsource a job than to invest in the equipment that would allow you to bring it in-house, at least for the time being.
For example, perhaps you've recently learned that a couple of your customers regularly order banners or window signage. You could choose to purchase a wide-format printer, media, inks, design software, a laminator and its related consumables, and spend the money and time to train one of your employees to run the equipment or even hire a new employee. Or you could opt to outsource the work to a trade printer that does wide-format work or even to a printer across town who already has the necessary equipment, but has excess capacity.
This would allow you to establish your company as the client's source for their signage so that you don't miss out on the opportunity. By the time the economy recovers, you will have a solid foundation on which to base your decision about whether or not to bring the service in-house.
Everything All the Time
For companies that seek to be a "one stop" print provider, brokering is a necessity. No printing company can do everything. And in the heart of a recession, even companies that normally consider themselves to be niche printers may find it desirable to expand their offerings by partnering with outside suppliers.
Of course, there are certain items that most quick and small commercial printers outsource on a regular basis all the time. Common examples are labels, business forms, promotional products, thermography, plastic cards, and magnetic products. It is also a common practice to outsource full-color printing orders that require run lengths that exceed your optimal parameters for profitability. Foil stamping, embossing, and die cutting are also frequently jobbed out.
Typical reasons for printers to broker work to outside providers include:
- Work that requires specialized equipment, e.g.: thermography, die cutting, embossing
- Jobs that exceed the optimal capacity of yourequipment, such as long run lengths
- Work that may be less expensive to outsource than to produce in-house, e.g.: labels, business forms, envelopes
- Overflow work when your schedule is full
- Specialty items needed to complete a job, e.g.: imprinted promotional products
- Translation services if you don't have the talent on staff
One of the most critical decisions you will have to make is where to send the jobs. There are companies that specialize in almost anything you might wish to outsource. However, don't forget to also look close to home. There may be a large commercial printer in your area that could fulfill the full-color offset work that you can't produce. Maybe a photo lab has a wide-format device that is often idle.
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