Paper Price Increases – Problem or Opportunity?

Paper vendors have been announcing price increases in recent weeks. This is often met with angst by printers. We are always nervous about informing our customers that our services will cost more. However, I have always looked on paper price increases as more of an opportunity than a problem. I have always found it easier to maintain or increase gross margin when customers are expecting inflation, and rising paper prices give us license to raise prices.

Now don’t get me wrong: I am not saying that increasing costs of our raw materials is a good thing. It’s not. Quite the contrary, it can cause more customers to look for alternatives to print. However, we can’t change the dynamic going on with paper mills. Lower volume means they have to increase prices to survive in what is already a low-margin industry.

So where is the opportunity?
Sooner or later, all printers will need to pass on these increases. Of course, some may delay increases to gain competitive advantage. These tend to be the price sellers and bottom feeders that will do anything to buy jobs. We can’t change that. However, the paper increases give us both a reason and an excuse to raise prices and add in a little extra to increase gross margin. If it becomes necessary, we can then explain to our customers that we must pass on these increases. Good, rational customers understand that we must pass on increases from our suppliers if we are to stay in business.

Even if you only change paper prices in your estimating software, it should result in some extra margin dollars for you. If you use standard markup tables, you will be marking up a larger number which will result in more margin dollars. Not a bad thing if you like to make money. It’s just the way the math works.

Carl Gerhardt is the chairman of Alliance Franchise Brands LLC, the parent company of Allegra Network LLC and Sign & Graphics Operations LCC, and a world leader in marketing, visual and graphics communications, linking more than 600 locations in the United States, Canada and United Kingdom. The company’s Marketing & Print Division, headquartered in Plymouth, MI, is comprised of Allegra, American Speedy Printing, Insty-Prints, Speedy Printing and Zippy Print brands of marketing, printing, mailing and Web services providers. Its Sign & Graphics Division, headquartered in Columbia, MD, is comprised of Image360, Signs By Tomorrow and Signs Now brands of sign and graphics communications providers.

Carl and his wife, Judy, owned and operated their own successful Allegra franchise for nearly 20 years before selling the $2.3 million operation in 2003. He is a PrintImage International/NAQP Honorary Lifetime Member and was inducted into NAPL’s prestigious Soderstrom Society in 2010 in recognition of his contribution to the industry.

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Comments
  • Larry Edwards

    I sold printing paper for 38 years and I agree with Carl’s statements. I used to get concerned about announcing a paper price increase to my customers as it brought their attention to price. However, I used this as an opportunity to explain how this would be an excellent opportunity to generate greater profits as a result of marking up a high cost of materials. I told my customers everyone would be receiving the same price increase and everyone would need to pass along the increase to maintain profit margins required to offer the same quality and services. This always worked for me, but I still felt nervous about having to alert them of an increase.

    I sold printing for about a year. While doing so, I couldn’t understand why printers were always so focused on the cost of paper after finding out how little the cost of paper had to do with the selling price of a job.