Getting to the next level

Here's an interesting test. Post a technical question involving InDesign or Photoshop on anyone of the three or four printers list servs in this industry and then sit back and see how many owners provide an answer!

What wrong with that? I can make a strong argument that in order for owners to take their companies to the next level (whether it be $750,000 or $1.2 million or whatever) they need to quit doing what they like to do and start doing what they need to do! Too many owners enjoy learning all about DTP software and consequently end up spending far too little time managing their businesses.

I can almost guarantee that the faster an owner is to post an answer the more likely he or she has not reached that next level.

Owners should not be working in the DTP department or filling-in in the pressroom. They need to be managing their business, analyzing their financial statements, looking at new profit centers, developing and implementing a solid marketing plan, setting goals regarding key ratios and doing whatever else only they can do!

Owners are spending too much time learning about the lastest tricks for ripping files and combining layers and too little time mastering the fundamentals of business management.

Conclusion - If you know more about InDesign or Photoshop than you do about the top ten financial ratios in this industry then shame on you!

Printowners List Surveys Owners

Well, the good news is that approximately 210 individuals responded to a recent survey conducted on the Printowners List Serv. The bad news is that, lacking even the most basic of filtering data, it is difficult to gauge how reflective the responses were to the industry at large.

I guess I have a built in bias that give equal weight to the responses of the "Joe the Plumber" or "Joe Six-Pack types" as against the opinions of owners who operate high $$$ volume and high profit printing firms. I put a lot more weight on the opinions of the latter and very little on those held by the former.

Ideally, I would love to have compared the opinions expressed by the "profit leaders" in this industry and see how they compared to those at the other end of the spectrum. I think the results of the survey would have been quite different had this been done.

You could tell by the answers to most of the questions that the vast majority of respondents were/are clearly anti-big-government, anti-administration, anti-Obama type folks. A plurality favored the Tea Party over the alternatives. A majority see themselves as conservatives, and 92% disapprove of how Congress is doing its job. Approximately 74% say the nation is going in the wrong direction.

The responses to one question did surprise me - that a significant majority (71%) candidly admitted that they have not donated to any political candidates this election season! I would have expected almost the reverse, especially from a group as pro-active and conservative as this group was.

In conclusion, my experiences in surveying this indusgtry for more than 25 years, is that the government, both local, state and national rarely plays a significant role in the success or failure of most businesseds. Most problems or challenges facing businesses today are self-induced and not the fault of government meddling or interference. In fact, the more troubled the shops, the louder they want to blame others for their problems, when in fact outside influences and "big government" rarely has anything to do with the problems they are facing.

Increase Business Value Now

Here is a small list that will almost instantly increase the value of your business:

1. Don't wait until it is time to sell to improve your SPE to industry-leader status.
2. Fine-tune your employee team now, don't wait until it is time to sell; get rid of the "bad apples" now (yes, before Christmas), and give an early reward to those employees you intend to keep for the long-term.
3. Make triple sure that your financials are well-organized, and can easily be compared to those appearing in the industry's Benchmarking Study. (Visit NAPL at: www.napl.org)
4. I've said it a dozen times, if there are questionable notes receivable or payable on your balance sheet take care of them now, otherwise you might as well forget collecting any notes receivable that your company may owe you as a result of previous loans to the company.
5. If you are within two years of selling, restrict new equipment purchases to the bare necessities. Concentrate on boosting net earnings, and decreasing depreciation and interest expenses.
6. Apply a fresh coat of paint, install new carpeting and make sure both the front and the back areas of your shop are clean and well organized. Nothing will turn off a potential buyer more than a shop that looks dirty and disorganized.

Harsh Reality Hits Print Shop Owners

Too many owners are now finding that just as they are ready to sell and retire to greener pastures their business isn't worth nearly what they thought it would be. Yes, in some cases the recession has been the primary cause of the drop in value, but in other cases it was an overly optimistic valuation, and now the harsh reality has set in.

Sarah Needleman, a columnist for the Wall Street Journal, wrote an interesting column on Oct. 14, 2010 titled, Businesses Put Up for Sale Smack Into Harsh Reality. For the link go here: http://online.wsj.com/article/SB10001424052748703440004575548393965927782.html

Needleman says a combination of "tight credit, skittish buyers and business owners unwilling to sell at rock bottom prices - factors similarly affecting home sellers - has left the small business marketplace at a standstill."

Long before this current recession, Larry Hunt and myself warned in our book titled, "Print Shop for Sale," that owners who were really interested in selling need to be prepared to provide or at least offer some financing to potential buyers. In fact, we quote on franchise president who notes that an unwillingness to take back or offer financing is one of the biggest impediments to selling a printing firm.

Abbott Glucose Meters are Junk!

Following a diagnosis of diabetes by my family physician, I was prescribed a FreeStyle Lite gluecose meter made by Abbott Diabetes Care, Inc. (which I assume is connected to Abbott Labs, Inc.).

In any event, I must comment that this meter is a piece of junk. I assume many other meters fall into this same category. There's a lot of political crap going on too.... when a meter is allowed a 20% +/- variation and gives widely different readings within 30 seconds of each then I say it isn't worth the cheap plastic from which it is made.

Companies like Abbott certainly are not held to any exacting standards whatsoever. I'f my statistical and financial ratio studies ever varied by +/-20% I would be laughed out of the industry. It is shocking that the FDA allows such variation to exist. In fact, if the testing strips measure between 83-125 using a known glucose standard it is considered ok!

Well, it's not ok in my book. That's what I call a crap product produced under lax standards and casual monitoring by the FDA. By the way, the American Diabetes Association seems to give its blessing to these loose standards as well.

Business Valuations vs. Selling Price

Sometimes it’s a hard concept to explain, but there is a distinct difference between the value (valuation) of a business and its suggested selling price. How can that be?

Here's an example. Using our formula, it is not that unusual to arrive at a $500,000 value for a business, but in the same breath recommend that a "fair market" selling price for that business might be $425,000.

How does that happen? Because in almost all transactions involving the sale of a business, certain assets (equipment and inventory as an example) are sold, but other assets are retained by the seller.

A perfect example of that would be a business that has $20,000 in a savings account. You normally don't sell cash, so that would be retained by the seller.

Another example would be a situation where the seller wants to keep the company car that he has been driving and a fair market value for the car is $18,000. That $18,000 would be excluded in our estimated selling price, but that $18,000 is part of the overall value of the business.

Another situation is that an owner typically retains the rights to the AR as of a certain date, but also assumes responsibility for taking care of all AP. The list goes on, but I think you see what I mean.

Our formula calculates the value of all the assets (tangible and intangible) to be sold, but it also assumes that the owner will benefit or keep certain other assets of the business. And it is the value of these retained assets, plus what the seller receives from the sale, that truly constitutes the full value of the business in question.

If you have any further questions as to business valuations, we suggest that you visit our page on business valuations at:
www.quickconsultant.com
and/or
www.printshopsforsale.net.
The second site maintains and updated Q&A section that answers many questions on valuations that we have received since our book "Print Shop for Sale" was first published.