Printers Praise New Digital Pricing Study

Below are just a few of the printers who have praised the value of our latest industry report, “The 2019-2020 Digital Color Pricing Study.”  You’ll find the very latest info on pricing digital products and services when you dive into this new study. Many printers have admitted that after studying the report, they were either over-charging or under-charging for products such as envelopes, rack cards, newsletters and carbonless forms.

The new Digital Pricing Study is quickly earning its reputation as a “must-have” study for firms relying more and more on digital printing as a major source for their income.  NPRC’s newest report features the very latest info on pricing more than 16 digital products. Visit our Bookstore for further information about this brand new report.

I was undercharging on envelopes…

“I always enjoy receiving the pricing studies and I learn something every time.  I have been doing printing for over 45 years and still learn how to price things better.  Through the Sweet Sixteen pricing study, I learned I was undercharging on envelopes (which surprised me) so this will more than pay for the cost of the membership and Pricing Study.”

Wayne Clark, Graphics North Printing
Fairbanks, AK

Keep up the good work…

“John, thank you for all your work in providing the printing industry with the “Sweet Sixteen” Digital Color Pricing Study, and the many other studies you have published for us for so many years. It always helps to know where we are at and not to leave money on the table. Keep up the good work.”

Arie Teomi, Lasting Impression Direct
Cleveland, OH

Knowing our prices are reasonable…

“I always look forward to receiving your reports, particularly the pricing studies. They’re my best source of data to be sure our prices are within a reasonable range, and the best confidence-builder I’ve found against buyers who say our prices are too high. Knowing our prices are reasonable means I look for better prospects, rather than caving on prices.”

Steve Blatman, Ink Spot Printing & Copy Center, Inc.
Frazer, PA

Confidence that our prices are fair…

“Your studies have been a big help in keeping me in business for more than 28 years. I have used the industry pricing studies over the years to make sure our prices are competitive and adjust where necessary. This gives our customer service representatives confidence that our prices are fair and reasonable. I cannot understand why many more print shop owners do not take advantage of these valuable studies, especially when they can get them for free with just a little effort.”

Mike Geygan, Minuteman Press
Lebanon, OH

The study gives us information… to stay in business…

“I want to thank you for including my firm in your annual pricing study. Even though my company is extremely small, the study gives us information necessary to stay in business. Unlike the bigger companies, which can try random pricing strategies, we need to only use fact-based strategies which the pricing study provides each year.”

Ralph Dunavant, American Printing & Promotions
Manassas, VA

This information has helped me be sharper in our pricing…

“I have been participating in your surveys for more than 20 years. As I look back over those years, I realize that I have referred to your surveys more than any other source of pricing information in the printing industry. It is concise, accurate and timely. I would have to say that this info has helped me be sharper in our pricing, win more bids and make more money. Thanks so much for your efforts.!”

Jon Robson, Auburn Document Centre
Auburn, NY

A fantastic job well done…

“John, thank you again for a fantastic job well done. We eagerly await each of your studies, as they are crammed full of helpful insights, sage advice, and of course ‘real-world’ data and pricing information. Your studies start to pay for themselves from the first page!”

James Jepsen, General Manager
Local Copies Etc., Santa Maria, CA

 

 

 

$130,000 SPE – The Magic Number!

By John Stewart, Executive Director, NPRC

$130,000 SPE – The Magic Number! If your firm is going to survive or prosper in the next five years, you must currently have an SPE of $130,000 or higher. If your firm fails to achieve that SPE the chances are good you will soon become just another mediocre firm. There are too many firms today that are simply holding on to a few “old timer” customers while the owners are eagerly awaiting retirement, forced or otherwise!

The answer may very well be found in your current sales per employee (SPE)! Meet or exceed an SPE target of $130,000 and you’re likely to be one of those firms that survive and prosper. Allow your SPE to drop below that mark and you are likely going to face increasingly serious problems in the next few years.

Defining SPE

First, let’s precisely define how to calculate SPE. Divide your total annual sales (actual or projected) by the total number of full-time equivalent employees, including all working owners, used to produce those sales. You’ll be wasting your time doing this calculation if you do not do it properly.

“Unfortunately, we also know of printing firms selling the same mix of products and services as our first example, that will often require 8 to 8.5 employees to produce that same amount of sales.”

SPE is an important productivity ratio that indicates how many employees does it take to produce $XXX in sales. The converse is true as well. You can use SPE figures to estimate the annual sales you can expect X number of employees to produce.

As an example, SPE data we rely upon states that $1,000,000 sales can be easily produced by no more than 6 to 6.5 employees. Unfortunately, we also know of printing firms that will require 8 to 8.5 employees or more to produce the very same mix of products and services.

Properly Counting All Employees

As part of the calculation, you must count all “employees” whether or not they are on the payroll. Do not rely strictly on your payroll reports to make this calculation. An example of this would be when you have a husband and wife both working in the business but where only one of them actually draws a salary.

Yes, you should also include outside sales representatives as well as in-house bookkeepers. If your father retired from the business but now comes in and works about 20 hours a week then he too should be counted as a 1/2 or .5 employee.

You also must accurately account for all part-time employees. If a graphic artist or bindery operator consistently works 30 hours per week they would be counted as a ¾ or .75 employee. On the other hand, if you have an employee that consistently works 50 hours per week then they would count as 1.25.

The only exception to the above process for counting employees occurs when we are dealing with working owners. The reality is that owners are typically expected to work 45-50 hours because they are in fact the “owners.” However, in situations where one or more owners or partners, feel compelled or are obligated to work 60-70 hours or more each week then it is time to start counting them as more than just one “body.”

If in fact an owner is consistently working in the 60-70 hours per week range then we suggest they should at least be counted as 1.5 employees!

Industry Overview of SPE

Below is a broad overview of sales per employee statistics in the printing industry. Whether or not our numbers reflect the industry at large is subject to debate. We speculate that our industry surveys tend to attract slightly more successful printing firms than exist at-large, and thus our average and median numbers may not be reflective of the industry.

Nonetheless, the numbers clearly indicate that SPEs of $130,000 and higher are easily achievable, and we can’t help but wonder why so many owners appear to be willing to tolerate SPEs of $120,000 and below.

If your firms is indeed struggling with SPEs in the $100,000 to $120,000 range you need to make “improving your SPE” a major goal for 2019-2020!

Counting Owners Properly

On the other hand, an owner who consistently works 55-65 hours we would suggest that a more accurate SPE calculation might result if we count the owner as at least a 1.25 employee. Yes, there is some subjectivity in the calculation when dealing with owners and we will just have to live with that.

Nonetheless, SPE is the most frequently tracked productivity ratio in the printing industry and we have been tracking and recording it for more than 25 years. Virtually every pricing, productivity and financial ratio study published during this time has tracked that ratio.

SPE QUARTILES – WHERE DO YOU RANKWe calculated the sales per employee of all participants based upon the information provided, and then ranked the data from high to low. Next, we divided the list into four approximately even breakouts or quartiles. Last, we averaged the SPE for each quartile breakout. The results are depicted above. If your SPE falls into either the bottom (red) or the 2nd quartile ((gold), your SPE number falls into the bottom half of the industry and should be a source of  concern. On the other hand, if your SPE is in the $130,000-$175,000 range you deserve a pat on the back. (This chart and caption appeared in the 2019-2020 Sweet Sixteen Digital Color Pricing Study published by NPRC.)

“We estimate that close to 50% of the industry (see graph above) is failing in terms of SPE, and many of those firms will most likely not make it another five years.”

We estimate that close to 50% of the industry (see graph above) is failing in terms of SPE, and many of those firms will most likely not make it another five years. There is little or no chance for firms with SPEs of $115,000 and below to pay the owners a reasonable salary and generate the excess earnings required to maintain or boost value as well as provide the funds required to finance upgrades in equipment. It just can’t be done with SPEs that low.

Higher Profits, Better Ratios

If your calculated SPE is $130,000 or higher it typically places your firm in the top two quartiles in the industry in terms of profitability. Printing firms in the top half of the industry typically report lower cost of sales ratios (30-26%) and lower payroll costs (28-30%). As a result of running leaner firms and better operating ratios, owners of firms in the top two quartiles report significantly higher owner’s compensation ratios in the 19-27% range.

Looking at the other side of the coin, we know that approximately 35-40% of the firms in our industry (based upon the feedback and results of our numerous industry surveys) report SPEs of $120,000 and below. That can be reaffirmed by examining the bar graph above.

Causes of Low SPE

There are many reasons for low SPEs, and we can only speculate for a few of them. Below is a brief listing of some of the causes we have encountered over the years as a consultant:

Build it and they will come – One cause of low and declining SPEs stems from firms acquire one or more highly productive pieces of equipment (like large, expensive and very productive digital printers or presses) only to maintain their current employee staffing. It is indeed rare these days to expect that demand will increase as the result of acquiring a new piece of equipment. The “Build it and they will come” approach is rarely an accurate assumption, at least in the short-term of 12-24 months. The original assumption in most cases is that the new equipment will produce more product than before with lower labor costs, and yet labor is rarely adjusted downward.

“…many of these owners fail to recognize the benefits that can be realized from new technology, especially as it relates to allowing them to reduce overall payroll costs.”

Failure to Invest – This is almost the exact reverse of the “Build it and they will come approach” noted above. Many owners continue to report and tolerate excessively low SPEs because they prefer to stick with what they know, rather than invest in new technology. They are fearful of new technology and often shy away from new investments in equipment, fearful of taking on new financial obligations. While the latter is a legitimate concern, many of these owners fail to recognize the benefits that can be realized from new technology, especially as it relates to allowing them to reduce overall payroll costs – i.e. produce more with fewer people! The number of small, medium and large firms that have reduced their offset press footprint and transitioned to 70-100% digital production continues to grow virtually every month. As a consequence, some have reported significant reductions in payroll costs.

The 80-20 Rule is another source or cause of low SPE ratios. There are many variations and applications of the often-quoted “80-20 Rule,” but one of the more common examples states that 20% of your employees cause 80% of the employee problems. That means in the typical company employing ten individuals, approximately two of those employees appear to cause most of the problems. Poorly managed printing firms tolerate employees that would never “make it” in more productive firms.  It is ironic that an educated outsider can often spot those “bad apples” within a few minutes or at most a couple of hours. How or why it is that owners continued to turn a blind eye to these employees and tolerate them year after year is beyond comprehension.

Tolerating Mediocrity – This may indeed sound cold-hearted and that may indeed be true, but time after time I have visited firms where there was a great reluctance to terminate employees that by any reasonable measure should be terminated. Owners typically recognize the need when it is pointed out to them, but they are rarely willing to act. By the way, most employees already know who the  bad apples are, but they are typically reluctant to share their beliefs with management.

As always, we encourage your feedback. Send us your experiences, especially if you have increased your overall productivity and SPE. We’d love to hear from you. We can of course treat any stories and tales you provide with 100% anonymity.

 

 

Industry Mark-up Rates & Practices

Occasionally, we receive inquiries from printers asking us about markup rates and practices in our industry. Some of the inquiries come from folks who have just gotten into the business, while others come from old-timers who entered the industry during the 1980’s and 90’s.

Here’s an email we received just the other day along with our partial response:

“Hello John, I received the new pricing guide and think it is great information, thank you. I do have a question that maybe you could point me in the right direction.  We’re going thru the process of updating my pricing ,  and I’m interested on how other printers handle outsourced costs & final price vs in house.

“I use PrintSmith and years back set up a mark-up % for cost to arrive at a selling price. However I’m struggling to have a consistent price point when generating an invoice to the end user when we decide to outsource vs in-house. I may be making it to complicated, but hoping someone could give me some pointers.”

I responded with the following:

Dear Bob (not his real name), the best I can offer is some observations based upon 35+ years of consulting plus more than 30 years of publishing various pricing studies.

My first observations is that most printers really don’t understand the purpose of mark-ups and consequently, they tend to use far lower markup rates than they should.

Markups on purchases of outside products and services should be used to establish a selling price that recovers all direct and indirect costs as well as the anticipated risks, as well as produce a reasonable profit. Unfortunately, many, many printers in this country aren’t doing that. In fact, the more they broker the lower their profits tend to be.

Low Costs, Thus Low Markups?

A couple of weeks before receiving the inquiry from Bob, I received a similar inquiry from a graphic designer who told me he was just starting off in business. He said he already had a couple of customers but was totally confused about what types of markups he should use when purchasing brokered services.

He emphasized the fact that his business was very small but he wanted to grow. He noted that right now he was working out of his house and thus he had little or no overhead to account for, so in his mind that justified much lower markups. In fact, by not having to markup jobs as much he figured he has a competitive advantage.

Of course the flaw in that argument is that if he truly wants to grow his business, acquire an office, hire staff or a secretary to field calls and inquiries, he needs to be taking that into account now when he sets his markup rates. “How do you ever expect to grow and prosper if you are not charging enough now to produce profits sufficient to finance and support that growth,” I asked.

Many printers intentionally ignore a fundamental business principle that states that when it comes to pricing, every effort must be taken to recover all direct and indirect expenses involved in the production or brokering of a job. Just because a job is brokered doesn’t mean it is exempt from contributing to the general overhead expenses of the business.

The facts are it is highly unlikely you would fielding calls regarding those brokered products if it was not for the physical structure being supported by those fixed overhead expenses. If you fail to account for these types of expenses and fail to assign a portion of these costs to every brokered job you are making a serious mistake.

Markup Rates & Practices

If you bring up the topic of markups in a gathering of printers you will likely hear two common responses:

  • ” We generally double our costs, unless it is a big job and then we might lower that a bit.”
  • “We markup all outside purchases by 50%, unless they are really big jobs and might drop that down to 40% or so.”

The problem with the practice of “doubling the costs” is that it is rarely applied as a “flat” across-the-board markup. Far more common, is the practice of lowering markup rates as the costs increase. While this practice holds up well for brokered products and services costing $100 or less, many printers feel compelled to dramatically lower the markup percentages they use when dealing with brokered jobs costing them $500, $1,000 and more.

So while a 100% markup (doubling the costs) might be considered adequate for jobs costing $100 or less,  many printers seem to be terribly reluctant to use similar markups as their internal cost of the jobs starts to approach $250, $1,000 and $2,500. The irony of this type of attitude is that the financial risk increases as the cost of the job increases. If a job that costs $50 and is sold for $100 has to be “eaten” by the average printer, he or she can afford the costs of the rerun. However, what about the brokered job costing $2,500 that must be rerun at the printer’s expense? Was it marked up sufficiently to cover the risks that might be involved if the job has to be rerun at the printer’s expense? Generally, the answer is “No.”

Gross Profits* Too Low

What about marking everything up by 50% or so? Does that work? Not if you want to survive in this industry and remain profitable.  Marking something up by only 50% produces a gross profit of 33%, far too low a gross profit to sustain, let alone grow a business. Even doubling the price (a markup of 100%) produces a gross profit of 50%, and that is still too low.

*Gross Profit is defined as selling price less cost of goods. Labor costs are not included in cost of goods.

A Markup of 100%

Selling Price $ 200
Cost $ 100
Gross Profit $ 100 (50%)

A Markup of 50%

Selling Price $ 150
Cost $ 100
Gross Profit $ 50 (33%)

It is important to note that in the printing industry, as a general rule, the average gross profit ranges between 68-70% on all jobs. However, if it is a brokered job and you’ve marked it up 100% you are producing a gross profits substantially lower than if that job or a similar job had been produced internally.  Ironically, the risks involved in brokered jobs is significantly higher than those jobs produced internally. When you broker a job, you lose control of the production process. When a job is produced internally, you can spot, correct and fix mistakes far quicker than when a job is brokered.

For the record, firms that tend to broker 25% or more of their sales to outside vendors typically report significantly lower gross profits and lower net owner’s compensation. Although brokering can be profitable, it is rarely as profitable as work produced internally. The bottom line, the more a firm brokers, the less profits it tends to produce.  (Data extracted from page 33, of the 2017-18 Financial Benchmarking Study.)

All too often it seems that printers are more concerned with pleasing customers and making them happy than they are producing a profit. I suspect, that there are some printers out there who would gladly markup something up as little as 10-15% just to keep a customer happy. Worse, are the printers who totally ignore their labor and overhead costs and thus fail to take these costs into account when calculating the types and percentages of of costs that need to be recovered by every single job processed through the printing firm – produced internally or by a broker.

Don’t ever apologize – A printer who knows a brokered job will cost him $1,000 and marks it by 70% and consequently sells it for $1,700 has nothing whatsoever to apologize for or feel guilty about! Remember too, that graphic design charges and shipping charges also need to be added to that $1,700 job.

Many of the pricing studies produced by NPRC report on markup practices. Some studies only cover paper markup practices, while other studies have addressed markup practices involving outside products. The 2018-19 Signs & Wide Format Pricing Study is a good example of the latter.

Markup Rates for Outsourced Products & Services – 2018-19 Signs & Wide Format Pricing Study

As I told Bob in my email to him, “Most printers tend to use a sliding scale based upon their costs, whether they are dealing with cost of paper or the cost of the brokered product or services. Whether the markups they are using are sufficient remains to be seen.”

I offered Bob some examples of current markups in use in our industry. The data I sent him appears below:

MARKUP PRACTICES

Brokered Cost $50 $100 $250 $1,000
Mark-up % 120% 99% 86% 71%
Aver. Selling Price $110 $199 $465 $1,715

The data above is taken from page 54 of the 2018-2019 Signs & Wide Format Pricing Study. I know many printers that would  use far more aggressive markup rates.

There is one very successful printer in the Northeast who would scoff at using any markup less than 100%, regardless of the projected selling price. In fact, this printer tends to prefer using markups of 125-150%. She knows full well that some of her more timid competitors just down the street would never consider using markup rates anywhere near that large.  Does she worry about losing a job because a competitor is offering the same job for far less? Not a chance.

For those printers (and I know some of you will react this way) who will respond by claiming there is no way they could get away with markups like we are talking about I will tell you that you are wrong. Yes indeed, there are printers within a couple of blocks of your operation that are indeed marking up 100% or more and getting the jobs – the same jobs that you will timidly markup 30-40%!

Many readers claim to know their markets when nothing could be further from the truth. They know nothing more about their markets that what an occasional customer has remarked about their pricing. Oh, you conducted a pricing survey a couple of years ago and you know what your market will accept in terms of markups. Hogwash!

I’ll bet the survey wasn’t worth the paper it was written on, and I wouldn’t put a lot of faith in the individual conducting that survey either! Who was it? Your lead CSR, your delivery guy or possibly your cousin? Wolw, before you rationalize and give us all the reasons why you can’t do this and why you can’t do that, read the article titled “Shopping Your Competitors” in the NPRC Blog.

Less successful printers, those who make marginal profits and struggle to make payroll including their own, tend to shy away from markups of 100% and more, believing instead that markups of 50% are good enough, which of course they never are!

 

Printers Praise New NPRC Digital Pricing Study

Printers from across the U.S. are praising NPRC’s newest study, The 2019-2020 “Sweet Sixteen” Digital Pricing Study. This just-released report, covers 16 of the printing industry’s most popular digital products and services, is only available as a hard copy.

The new report is packed with the very latest pricing info and includes literally hundreds of average and median prices for more than a dozen of the most popular digital products and services in the printing industry. Click here to view and download the study’s Table of Contents.

Virtually every page in this just-released study reveals pricing info you can use immediately to cross-check and compare your own pricing against others in the industry.

Most products and services covered in this study include average and median pricing, a 10% high and low extraction, plus pricing based on a per unit basis such as pricing per sheet, per click, per envelope and even pricing per carbonless set. This feature makes it easier than ever for readers to obtain pricing for unusual quantities or quantities simply not covered in the report.

Orders are processed and shipped same-day as received via USPS Priority Mail.

Retail Price: $245. Click here to order:

Go below and read what fellow printers
have to say about this new pricing study…

“John, thank you for all your work in providing the printing industry with the “Sweet Sixteen” Digital Color Pricing Study, and the many other studies you have published for us for so many years. It always helps to know where we are at and not to leave money on the table. Keep up the good work.”

Arie Teomi, Lasting Impression Direct, Cleveland, OH

 

“Having just updated our digital press so we are able to competitively print 4-color envelopes, this price study is invaluable when setting competitive pricing for 4-color envelopes.”

Marian Fenlon, DPI Printing, Oshkosh, WI

 

“I always look forward to receiving your reports, particularly the pricing studies. They’re my best source of data to be sure our prices are within a reasonable range, and the best confidence-builder I’ve found against buyers who say our prices are too high. Knowing our prices are reasonable means I look for better prospects, rather than caving on prices.”

Steve Blatman, Ink Spot Printing & Copy Center, Inc., Frazer, PA

 

“Your studies have been a big help in keeping me in business for more than 28 years. I have used the industry pricing studies over the years to make sure our prices are competitive and adjust where necessary. This gives our customer service representatives confidence that our prices are fair and reasonable. I cannot understand why many more print shop owners do not take advantage of these valuable studies, especially when they can get them for free with just a little effort.”

Mike Geygan, Minuteman Press, Lebanon, OH

“I want to thank you for including my firm in your annual pricing study. Even though my company is extremely small, the study gives us information necessary to stay in business. Unlike the bigger companies, which can try random pricing strategies, we need to only use fact-based strategies which the pricing study provides each year.”

Ralph Dunavant, American Printing & Promotions, Manassas, VA

 

“Hi John, I have been participating in your surveys for more than 20 years. As I look back over those years, I realize that I have referred to your surveys more than any other source of pricing information in the printing industry. It is concise, accurate and timely. I would have to say that this info has helped me be sharper in our pricing, win more bids and make more money. Thanks so much for your efforts!”

Jon Robson, Auburn Document Centre, Auburn, NY

 

“We have been participating in the NPRC’s surveys for some years now. The information they have provided us with has been the topic of many pricing plan discussions in our weekly meetings. they help us stay competitive. The “Sweet Sixteen” survey helped us tune our digital pricing structure as we move forward to grow the digital segment of our business. Invaluable information.”

David Adams, Quality Printing Services Inc., Petaluma, CA

 

 

 

 

 

David Adams

90 Sycamore Lane

Petaluma, CA 94952

707-775-4300

NPRC Releases New Digital Pricing Study

NPRC has just released its latest research report, the 2019-2020 “Sweet Sixteen” Digital Color Pricing Study! The new report, packed with the very latest pricing info, and including literally hundreds of average and median prices, is now available for immediate shipment. The new study covers more than a dozen of the industry’s most popular products and services in the digital printing arena.

The 90+ page study offers an up-to-the-minute look at what printers are charging for services such as flyers & catalog sheets, postcards, rack cards, carbonless forms, newsletters and digitally printed envelopes, just to name a few. Click here to view the entire table of contents.

Each page in this brand new study is packed with pricing info you can use to cross-check your own pricing against printers around the country.

Most products and services included in this study include average and median pricing, a 10% high and low extraction, plus pricing based on a per unit basis such as pricing per sheet, per click, per envelope and even pricing per carbonless set. This feature makes it easier than ever for readers to obtain pricing for unusual quantities or quantities simply not covered in the report.

Due to on-going concerns regarding copyright violations, this study and possibly future NPRC studies, will no longer be made available as a PDF. Instead, we will only provide “hard” copies. Most orders are processed same day as received and are shipped out via USPS Priority Mail.

Available for sale beginning July 18, 2019.
Retail Price Only $245. Hard copies only!
Click below to visit the NPRC Bookstore for more details.

NPRC BOOKSTORE

 

Who Pays the Tariffs?

The Myths About Tariffs?

Recently, we got curious about the real story behind tariffs and who actually pays them and who really benefits. President Trump is a fan of tariffs and implies that we (the U.S.) are going to rake in billions of $$$ with the new 25% tariffs being imposed on China as of midnight, May 9, 2019.

As we conducted some very brief research on the web, I uncovered some very interesting stuff that really opened my eyes.

Do Countries Pay Tariffs?

First, governments or countries don’t pay tariffs on the products they export or import. Second, it is the importers of products that pay the tariffs and ultimately those tariffs, or the bulk of them, are paid by the consumer! 

The Idiot we have for President doesn’t seem to understand… Speaking at a rally in Florida later Wednesday (May 8, 2019), Trump said the new tariffs were because China “broke the deal.” “You see the tariffs we’re doing?” the President asked his supporters. “Because they broke the deal!” 
 
“The vice premier is flying in tomorrow, good man, but they broke the deal. They can’t do that,” he added. “If we don’t make the deal, nothing wrong with taking in over 100 billion a year. We never did that before.”  << The idiot president talks like a 3rd grader, and seems to be implying that is good news… what he fails to mention is it will be Americans who will be paying those “100 billion a year.”
 
May 13, 2019 – “President Donald Trump’s chief economic adviser Larry Kudlow said that American consumers would bear a burden from the escalating trade war with China, contradicting the President.” Of course President Trump will quickly call this “Fake News” as he identifies any news that he doesn’t like. 
 

An Example of Applying a Tariff

Let’s keep it simple, and assume Costco decides to purchase $100,000 worth of TVs from Sharp TV in China.

Let’s continue to keep it simply and assume new tariff on Chinese TVs is 25%. The product is shipped by Sharp and arrives in LA. Customs and Border Patrol inspects shipment and scans code for the TVs. (Note that every single product large or small imported into U.S. has a special import code). CBP calculates the amount owed ($25,000) and sends an invoice to the specific importer, or in this case Costco. Costco has 10 days to pay invoice.

Now Costco has a number of options: (1) They could have talked to Sharp prior to placing their order and arranged for some type of discount or rebate from Sharp to help them offset some of the new tariff; (2) They could eat the entire cost of the new tariff and accept lower profits, but of course that would impact their investors; (3) They could pass on the new tariff costs, or at least some of those costs, by increasing the price to their customers; (4) they can cut-back on purchases from China/Sharp and go instead to another TV manufacturer in another country not subject to the new tariffs.

They could also use a combination of the above.

Citizens Pay Tariffs

However, in almost all cases, governments  simply don’t pay tariffs, the citizens of the country importing the goods pay the tariffs. President Trump brags about the billions of additional $$$ that will be raised and deposited into the U.S. coffers, but he fails to point out that it is U.S. citizens who will be paying those tariffs, not China nor its citizens as he often seems to imply. 

Yes, it surely gets a bit more complicated, but when Trump brags about collecting billions more from tariffs,  he is really unintentionally bragging about sticking it to millions of American citizens who will end up paying these new tariffs. Donald Trump doesn’t really understand tariffs, but then again he doesn’t understand many things! 

What’s Your Net Worth?

Net worth is considered by many financial experts as the ultimate number that you need to track regarding personal finances. Net worth is the total $$$ remaining if you sold/liquidated everything you own and paid off all of your debts. Tracking your net worth over time will put you on the road to financial independence or retirement… Or, maybe not!

How do you calculate your net worth?

To calculate net worth, add up the value of every single one of your assets. That would include the value of your home(s), your cars, all checking and savings accounts, brokerage accounts, retirement accounts, your business, and everything else that could be liquidated. When it comes to valuing your business, you should have a detailed, logical method for justifying that valuation, just as you would when justifying the value of your home – i.e. comparables, recent sales, appraisales.

Next, subtract the sum of all of your debts. This would include all real estate mortgages, credit card debts, notes payable (personal), loans, as well as all other personal obligations and liabilities.

The resulting total is your net worth. With that net worth in hand, examine the graph below and compare yourself against other American households as depicted on the accompanying graph. (Editorial note: Nothing lends itself more towards creating and updating your personal net worth on a periodic basis than an Excel Spreadsheet. Keep it on your desktop and revise as needed.)

Other notes regarding net worth…*

Note that the top 1% represents roughly 1,259,817 households in the U.S. 

What about the top .1% (one tenth of one percent) in terms of net worth? There are approximately 125,981 households in the U.S. that would fall or qualify for the top one-tenth of one percent (.1%)  in terms of net worth, and they would have a net worth of at least $43,090,281 or greater.

* Data extracted from an article by DQYDJ (Don’t Quit Your Day Job) at www.dqydj.com

 

“Pricing” – Where Does it Rank?

Earlier this week (April 8-10, 2019) we posted a graph and some summary comments regarding a survey conducted by RIT in 2003. We encouraged reader feedback and while we did receive two comments, we are looking for additonal feedback that we can post here.

Click artwork to download 2-p PDF

In the meantime, we have obtained permission from the original author to reprint the entire 2-page article. You need to read this article with an open-mind, rather than through some heavily tinted glasses that always seem to blame pricing for all your woes. Way too many printers often cite “pricing” as the primary cause for their lack of growth, poor profits, and the lack of customer loyalty, just to name a few.

If printers could only hear themselves talk sometimes. If they did they would realize that they use “pricing” as an excuse for their troubles. They blame printing brokers, low ball competitors down the street as well as the lack of loyalty from their own customers. If these printers did a little bit more probing, they would possibly discover that it really wasn’t pricing that caused their customers to leave, but things like consistent failure to meet deadlines, sometimes poor quality and less than friendly CSRs.

Anyway, enjoy the article and send us your feedback to: membership@printingresearch.org

Yes, we would love to do this survey all over again and see what has changed and what has remained the same, but getting our hands on a representative list of prospects to whom we could mail would represent a real challenge. Any ideas>

Benchmarking Study Table of Contents

Check out the Table of Contents of the just-released 2019-2020 Financial Benchmarking Study.  This study is packed with down-to-earth comparative P&L analyses comparing firms based upon annual sales, profitability, sales per employee as well as percent of brokering, offset and digital printing. The study even compares franchise vs. independent performance.

Click the link above or the artwork to view Table of Contents

 

Characteristics of Leaders & Laggards

Learning to Distinguish Between The
Leaders & Laggards in the Printing Industry

By John Stewart, Executive Director
National Printing Research Council (NPRC)

I’ve been actively involved in this industry since the early 1980’s working with association such as NAQP, NAPL, NPOA and NPRC. I’ve published or co-published virtually every statistical study produced in our industry, ranging from wage and benefits and pricing studies to studies dealing with compensation practices for outside sales reps to what I consider the most valuable of them all – the biennial financial benchmarking studies.

My expertise as an observer of our industry’s history also stems from the fact that I have conducted more than 400 on-site consulting visits both in the U.S., Canada, Australia, Ireland and even Brazil. Most of these consulting visits were conducted in the late 1990s and early 2000s.

Ironically and to a large extent, I can still recall the physical attributes of almost every shop I ever consulted with as well as the major recommendations I made following the visit. As the popular Farmers Insurance commercial suggests, “We know a thing or two because we’ve seen a thing or two.” I truly have seen it all, but the one more humorous visits I can recall was a consulting visit to a printing firm in Brazil where I encountered press operators using gasoline as a press wash while smoking cigarettes.

Characteristics of Winners vs. Losers

With the foregoing out of the way, and hopefully having established some credibility with you the reader, I would like to share with you what I consider to be some specific characteristics that distinguish highly efficient and profitable firms from firms found at the other end of the spectrum.

Success or failure in this industry can rarely be blamed on cut-throat competitors, brokers, the local economy or even on employees.

I will note that, more often then not, the primary cause of failure in this industry falls entirely on the shoulders of the owners. Success or failure in this industry can rarely be blamed on cut-throat competitors, brokers, the local economy or even on employees. The blame belongs precisely where it should – The owner.

Monitoring Productivity via SPE

As many of the studies that I have published, it is shocking to see a histogram depicting sales per employee in our industry, and observing the fact that sales per employee (SPE) can range dramatically from a low of $80,000 to more than $200,000 at the high end.

Tell me your annual sales and the total number of employees (including yourself, partners and spouses) and I can closely predict where you will fall in terms of real profitability. SPE in turn will also provide a good indication of the ultimate value of your firm if  it was put up for sale tomorrow.

According to the just-released 2019-2020 Financial Benchmarking Study, (visit the NPRC Bookstore for further information about this study)the average SPE of our 177 qualified participants was $139,595. The median SPE was almost identical. Firm’s falling into the bottom quartile reported SPEs in the $119,000 range while those in the top quartile reported an average SPE of approximately $144,000.

It never ceases to amaze me how poorly some printers perform these days!

Owners of troubled printing firms constantly make excuses for poor performance. The solution for boosting and improving SPE is two-fold – Terminating excess or unproductive employees and boosting the firm’s overall productivity and efficiency.

Unfortunately, all I hear most of the time from owners of troubled firms is excuses, excuses and excuses. Owners are simply afraid to make changes and constantly rationalize as to why certain suggestions can’t be implemented at their firms. Offer specific suggestions for major improvements in their SPE and owners balk and claim, “It simply can’t be done at my company.” 

The truly sad thing is most of these owners will never, never change, and will ultimately end up closing their doors because they will never find a qualified buyer for their firm willing to pay them anything close to what they think their business is worth. In the best case scenario, many, many printers will end up closing their doors, selling off their equipment, and selling the customer list for mere pennies on the dollar.

Poor Financial Reporting

Profit leaders in our industry are far more likely to receive monthly financial statements, including a P&L and a balance sheet. Even more important than the statements themselves is how they are formatted.

No profit & loss statement should come across your desk without a column of “expense ratios” appearing directly to the right. If total cost of goods (COG) is $440,000 I want to immediately know what percent of gross sales does that figure represent? Is it in the 31-32% range (that’s bad) or is it 29% or lower (that’s good).

Comparing the performance of leaders against laggards in our industry.

Far more critical is taking a look at total payroll expenses (excluding what is paid to a single working owner). The most financially troubled firms in this industry report payroll ratios of 34-38% and higher, while the best performers in our industry report keeping payroll ratios in the 25-29% range.

Check-out the percent of owner’s compensation being withdrawn in the industry.

If your bookkeeper or CPA is providing you with financial statements that lack comparative ratios adjoining your column of expenses you need to fire them immediately. There is no excuse for failing to provide “ratios” next to “expenses.” It shouldn’t be a question of “well you never asked.” That was and is their responsibility to provide you with the proper tools, whether or not you asked for it. And, these “ratios” are indeed the most important tools you can use to help you analyze your business.

Of course, the worst sin of all is to see owners of troubled firms receiving properly formatted financial statements month after month and yet seeing them take no action. What the hell are they waiting for. As you can surmise, I have little sympathy for owners who sit on their ass every day checking their Facebook accounts and reading their Twitter feeds.

Owner’s used to ask me what guarantees I would offer and I used to respond. I will refund the entire consulting fee if I can’t turn your company around, but you have to give me total authority to implement all of my recommendations. And that authority would include terminating your son or daugher-in-law and raising prices across the board. Guess what, too many timid owners out, almost all of whom where afraid to give me that authority.    

It’s All About Pricing – NOT!

Profit laggards (those making less than 6% owner’s compensation) are far more likely to be willing to match or lower prices than those offered by profitable firms – firms reporting owner’s compensation of 25% or more.

 Sometimes a printer will tell me that, “I don’t try to be the lowest priced printer. Instead, I try to be sort of in the middle.” And yet, when challenged, many of these printers simply know very little about local or regional pricing. Troubled printers are far more likely to be swayed by customers telling them that their prices are a bit high, too often responding to the customer by saying, “Let me look over the quote we provided and see if we can’t shave it a bit.”

In my experience talking with some of the best and most profitable firms in this industry, they tend to have an attitude that their first price is also their best price, and they make no apologies or excuses for the fact that their quote is may indeed be higher than other quotes obtained by a customer. They know the value of their product and will not quibble.

Imagine visiting a high-end restaurant and when the waiter comes to your table, you point out the price of the eight ounce filet mignon on the menu and asking him if he could do a bit better on the price. Even worse, imagine telling him that all three of your guests are going to be ordering filets and surely they can lower the price a bit!

For additional information on pricing in our industry, we invite you to visit the NPRC blog where you can find two articles of interest:

Major Pricing Variations A Myth (Page 1 of Blog)
Shopping Your Competitors (Page 2 of Blog)

For those who always seem to get hung up on price and believe it to be the most important criteria when it comes to selecting one printer over the next, I suggest that the next time you are at the grocery store and explain, if you can, how Philadelphia Cream Cheese is consistently priced 30-40% higher than the store brand sitting directly next to it? Better packaging, marketing, shelf placement, great recipes? Whatever your excuse or answer, it can be applied to printing products as well.

 

A survey print buyers conducted years ago found “Price” ranked #5 in terms of importance.

P.S. A study of print buyers conducted a number of years ago by RIT sought to determine the importance of various factors in making a decision to use or select one printer over another. They prepared a scale that ranked eight various factors in the selection process. Guess where “price” fell? Pricing was ranked #5. What factors were more important? Dependability was #1, and was followed by Print Quality, Turnaround Time, and Ease of Doing Business – all ranking above “Price.”  

Failing to Practice the 80-20 Rule

 Learning to spend time wisely (The 80-20 Rule) is another characteristic that seems to distinguish the best run printing firms from the also-rans. Owner’s of top tier firms seem far more disciplined that owners of troubled firms.

One perfect example of the 80-20 rule suggests (at least roughly) that 80% of your employee problems are caused by 20% of your employees. A very small number of employees cause most of the problems… they call in sick, make most of the mistakes, and seem to be the root cause of much of the turmoil in a company. In you have 10 employees there’s a very good chance that two of them cause most of the problems in your company. Terminating these employees can make a major improvement in most companies.

Another example? Approximately 20% of your overhead items account for 80% of your expenses. If you’re motivated to cut expenses and improve profitability, don’t spend time worrying about the reducing the cost of office supplies, trash removal, travel and marketing. Concentrate instead on some of the “biggies” like auto operating expenses, building rent (Yes, that too can be renegotiated), lease expenses, repairs & maintenance, and even utilities. Successful companies find a way to reduce these types of expenses, while troubled firms once again just rationalize and make excuses.

Too Much Time On Social Media (A personal a rant <g>)

There is no doubt in my mind, that there is at least an inverse relationship between profitability and the time spent by many owners on social media. While I cannot point to hard statistics to back up this claim, Just observing printers from close up and afar I see so much time being wasted in this industry on social media such as Facebook, Twitter, WhatsApp and Instagram, just to name a few. I would also include various printing related listservs to this list as well.

I believe a significant percentage of our political and social discord in this country can be directly traced to what is published and shared on these sites. I think many owners and their families would be far better served by reducing participation in these various social network sites.

It is embarrassing these days to go out to a medium or high-end restaurant these days and to observe two adults and two children all with their heads down sending out text messages and reading the latest posts on Facebook. Not only is it rude and impolite, it is a terrible waste of intellectual talents.  Enough ranting!

I used to own a cell-phone jammer (Yeah, yeah, I know they are illegal – who cares) and I could destroy an evening for a family like that, but unfortunately it only worked G3 Networks. When they went to G5 the jammers got more expensive and harder to purchase. When it worked, it was so much fun watching folks suddenly losing reception and then holding up their cell phone higher in the air somehow thinking this would boost reception. 

Enough for now. Have a great week.