‘Printers Continue to Dig Their Own Graves’ —MichelsonJanuary 2010
THAT WAS the subject line of an insightful e-mail I received recently from Tim Rolfsen, president of Indianapolis-based Vista Graphic Communications. Rolfsen felt the need to vent about the ridiculously low prices that printers often charge just to get the sale. "There seems to be a new formula for determining the price of a job: material cost times (x) two. Regardless of the effort that goes into producing jobs—whether it's several signatures that need to print, fold and stitch, or complex diecutting and hand work—printers seems to think that living with 50 percent or less value-add is acceptable," he wrote.
"Please remind my colleagues that variable expenses such as labor, electricity, maintenance, commissions and the like fall below the value-add line on the income statement. As the complexity of a job increases, so do those variable expenses, until that trivial value-add is eaten up—sometimes before it even makes it to contribution, let alone gross or net profit."
Rolfsen went on to point out how printers are in a complex business with a lot of exposure (read: risk) if they don't do jobs correctly. That in itself warrants a reasonable return on investment and equity, he maintained, noting how many shops are now frantically changing their business models to include services like mailing, kitting, fulfillment, converting, etc. These require big investments in people who are experts at what they do, and the equipment, software and procedures to ensure things are done correctly. Yet, even these services are often given away to secure the print [business]. "Hello—it's the other services that are going to make you the most money, not ink on paper," he stressed.
Launched 25 years ago as a small laminating shop that eventually migrated into UV coating, folding carton converting, high-end finishing, and kitting/assembly and fulfillment, Vista had spent a long time observing which services made money for printers, and which didn't, before launching its own pressroom a few years back. In conjunction with purchasing the assets of Centennial Press—a local mail house and digital printing operation—today Vista operates a 44˝, six-color Komori sheetfed press with coater; a half-size, six-color Heidelberg 4/2 perfector with coater; as well as a Canon 7000 imageRUNNER color digital press with in-line finishing and three Konica bizhubs. Its in-house bindery houses folding, stitching, cutting, creasing and mailing equipment.
Vista's president already knew that the real profits lie in value-added services built around its press work. "By providing true turnkey services, we can and do earn a nice profit, and our diverse, yet synergistic, offerings provide stability for our business. From printing and mailing, to variable data campaigns, to packaging and point-of-sale, our goal is to cross-sell each of our accounts as many of our services as we can. We are considered problem solvers in their eyes, where printing is only part of the process. As a result, clients are willing to pay a bit more for our expertise," according to Rolfsen.
"I truly hope that many of the printers will wake up before they put themselves out of business. The hard reality is that the world has forever changed, and gone are the golden days of print," he concluded. "We still have 40 percent to 50 percent more capacity in the market than is needed, so perhaps the process of thinning the ranks is being hastened by those who would rather watch cylinders turn than earn a profit."
Sage business advice that fellow printers, both large and small, can take to the bank.