NPRC Reveals Findings of Latest Survey

Dear Fellow Printer,

First, we want to thank you if you participated in our recent survey about “Industry Surveys.” If you haven’t participated there’s still a couple of days left to participate. Go below for a link to our latest survey.

Second, we’d like to tell you what fellow printers told us and how we plan to react to the many suggestions we’ve received.

Independents vs. Franchises – 80% of our respondents were independents, while most of the rest were franchisees. About 48% of our respondents were members of one or printing associations. The rest claimed no association affiliation.

Participation Rates – Approximately 90% of our respondents have previously participated/completed one or more industry surveys, with 65% have completed or purchased three or more surveys/studies. It is obvious that our list is heavily skewed towards printers who tend to be far more active and involved in the industry than the industry as a whole. We may in fact be preaching to the “choir” and we are not sure how to correct that.

Popular Studies – When it comes to surveys printers would most like to see published, the clear winner was a “Color Digital Printing Pricing Survey.” Following close behind in terms of popularity were “Financial Benchmarking Studies” and a “Bindery Services Pricing Study” Based upon that feedback, we will attempt to published the three studies noted above in the next 6-18 months.

Serious Misgivings – We do have serious misgivings about pursuing or publishing a new Financial Benchmarking Study. In my mind, and that of many top-notch printers and consultants in the industry, there is no study of greater potential value to the average printer than this specific study. And yet, recent participation levels are the lowest they have ever been and the sales are equally low. Without sufficient sales, we simply cannot continue to publish this study. Maybe we’ll change our mind but at this point this study may never be published again.

Reasons for Not Participating – When we asked printers 
who have not completed a survey in the past three years the reason why they had not done so, almost 73% of respondents told us,
“I never could find the time to complete a survey.” Approximately 37% told us, “I never

Survey Deadline is Friday – Please help us serve you better. The deadline to complete this 3-minute survey is this Friday. We’ve heard from about 104 printers but we’d still like to hear from you as well.thought the resulting studies related to my size shop.” Based upon that feedback we are going to make a concerted effort shorten surveys, and emphasize in our marketing efforts that these surveys are based upon an almost equal distribution of very small firms with sales in the $250,000 to $500,000 range as well as fairly large firms reporting sales in the $1.2 to $1.5 range.

Increasing Participation Levels? Survey participants suggested “shortening surveys” (55%) and “offering special incentives” (47%) as the two major methods for increasing participation levels. Since we already offer a FREE study to every participant we’re not sure what else we could offer. A special discount coupon on NPRC publications is a possibility, and we are of course open to other suggestions. Almost 26% of respondents suggested sending out more reminders – that was surprising and reassuring, especially since it is contrary to what we often hear from folks who tell us we send out too many reminders!

Pricing of Studies – Approximately 72% of all participants suggested a price range of $85-$105, with another 21% suggesting a range of $110 – $135. Knowing how expensive and time-consuming these studies are to produce, and recognizing that we receive virtually no industry sponsorship, we are inclined to stick with the $110 – $135 range.

Editorial Board Volunteers? – Approximately 30% of survey participants indicated they would be willing to serve on an editorial board and provide assistance in developing one or more surveys. We appreciate those who volunteered and we will be in touch with them shortly.

Click Here to Take Survey

Free Excerpt From Financial Benchmark Study

Printing Association Releases
2017-18 Financial Benchmarking Study

The 2017-18 Financial Benchmarking Study, sponsored by Accuzip, is by far the most valuable, information-packed study publichsed in the printing industry, especially for firms with sales ranging between $400,000 and $3 million. It is filled with useful graphs, charts and real-world profit & loss statements (and balance sheets) depicting, among other things, the key ratios that distinguish the “profit leaders” from the “profit laggards” in this industry.


Click on the artwork above or click here to read the entire PDF excerpt

Because we believe so strongly in the value of this document, we have decided make available a PDF containing an excerpt from the Executive Summary for this key industry report – just to give you an idea of what it contains. Authored by industry financial expert Larry Hunt, Hunt tracks and explains the ups and downs and the successes and failures that have occurred in this industry for more than 30+ years. 

You can of course purchase the entire report by visiting the NPRC Bookstore.

10 Tips for Increasing Company Value

Analysis Reveals Huge Disparities in Company Values
Among Firms Reporting Almost Identical Sales!
By John Stewart
Printing Firm Valuation Chart

35 Valuations – Even the small portion of valuations excerpted above illustrate the huge variations in valuations for printing firms in this country. For explanations of the “headers” please visit the full chart at the end of this post. As to why the huge variances? Click here or the chart above to download a PDF of the above chart. Read further…

Rules of Thumb

In the old days, one of the most popular rules of thumb for determining what a printing business was worth or company valuations was based upon nothing more than a multiple of sales –one times annual sales was probably the most common.Sometimes that multiplier even exceeded one! The amazing thing about that rule was that it never took into account profitability or what a working owner was able to take out of the business.

Other valuation rules that are still floating around today may be a bit more logical in that they take profitability into account. Some rules rely on a multiple of excess earnings, and some modify that by adding in the value of net assets. Still other rules use a average of owner’s compensation over a period of time multiplied by a factor between 2-6.

Unfortunately, many owners don’t understand the term “excess earnings,” or give much thought to company valuations until they near retirement and suddenly realize that the business isn’t worth half what they thought it would be! Very few owners fully understand terms such as “owner’s compensation,” or “earnings multipliers” and thus have great difficulty determining the value of their own firm.

“Print Shop For Sale” Published

In 2007 Larry Hunt (a highly respected printing consultant) and I published a book titled, “Print Shop for Sale.” PSFS, a 280+ page publication, has been reprinted numerous times and at last count had sold more than 3,800 copies. At the time “Print Shop for Sale” was published it was the only book in the printing industry dedicated strictly to valuing printing firms. It continues to hold that distinction today. As noted on the cover of the book, it is intended to provide readers with, “A step-by-step guide for establishing a fair market value for your printing firm, or one you are looking to buy.”

Writing the book with Larry was a true labor of love. Neither of us imagined that it would eventually lead to numerous inquiries from printers around the country asking if we would value their firm. Naively, we assumed our $89 book would do the trick. We figured the book did a pretty good job at explaining the “Modified Excess Earnings” approach and how to use that to arrive at the value of a printing firm.

Wow, were we wrong! We began getting calls from both independents and franchises alike asking us if we would prepare a valuation for their firm. Larry decided he would prefer to retire early and play golf. I don’t play golf, but I do own an airplane which is very expensive to operate and maintain, thus I continue offering valuation services when asked. <g> (Interestingly enough, after we evacuated the plane during the last hurricane we returned to Melbourne only to discover that we had developed a crack in the engine block and we are now looking at a $37,500 cost for a re-built engine!)

When an independent or franchise owner would call about valuations one of the first things I would recommend is that they should buy the book and gather together the various forms suggested in the book and then provide answers to our valuation questionnaire. If they still had questions then they should call me.

Sometimes, you just have to do the “hard” work. There are no “rules of thumb” or shortcuts to valuing most firms.

Interestingly enough, many of the printers told me they had already bought to book but still wanted me to do the work. They wanted more than “Print Shop for Sale” had to offer.

Some owners, although telling me they had purchased the book, admitted they were not really into the “numbers” and wanted me to do the work. Some wanted a detailed valuation of their firm and were willing to pay the price. Other owners had found a business they were interested in buying but wanted my help in coming up with a “fair market” offering price.

Avoiding Valuation Pitfalls

Since that time, I have conducted more than 450 valuations and I continue to provide valuation services today. However, I am NOT trying to sell valuation services. What I would like to share with you are some general comments about valuations and why some owners are able to receive “top dollar” for their businesses, while other owners end up, even after 10-15 years of operation, with businesses with little if any value. The result, they work it to the very end and then close the doors.

For those of you who used to read my columns in Quick Printing magazine, or have read some of my recent articles posted on the National Printing Research Council website ( you know that I tend to rant and rave sometimes just to make a point.

That’s what I am going to do with the column – Offering up some “rants” and “raves” about company valuations and what causes some to be valued extremely high, while others end up being shockingly low.

First, let me observe that in today’s world, it does strike me that many of the owners that I encounter are far more realistic than they were in the past as to what they think their business might be worth. Buyers also strike me as being better informed and more realistic as to what they are looking for and what they are willing to pay. You’re probably not going get away with the old, “Hey, this business is a goldmine and someone with some real marketing skills and who is a good sales person can easily take this business to the next level.”

Unfortunately, there is also a substantial number of owners who have worked more than half their life to build a business, only to discover that it is worth far less than they thought it was. They had put most of their eggs into one basket (the business), only to discover too late that they had been making poor decisions almost from day one – decisions that would really hurt them in the long run.

Low Valuations and Lost Friends

The sad thing is that I have actually lost a couple of friends along the way as the result of valuations that came in much lower than what they had expected, and they blamed me for the low valuations. They had been counting on a valuation of $$$ for the last few years, and then I prepare a valuation based upon the numbers they provided and I end up telling them their business was worth less than 50% of what they thought.

Another owner bragged about how much money he was able to take out under the table and thus avoid taxes. When I valued his firm, and told him we couldn’t use that “stolen cash” to value his business he was shocked!

Still another owner bragged to me about his excellent package of equipment and that he could produce 95% of all his work in house. What we discovered was that he was asset-rich and excess earnings poor. He had accumulated far more in equipment than he really needed to produce his annual sales.

Sure, the equipment was really neat, and worked extremely well, but a lot of it was only used 2-3 times a month and for the remainder of the time it sat in the corner collecting dust. Excessive amounts of hard assets, as a percent of sales, combined with low excess earnings, typically produce low company valuations. Most savvy buyers are not interested in buying all of your fancy assets, but rather what those assets can produce in terms of excess earnings!

The Worst Case of All!

Of course, the worst case of all is to put a fairly-valued firm up for sale hoping to get lots of offers only to hear dead silence. Even the best, most logical, common-sense valuation doesn’t guarantee and that that you are going to find qualified buyers in your market willing and able to pay your asking price. Bottom line, that unlike in the residential real estate market, there really isn’t much of a market in which to advertise, let alone sell printing businesses.

Special Editorial Note: Actually this entire article is an “editorial note” <g>, but I want to point out the values assigned to various businesses noted in this article are not meant to imply that these businesses sold for those prices, or in fact sold at all! Many businesses just never sell. Some are taken off the market by the business owner or broker and some never get even a nibble because of excessive value placed on the business by the owner, a business broker and yes, even a consultant. 

“Print Shop for Sale” quotes a well know author on valuations as saying:

“Despite the commonly held belief that markets are efficient, and efficient market does not exist for privately held businesses… unlike the NYSE or the NASDAQ, there is no place to buy and sell privately held businesses aside from the business brokerage community, which is small in scope. As a result, it is very difficult to determine what a privately held business is worth in the marketplace. This lack of an efficient market presents a critical need for valuation services.

This study is “worth its weight in gold,” say many of the profit leaders in the industry. Unfortunately, this may indeed be the last edition of this study to be published in the industry due to a lack of support by printers.

Let’s face it, this industry, taken as whole, is also a very mature industry. Sure, we’ve evolved in the products we produce and how we produce them, and we’ve added more services and products but it is difficult to argue against it being a mature industry. To claim that the printing industry offers up boundless opportunities for sales, growth and profits has to be taken with a grain of salt.

When it comes to valuations there is one thing you don’t want to do and that is to be caught with “your pants down” when you are are approached by a competitor asking, “Have you guys ever thought of selling your business, and if so what do you think it is worth?” That’s not the time to be scrambling around to come up with some value.

To be blunt, valuing your own firm ought to be done every couple of years, just like to update your statements of personal net worth – Of course you do that, don’t you? If the value of your firm has continued to grow over the years then congratulations! If it hasn’t, then do something about it. See my list of “Key Take-aways” near the end of this article.

35 Randomly Selected Printing Firms

Recently I was looking for a specific chart I prepared a few years listing and comparing company valuations but for the life of me I could not find it. So I went searching out some of hundreds of valuations I have conducted in the last 7-10 years and started opening up one folder after another, retrieving basic information from each valuation.

I extracted data for 35 firms. I could have easily extracted 50 or even 100! However, I know from experience that once I passed the 25 count or so, that the average and median data I was searching for would change little if any.

I assigned a fictional name to each company folder I opened, and then retrieved the following items:
       • Annual Sales
       • Calculated Excess Earnings
       • Value of Net Assets* (sold)
       • Excess Earnings Multiplier used in the valuation
       • Estimated Valuation of Firm

*NET ASSETS, as defined in the accompanying charts, is the true, market value of the essential assets (equipment, furniture and fixtures) transferred and sold to the buyer. This value is not necessarily “book” value, but rather the value that a savvy buyer would pay if he or she had to go out on the street and replace the equipment used to produce the sales in question.  As a general observation, many owners want to assign a much higher value on their equipment package than would be warranted in the real-world marketplace!

For purposes of comparison and sorting, I also calculated the percent of net assets to annual sales as well as the value of the firm expressed as a percent of annual sales. Below is one of four charts I prepared. It illustrates, without sorting, the first 17 firms for which I recorded data. Note that we eliminated two “outlier” firms (#4 and #17) – One was worth 110% its annual sales (certainly possible but still a clear “outlier”) and one firm that actually had a negative value – that scenario is also quite possible, but it too was an outlier that would have otherwise distorted our average.

SPECIAL CAUTION: Be advised that the above company names are totally fictional and have no relationship whatsoever to firms that might coincidentally have the same name. You don’t know how hard it is to actually come up with a fictional name without a real firm name coming to mind.

Of the 35 companies for which we retrieved valuation data, the smallest firm we uncovered (Instant Copy) reported annual sales of $230,256 and was eventually valued at $114,905, or 49.9% of its annual sales.

The largest firm in our selection of 35 firms (Signature Offset) reported $4,199,105 in sales, and it was ultimately valued at $931,116, or 22.4% of its annual sales.

All Firms Ranked – Although the above chart reflects the remaining 18 firms we analyzed, we have included at the end of this article a single table ranking the above firm in terms of calculated value to annual sales.

As you examine the two tables above, you can’t help but notice the range of valuations based upon annual sales. Some firms are valued extremely low at 3-29% of annual sales, while other firms, those near the top, are valued at 52-75% (and some even higher) of annual sales.

Each of the valuations were subjected to the same valuation tests and formulas. You would like to think that the highest valued firms were those with the highest ratio of “Excess Earnings” to “value” but that is not always the case. The same expectation might be said for “Net Assets to Value” but that too cannot be said. What we can say is there are so many variables when it comes to preparing a valuation that it pretty much precludes the ability to offer up a neat “rule of thumb” that you could quickly apply to just two or three ratios.

Below is the entire list of 35 firms sorted by their value as a percent of annual sales:

Click image to download PDF of this chart

Partial Definitions of headers:
   Annual Sales – Self explantory
   Excess Earnings – Total owner’s compensation less “fair market salary” for working owner. Explained in detail in Print Shop for Sale.
   Net Assets – Hard assets (“real world” street market value of equipment, furniture & leasehold improvements) transferred free & clear at time of sales. Does    not include cash, AR, etc. as those normally are retained by seller.)
   % Of Assets to Total Sales – A comparative ratio of Net Assets to Sales.
   Earnings Multiplier – Multiplier and score arrived when sellers complete valuation questionnaire as explained in Print Shop for Sale. Questionnaire is also available for inspection at our Valuation Services Page on our companion site.
   Estimated Valuation – This is the value (we sometimes determine a range rather than a specific figure) that we arrived at when applying and using the Modified Excess Earnings Approach.
   Value as a Percent of Sales – We divided estimated value by annual sales to arrive at this ratio.

Key Take-Aways for Increasing Value

While I cannot offer up hard “rules of thumb,” I can still rant a bit and offer up suggestions for improving the overall profitability of your firm and thus its value. Some are common sense, others are not as obvious:

1. Monthly Financial Statements – Generally speaking, the most troubled firms I have encountered over the years, including many of those with a low valuation as a percent of sales, are those that either don’t receive monthly financial statements, or if they do they don’t read them! Some owners just don’t seem to care too much about the “numbers” and it shows when it comes time to value their firm. It’s probably preaching the the choir, but my guess is a vast majority of the most troubled firms in this industry have never, never examined an Industry Financial Benchmarking Study  and that is a tragedy. (This link directs you to our bookstore where this key study can be purchased)  Hell, Larry Hunt’s Executive Summary is a treasure trove of suggestions for becoming a profit leader! Do I feel sorry for these folks? Not a bit. That’s a rant!

2. Properly Formatted Financial Statements – Of Course, you can get financial statements every month, but if they are not formatted properly you’re not going to be able to find the key info that you need to manage the business. At the very least, your financial statements need to breakout expenses into three basic categories – Total Payroll, Cost of Goods and Overhead Expenses. When it comes to payroll, you also need to be able to quickly distinguish payroll costs and benefits paid to a single owner as compared to what is paid for all other employees. This is critical info required for a valuation. P.S. If both husband and wife work the business, one of those salaries needs to be shifted to general payroll. By the way, it is up to you and not your CPA or bookkeeper to determine how your P&L should be formatted.

3. A Huge Mistake Made by Many – Far too many owners allow either their CPA or their internal bookkeeper to provide raw dollar figures without providing them with an adjacent column reflecting the the actual ratios or percent of annual sales that each cost item or category represents – These are critical ratios you need to commit to memory and if someone isn’t giving these ratios to you then fire them! These ratios, whether good or bad, can be used to compare to the ratios for profit leaders and laggards found in industry benchmarking studies.

4. Excess Earnings vs. Owner’s Compensation – “For a business to have any appreciable value to a potential buyer, it must produce a cash flow above and beyond what would be required to pay a fair market salary to the new owner or manager. It is this ‘excess cash flow’ or ‘excess earnings’ that is used to purchase the business from the former owner.” (Excerpt from Print Shop for Sale.) If you’re unfamiliar with this principle or don’t understand it you need to hit the books! If you think someone is going to buy your business and not take out a reasonable salary while he/she uses the profits of the business to pay you off you are sadly mistaken. That new buyer is entitled to pay himself/herself a fair market salary and still have enough money left over to pay you! Where is that money?

5. Truly Understanding Owner’s Compensation – Most owners don’t fully understand what is meant by the term “Owner’s Compensation.” “Owner’s Compensation” is defined as, “all the money that is left over in the business after covering all expenses of the business (cost of goods, payroll and overhead expenses) but before paying the primary working owner a salary or giving that owner any fringe benefits.” “Owner’s Compensation” DOES NOT include combined salaries or benefits paid to a spouse or partner. You should be able to calculate your owner’s compensation quickly and without trying to play games with the numbers.

6. Blood Sweat and Tears Don’t Count – Just because you and your spouse or partner have worked the business very hard for so many years plays little if any role in its value to others. In “Print Shop for Sale” we discuss the “Endowment Principle” – “The endowment principle suggests that an owner of an object tends to attribute a higher value to that object because he owns it. Consequently, the owner of a business may think that the business has a higher value than it actually does, merely because he or she started it, nurtured it, etc.” That principle is often the cause for the vast differences in valuations prepared by sellers as opposed to those prepared by potential buyers.

7. Whatever You Do, Clean-Up Your Balance Sheets – In 90% or more of sales involving small businesses, the seller typically keeps or retains all cash and AR and assumes responsibility for paying off all short and long-term accounts payable, including notes, loans, etc. (Operating Leases remain on the books as an expense) As for all those special liabilities or notes payable to owners or relatives forget about them! No buyer is going to pay-off those types of liabilities. If the company owes you money you better take care of it now because it won’t happen at the time of sale. The same is true for fictional entries like “amortization” or trade secrets or other ill-defined items listed as assets.

8. Increasing Value by Decreasing Costs – You may think you are running a tight ship. Chances are you’re not, certainly not when compared to the real “profit leaders” in this industry. For every $10,000 in annual expenses that can be trimmed means that the value of your business can increase by anywhere between $25,000 and $60,000!

9. Inability to Make Hard Choices – Sometimes, owners with the best of intentions fail to make decisions that would almost immediately enhance the value of their business. Terminating bad apples or at least apples that are starting to rot. Like it or not, almost every company with six or more employees has one of these employees. Failure to act on the obvious ultimately leads to lower excess earnings and lower valuations. It is also possible that you have a great team of long-term, very loyal employees, all of who are highly valued AND YET it is also quite possible that you may have one more employee than you really need. (for a good article on Sales Per Employee and how it is related to profitability, go here.) If you terminate just one $40,000 employee that could easily increase the value of your firm by $120,000 to $200,000! But you can’t do that at the very end and expect to benefit from that increased value!

10. Spending Too Much Time on Social Networks – While I rarely go out in the field these days, I can tell you that many owners I know spend an enormous amount of time on social networks. In many respects, I believe Facebook, Twitter, LinkedIn as well as various listservs can be tremendous time-wasters, preventing even the best-intentioned owners from really pursuing what needs to be done. What’s fun to do, is not the same as what needs to be done!

Thanks for Reading

Tired of my rants? I understand if you nod “yes.” If you spotted a couple of grammatical mistakes or missing words I am constantly reproofing so if you notice a mistake chances are good it will be corrected soon. On the other hand, if you find something wrong or unclear let me know ASAP and I will correct it. For those that finished this article I want to say thanks as well. I welcome your comments, although I can’t promise that I will be able to get back to all of them. You can email me at

SPECIAL NOTE – Last week, we launched a special 22% Discount Sale on all NPRC publications. The offer was originally set to expire Sept. 26th, but that offer has now been extended until Sept. 29th! You must use “Irma2017” for your coupon code. “Print Shop For Sale” is excluded from this special offer.

So, You Want to Sell Your Business?

Factors Impacting the Value of Your Business

So, You’re Thinking of Selling Your Business?
By John Stewart, Executive Director, NPRC

“Hi John, I think it’s time for a valuation. Lindsey and I are almost 60 and we’re giving some serious to selling the business and retiring, so what’s the first step we need to take to get a valuation done?”

How do I respond when someone calls me with a question like that?

Well, I start off by asking a bunch of my own questions. What are their current sales, and what do they think their business is worth. What are they going to do after they sell the business? How much is their net worth, and what percent of their total net worth is represented by the value of their business? What happens to their plans if their business simply doesn’t sell?

Sure, they may be calling me about a valuation, but virtually every single caller already has some preconceived notion as to what their business is worth.

Is the Business Value Inflated?

One of the early and most important questions I ask is, “what happens if it turns out your business is worth far less than what you think it is. What will you do then? Are you prepared emotionally and physically to continue operating it like you are today?” Some folks who call do have the time, the patience and the maturity to rationally answer those types of questions. Others are less fortunate and they are looking for instant solutions (selling) to problems that have taken years to develop.

One of the more challenging questions I raise with folks is, “What happens if you throw a party and no one shows up?” Unless you have one or two prospects already lined up and waiting to buy your business, what happens when you establish a fair market price for your business, put it on the marketplace and you are greeted with deafening silence?

Making More Money by Staying!

Many times, I end up suggesting to callers that they need to go back to the drawing board and rethink what they want to do, reminding them that they will never make as much money selling the business as they will from continuing to run the business on a day-to-day basis.

Even in cases where the callers are dead-set on selling their business sooner rather than later, postponing the sale by even a couple of years and concentrating their efforts on specific steps designed to increase the value of the business may very well be the best course of action.

Yes, that may be very discouraging for some folks to hear, especially folks who are biting at the bullet to retire now, but postponing the sale and working the business for a few more years may be a far more realistic option than what they have facing them now. There are many, many steps that owners can take in a relatively short period of time (12-24 months) to significantly increase the value of their business. We’re not suggesting these steps will be easy, but then again what is?

Business Valuations – Two Observations

I’ve been a consultant in the printing industry for more than 35 years, and I have also conducted more that 400+ valuations in the last ten years, and I feel comfortable in offering the following two, broad observations valuations conducted in our industry:

• Limited Market – First, unless you already have a serious, qualified prospect waiting in the wings to buy your business, the chances are better than 50-50 that no matter how fairly priced your business might be, you may never find a qualified buyer willing and able to buy your business, certainly not at the price you think it is worth, and certainly not for all cash, which is what many if not most sellers expect.

• Unrealistic Expectations – Second, most owners think their business is worth far more than most valuations would suggest, and they are sadly deceiving themselves to think they are going to find a buyer. PERIOD! Where or how some owners come up with their business valuations is beyond me. Anyone who suggests that a business is worth some multiple of annual sales needs to have his or head examined! Too many folks conflate the amount of money they collectively withdraw from the business on an annual basis with profitability or excess earnings. They are not the same.

Available only as a hard copy. Visit the NPRC website for details.

In 2007 I co-authored, along with my good friend and industry expert Larry Hunt, what is now considered a landmark industry publication titled, “Print Shop for Sale.” This 300+ page book has sold more than 4,000 copies, and remains as the only publication of its kind in the printing industry, offering “A step-by-step guide for establishing a fair market value for your printing firm, or one you are looking to buy.”

Valuation Lessons Learned

Since its publication, I have conducted well more than 400+ valuations. I have also been called upon to provide “expert testimony” at various legal proceedings where I have been asked to address various valuation methods as well as industry profitability ratios. Print Shop for Sale is available in the NPRC Bookstore.

I have encountered virtually every possible valuation scenario, ranging from nasty divorces where no one wins, to couples who had planned for the last 20 years to somehow retire at the magic age of 60 only to reach that age, and have nothing whatsoever to fall back on – their business having little if any value to anyone other than themselves, with the only source of additional income or benefits being what they will received from Social Security and Medicare.

As I alluded to earlier, the selling process is more likely to take a year or more, rather than months, and even then, there is no guarantee whatsoever that you will find a qualified buyer who is willing and able to pay your asking price, or anything close to that.

Remember too, that in at least a majority of the selling scenarios that occur in the real world, you are typically going to be asked to provide financing for the bulk of the selling price. If you think you’re going to show up at settlement, “Sign the papers and then walk away with a big check” you are mistaken. Consequently, the monthly payments you will come to depend upon will be closely tied to the success of the new owner and his or her ability to achieve all the promises that you made during the selling process.

“Even though sales have been somewhat flat the past four years, this business really has great potential, and with the right person at the top, it can reach the next level in terms of sales and profits.”

During the early stages of establishing a business valuation, owners who want to sell their business will often come up with a variation of the following: “Barbara and I have worked very hard the last 20+ years and we’ve made good money, and we’ve built a solid business, but we are getting burned out and we want to move on. Even though sales have been somewhat flat the past four years, this business really has great potential, and with the right person at the top, it can reach the next level in terms of sales and profits. Heck a new owner could easily double our sales if they got out there and properly marketed the business.”

Valuing a Business Based Upon Potential?

If you think you are going to sell your business based upon its potential you are sadly misleading yourself. In the simplest of terms, your business is worth nothing more and nothing less than (1) the current net, street value of your equipment and (2) the ability of the business to pay a new owner a “fair market salary” AND produce or generate enough excess earnings that allows the new owner to make payments to you the seller!

The bottom line in terms of selling your business is you are either a “leader” or a “Laggard” in terms of profitability and sales per employee. You either have it or you don’t. If you’re trying to make a “silk purse out of a sow’s ear” then good luck.

Just because you and Brenda worked 85-hour weeks and worked for less than minimum wage doesn’t mean a new owner should, certainly not if your business is half as profitable as you say it is.

Plus, if the business has potential to grow then you should have grown it. If the business has potential to be more profitable then you should have been the one to make it more profitable. If a new owner takes the bull by the horns and increases sales and profits as a result of their talents then the credit goes to them, and not you!

“If the business has potential to grow then you should have grown it. If the business has potential to be more profitable then you should have been the one to make it more profitable. If a new owner takes the bull by the horns and increases sales and profits as a result of their talents then the credit goes to them, and not you!”

If a business is unable to pay a new owner a working salary as well as generate enough “excess earnings” to pay the seller each month then it most likely is worth nothing more than the “street” value of the furniture and equipment used to produce those sales. We’re not talking net assets as found on the balance sheet, but rather the value that this equipment represents if a savvy business owner had to go out on the used equipment market and replace each key piece of equipment required or used to produce your current sales.

By the way, one of the biggest mistakes sellers can make is to load up their businesses with new equipment, leased or financed, in the last two or three years just prior to putting the business on the market for sale!

Regrettably, as many owners soon discover, there is very little interest in businesses producing mediocre sales and mediocre profits. Instead of being able to sell their business at a magical ratio of 60-70% of annual sales, they find they are unable to sell the business as an on-going entity, and instead end up closing their doors, selling off their accounts receivable, and then selling off key pieces of equipment one piece at a time, receiving just pennies on the dollar!

Owners ignore data like the above at their own peril. Many owners spend years in this industry never realizing how poorly they are performing as compared to their peers.

Five Factors Worth Considering

It would be easy enough for us to pull out the past dozen or so valuations and highlight what we found, but suffice it to say the five specific commentaries offered below would be near the top of just about any list I prepared.

(1) Confusing Salaries vs. Owner’s Compensation – Husbands and wives, or even brothers and sisters working as teams running and operating a business, often mistake the amount of money they collectively withdraw from the business as being the same as profits or owner’s compensation. They are not. Only the salary and benefits taken out by a single individual can be considered as part of the owner’s compensation calculation. So, just because Tony and his wife Carol collectively take out $75,000 on a business doing $750,000 in annual sales, this does not mean they are taking out 10% or $75,000 in profits. Far from that! Assuming a new owner would replace Tony as the new working owner, he would also have to go out on the market and replace Tony’s wife as well at a fair market, competitive salary. If that means spending $35,000 to replace her, then the unadjusted excess earnings for the company would now be $40,000, or 5.3% of sales.

(2) Failure to Achieve Top SPE levels – We can report with absolute confidence that firms falling in the top 25% of our industry report average “sales per employee” ratios of almost $160,000. We also know that those in the bottom 25% of our industry continue to struggle with reported SPEs of $125,000 or below! How owners (assuming they even track info like this) can sleep at night knowing their company’s SPE is so much lower than others in the industry is mind boggling, especially when it can be so readily improved.

(3) Ignoring Key Industry Statistics – The printing industry is almost unique in some aspects, especially its history of collecting, tracking and publishing key financial ratios. Owners who make excuses for not knowing the fundamental financial ratios that define this industry have no one to blame but themselves. To be blunt, if you can’t instantly put your hands on what those key financial ratios being reported by the top 25% of this industry then shame on you.

How on earth does a smart business person run a business without knowing the key benchmarks being achieved by competitors in their industry?

The 2017-18 Financial Benchmarking Study, one of many studies published by NPRC (and available in its bookstore) is packed with ratios related to what the winners in this industry report for benchmarks such as sales per square foot, current ratios, owner’s compensation, cost of goods and one of the most important ratios of all – employee payroll! It is not surprising that firms that lack this type of data tend to be under-performers.

(4) Rationalizing Key Ratios – It is one thing not to be aware of key ratios, it is a far different thing to actually have access to these key ratios, especially ratios reported by the very top performers in the industry, and yet to conclude that somehow they don’t apply to your firm. Rationalizing that key performance ratios don’t apply to your firm or that your company or market is different from all the rest is simply a recipe for disaster – It’s also a reason why no one in their sane mind will pay you what you think your business is worth. If only owners would stop rationalizing and act upon the wealth of information available to them they would end up making their lives so much much better, at least in the long run!

(5) The Enemy in the Mirror – Like it or not the biggest culprit preventing many owners from achieving higher levels of success (and higher values for their businesses) is the man or woman staring back at them in the mirror first thing in the morning. That individual typically exudes negative vibes. They are filled with excuses. They talk a good game, and say they are willing to change, but when push comes to shove they will fight the consultant and ignore advice from even the most qualified, most trusted advisers they can find. Sometimes that trusted adviser is a spouse or partner, but even then they are ignored. Many of these owners simply fail to push themselves or the folks around them. They make little effort to change, and remind one of the old expression, “It’s hard to teach an old dog new tricks.”

Ok, that’s enough negative rants for the day! <g>

Recovering from Hip Surgery

I just had my left hip replaced on Aug. 21, 2017 and I am very impatient to get back to my old self. If you sense from the column or comments above that I sound a bit “irritable” you are correct. Don’t look for a retraction! <g>

While I am pleased with my progress, it just never seems fast enough. The healing process pretty much is following what I endured five years ago when I had the other hip replaced. My hip was operated on Monday mid-day, and I was up on a walker walking around the ward five hours later.

I was discharged the next afternoon. By Thursday, I had given up using the walker, and I was walking up and downstairs as soon as I returned home. Each day it has been getting a bit easier to endure. Anyway, as I kept proofing and reproofing the above I kept stumbling upon one “negative” sound comment after another. I would revise or delete one and yet another one would pop up a couple of paragraphs later.

Nothing makes me angrier, however, to know that our industry has so many resources available to help troubled firms and yet so many just ignore them and think they “know better.” It is really a tragedy to find myself talking to owners who say they are now ready to retire but when I end up looking at their financial statements I discover one mistake after another than could have been avoided had they availed themselves of some of the many outstanding reports available in this industry.

Oh well, I hope you enjoy the column. Don’t hesitate to email me with any comments or questions you might have.


NPRC Releases New Digital Printer Survey

NPRC has just released its newest study – The 2017 Survey of Color Digital Printers, a 60-page report providing average and median ratings and performance data for 36 different digital devices. The new report is based upon input received from more than 280 survey participants.*

If you’re looking to upgrade to a newer digital printer this study will prove invaluable. It provides weighted ratings for 19 classes of digital printers, plus ratings and recommendations for nine different envelope printers, as well as the conveyors and feeders that are often sold with these devices.

“Another great report! The latest Color Digital Printer Survey allows me to evaluate all the current machines on the market and allows me to consider what machines can work and most important which machines to avoid. Not to mention information about service calls, envelope printers, click rates and all the other data. Each time I read one of NPRC’s Survey Reports, I am able to take away many actionable points to better my business and bottom line. I am grateful for the efforts of John Stewart and Bob Hall! Keep it up.”
                  Eben Miller, Miller Printing, Amsterdam, NY

The new report provides user ratings and data for a variety of devices manufactured by Canon, Konica Minolta, Ricoh and Xerox. We report the overall rating for 19 different classes of printers, plus average and median ratings as to whether users would recommend the specific device to others. Discover for yourself which currently available digital printers rate the highest and which ones received low scores from our participants.

“Thanks so much to the folks at NPRC and for what you do. It has always been worth the few minutes it takes to do your surveys in order to get the wealth of information your reports provide. From what machines perform the best and their features, to salary/wages and possibly most important – pricing. It is all great information to help- us run our business! Thank you.”
Jennifer Jordan, SD Visual Images, Marlborough, MA

To place your order for this or other reports, visit the NPRC Bookstore. This new publication is now available for processing and shipping. As always, this study/report is sold on a 100% money-back guarantee. No questions asked. If you believe you participated in this survey please read notice below.

Retail Price (PDF): $114.95
Retail Price (hard-copy): $124.95

NPRC Price (PDF): $57.50
NPRC Price (hard-copy): $67.50

Survey participants received special emails containing a download link on Friday, Aug. 18 and again on Aug. 23. The subject line was: “Your digital color copier survey available now.” Please check your spam, deleted and trash folders carefully. If you are not sure whether you participated or not, please visit our home page and check-out the list of participants.

List of Digital Printer Survey Participants – Are You Eligible?

The list below is an alpha listing by company name of firms who participated in NPRC’s recent 2017 Survey of Color Digital Printers and thus are entitled to a FREE PDF of the final report.

All participants, as listed below, were sent an advance notice email, plus two special emails on Aug. 18, 2017 and Aug. 23, 2017 advising them where to go to download their complimentary PDFs. 

If you do not recall seeing such an email we encourage you to go back to your “trash,” “spam” and other miscellaneous folders and check  for an email sent out on Aug. 18, 2017 with the subject line: “Your Digital Color Copier Survey Available Now!”

Please do not call us and request that an additional copy be sent until you have conducted a thorough examination of your email records. We do our very best to make sure all participants are sent a FREE PDF of these studies, but we don’t have a lot of sympathy for firms who casually delete emails and then ask us to send another copy.

Company City/Town State
A&B Digital Printing New Liskeard CAN
A. Carlisle and Co.  Reno NV
Abbotts Printing Inc Yakima WA
Accel Printing and Graphics Mount Kisco NY
Accurate Printers, Inc. Norcross,  GA
Action graphics Charlotte NC
Action Print Helena MT
Advanced Printing Stuart FL
Advantage Business Forms Rialto CA
ADVANTAGE Marketing and Print Auburn CA
Aiea Copy Center Aiea HI
AIM Mail & Print Center Redondo Beach CA
Alachua Printing Alachua FL
Allegra Charlotte NC
Allegra Alpena Alpena MI
Allegra Hamilton Hamilton MI
ALLEGRA Marketing Print Mail Alsip IL
Allegra Marketing Print Mail Tampa FL
Allegra Marketing, Print & Mail Rolling Meadows IL
Allegra Naples Naples FL
Allegra Print Marketing and Mail Plymouth MI
Alphagraphics Plano TX
AlphaGraphics Mokena IL
AlphaGraphics San Antonio TX
Alphagraphics Alexandria VA
AlphaGraphics Roseville CA
Alphagraphics #16 Salt Lake City UT
Alphagraphics #450 Brentwood TN
AlphaGraphics 711 Dallas TX
AlphaGraphics Boston Boston MA
Alphagraphics Cleveland Cleveland OH
AlphaGraphics Downtown Raleigh Raleigh NC
AlphaGraphics Kansas City Kansas City MO
Alphagraphics Los Angeles Los Angeles CA
AlphaGraphics Mission Viejo Mission Viejo CA
Alphagraphics of Carmel Carmel IN
Alphagraphics of the Twin Cities Minneapolis MN
AlphaGraphics US333 Bannockburn IL
AlphaGraphics-Savannah Savannah, GA GA
Alta Systems Inc Gainesville FL
American Harwood hts IL
American Printing & Promotions Manassas VA
Amity Graphics, Inc. Bemidji MN
Apple Printing Co. Buford GA
Arc Reprographics, Inc. Absecon NJ
Arrow Printing LLC Waterford MI
Arrow Swift Printing & Office Supply Greenville MI
Arthur Printing Cape Coral FL
ASAP Printing Okemos MI
B & B printing kewanee IL
Bart Nay Printing Houston TX
Bayou Printing & Graphics, Inc. Houma LA
Belmonte Printing Co. Schaumburg IL
Bentley Printing & Graphics, Inc. Garden Grove CA
Blacksmith Printing & copy center, llc Wolfeboro NH
Bob’s Printing boynton beach FL
Boggs printing Hatboro PA
Bozeman Printing Company Bozeman MT
Budget Print Clark  NJ
Campbell Print Center Harrisonburg VA
Canyon Copy Highland UT
Cascade Printing and Graphics Grand Rapids MI
Celestial Print & Design North East MD
Century Printing & Mailing El Reno OK
Cirrus Visual Tucson AZ
CJ Printing Highland IN
Clear Choice Printing Winchester VA
Cocheco PrintWorks Dover NH
Composite Forms Inc Port Chester NY
Copies Today Inc. Kelso WA
Copy Express Inc. Woodstock IL
Copy King Inc. Greensboro NC
copy stop/royal press white plains NY
Copycat Print Shop, Inc Wilmington NC
CopySetPrinting Des Plaines IL
Curry printing West Springfield MA
Curry Printing and Marketing Auburn ME
D&K Printing Boulder CO
DG Solutions  Conyers GA
Digital Printing Innovations Oshkosh WI
Dominick’s Quick Print, Inc. Ontario OR
Dsa Printing Chelmsford MA
DSIGNS Arlington Heights IL
Durel Mail & Imaging Technologies Lafayette LA
Econo Print Inc Pinckney MI
Edwards Printing Service, Inc. Dallas TX
Esprit Graphic Communications, Inc. Kennewick WA
Esterman Printing Services Cincinnati OH
Exclamarketing Miami FL
Express Printing Inc Hailey ID
Falcon Printing & Graphics, Inc. Freehold NJ
Fasprint Monticello IL
Fast Print, Inc. Fort Wayne IN
First Impressions Printing and Design Springfield MO
Fotorecord Print Center Greensburg  PA
Franklin Printing Co Inc Zanesville OH
Full Circle Printing Solutions Ellsworth ME
Furbush-Roberts Printing Co Bangor ME
Gerard Printing Elk Grove Village IL
GPI Farmington Hills MI
Graphic Information Systems Tualatin OR
Graphic Resources Woodbury MN
Gulf Business Printing San Antonio TX
Heartland Litho Monona WI
Henle Printing Company Marshall MN
Heritage Printing & Graphics, Inc. Waldorf MD
Highlight Printing Minneapolis MN
Holiday Print & Promotions Ltd London ONT
Holland Printing, Inc. South Holland IL
hudson printing carlsbad CA
Images Plus Madison WI
Impact Printing Thornton CO
Impression Printing Co., Inc. Seattle WA
Independence Press Aspen CO
Independence Press Aspen CO
Ink Spot Printing & Copy Center Inc. Frazer PA
Inklings Printing Company Lompoc CA
Instant Print Inc Inglewood CA
International Minute Press Charlotte NC
IPC Manchester MO
IPM Lithographics Inc San Diego CA
ISS Shirley MA
J & J Graphics and Design Canton MI
Jaz Press Norristown PA
J-M Printers, Inc. Crest Hill IL
John Latka & Co., Inc Westfield MA
 JS Printing   Franklin Park   IL 
JTCPrinting Needham MA
Kahny Printing, Inc. Cincinnati OH
ken’s printing co. smithfield RI
KKP Printing Brampton OH
Kustom Kwik Print Owensboro KY
Kwik Kopy Frisco TX
Kwik Kopy Business Center 130 Evansville IN
Kwik Kopy Printing  Chicago IL
Kwik Kopy Printing Dallas Dallas TX
Kwik Kopy Spring Spring TX
Launch Printing and Promotions Saint Marys GA
LAXprint La Crosse WI
Lithtex Hillsboro OR
Local Copies Etc Santa Maria CA
MarketMailPrint Austin TX
Marlow Visual Communication Cornelius NC
marshall anchorage AK
Masthof Press Morgantown PA
McKinsey Printing Tryon NC
Mercersburg Printing  Mercersburg  PA
Merlin International Corp Rochester NY
Miller Printing Amstedam NY
Miller Sherwood Printing Burbank CA
Minuteman Press North Palm Beach FL
Mission Graphics Ludington MI
Modern Way Printing Ooltewah TN
Moonlight Graphics Inc Grand Rapids MI
MP Express Salinas CA
Mpress Digital, Inc. Santa Cruz  CA
n.e.w. printing appleton WI
National Media Services Inc Front Royal VA
North Delaware Printing Tonawanda NY
Paradise Printing Paso Robles CA
Partners Printing So Portland ME
PBR Graphics, Inc. Albany NY
Pel Hughes Printing New Orleans LA
Pinnacle Printing & Promtions Southfield MI
PIP Ridgeland MS
PIP Marketing/Signs/Print Iowa City IA
Plaza Graphic Associates, Inc. New Hyde Park NY
Porath Printsource cleveland  OH
Portage Printing Portage MI
PostNet Humble TX
PostNet Bentonville Bentonville AR
Precision Printing Inc Louisville KY
Premiere Business Printing & Graphics Arlington TX
Premiere Printing Rockville MD
Presto Prints Wausau WI
Print Basics, Inc Deerfield Beach FL
Print Bureau Dublin IRE
Print Digital, Inc. Stow OH
Print Factory, PLL North Lima OH
Print It Plus Royal Palm Beach FL
Print King Inc Williamsville NY
Print King Inc. Williamsville NY
Print Max The Woodlands TX
Print Plus Buffalo NY
Print Professionals, Inc. High Point NC
Print Solutions Englewood NJ
Print Source Corporation Bluffton IN
PrintFocus Phoenix AZ
Printing Arts Press Mount Vernon OH
Printing Creations Inc. Columbia KY
Printing Depot Oldsmar FL
Printing Etc Dallas TX
Printing Ideas Fairfax VA
Printing Impressions Martinsburg WV
Printing Sensations Miami Gardens FL
PrintPlus Stewartsville NJ
PrintRoc Rochester NY
PrintSource Newnan GA
Pro Printers Hudson NY
Professional Print & Mail Fresno CA
Prographics Inc. Annapolis MD
Progressive Printing Battle Creek MI
Promotions By Mail, Inc Hilltown PA
ProPrint Digital North kansas City MO
Pro-Type Printing, inc. Paxton IL
Pyramid Printing Missoula MT
QP Consulting Melbourne FL
Quality Printing Services Inc. Petaluma CA
Quick Solutions Jamestown NY
Rapid Press Printing Forest Lake MN
Redlands Blueprint Co Redlands CA
replica printing services poway CA
Reprint, Inc. Houston TX
Reskyu Honolulu HI
Richwood Graphics Franklin VA
Royal Printing Company Sterling CO
Rutledge Printing Co. New Albany MS
Scott’s Discount Printing Fond du Lac WI
sd visual images marlborough MA
Service Printing of Lynchburg, Inc. Lynchburg VA
Shawnee Copy Center, Inc. Shawnee KS
Sir Speedy Havertown PA
Sir Speedy Mercerville NJ
Sir Speedy Greensboro NC
Sir Speedy Nashville TN
Sir Speedy Cranston RI
sir speedy printing orland park IL
Sir Speedy Printing 4072 Carrollton TX
Smellies Copy & Print Shop Bracebridge CAN
Solid Impressions Carol Stream IL
SOS Printing Port Townsend WA
South Shore Printing Scituate MA
Southbury Printing Centre, Inc. Southbury CT
Southern Printing  Hope AR
Southwest Printing & copying Dallas TX
Specialty Printing Shepherdstown WV
Speedy Printing Houston TX
Stallings Printing Co. Lenoir NC
Stone Mountain Printing Woodbridge NJ
Suncoast Printing New Port Richey FL
Sundance Printing Parker CO
Sunset Printing Gardena CA
Supreme Graphics Arcadia WI
Sycamore printing Muscatine IA
Systems Print & Mail Laguan Hills CA
TBL Print Clive IA
TechnaPrint, Inc. Eugene OR
the Copy Shop Wiscasset ME
The Copy Shoppe Springfield MO
The Foley Group Yorktown Heights NY
The Freedman Company Hurst TX
The Highland Press Athol MA
The Ink Spot Quincy MA
The Print Shop Naples FL
The Print Shop Marion AL
The Printers’ Printer Collegeville PA
The Printing Factory Mundelein IL
The Printing Spot Gilroy CA
The Responsive Mailroom Elgin IL
Towne Printer Kalispell MT
Tps Newton IL
Trademark Printing Cookeville TN
Triangle Reprocenter, Princeton Princeton NJ
Unique Litho, Inc Englewood CO
UpClose Printing Champaign IL
Volz Tucson AZ
Walter Printing Inc Albemarle NC
Wells Print & Digital Services Madison WI
Wolf Printing, LLC York PA
XPress Printing Sisters OR
Zip Graphick Cincinnati OH
Zoom Printing Syracuse NY


Save 25% on 2015-16 Mailing Services Study

NPRC is running a special 25% off sale on one of its most popular industry studies – The 2015-16 Mailing Services Pricing Study. This information-packed report contains pricing info on more than 45 key services and products provided in the mailing services industry. This special sale ends Nov. 31, 2017.

Retail price is $179, but for a limited time you can save 25% and pay only $134.25. NPRC members pay only $89. This study is available as either a PDF or hard-copy. As always, all NPRC publications are sold on a 100% money-back guarantee if you are not totally satisfied. Click here to visit the NPRC Bookstore and to place your order.

NPRC Releases Hourly Rates Report

The 2017 Hourly Rates & Mark-up Practices Report, a 58-page special report published by NPRC, will be available for purchase on June 28, 2017. This brand-new publication, based upon a recent survey conducted by NPRC in early June, attracted more than 240 printing firms.

The new report offers a special look at the popularity of various computerized estimating systems, and then quickly moves to various budgeted hourly rates used in graphic arts departments as well as hand labor rates for a variety of bindery and other back-shop tasks. The report also reports on mark-up rates used for handling sub-contracted services and products as well as rates used to mark-up paper used in offset printing. 

SPECIAL ALERT – If you believe you participated in this survey but have not received the PDF report then it is due to it either going into either your trash or spam folders, OR you accidentally deleted the email we sent you. It is also possible that you never received it because the email address from which it was sent ( was not “whitelisted” as we requested during the release of this survey. The PDF of this report was sent to 245 email addresses on both June 26th and then again on June 27. The subject line was, “Your Complimentary Copy of the Hourly Rates Report.” Please thoroughly check all email folders prior to contacting us.

Table of Contents… Click here to view the Table of Contents for this new report.

Table of Contents

Retail pricing for this new study is $49.95 (PDF) and $56.95 (Printed);

NPRC member pricing is $24.95 (PDF) and $31.95 (Printed).

Order your copy via the NPRC Bookstore.

Save 40% On Digital Pricing Survey

Take advantage of this special, limited-time offer from NPRC.

Place your order for this popular study no later than Aug. 16, 2017 and save 40% or $91.50 on the 2016-2017 Printing Industry Digital Pricing Study.

This special NPRC Study is 114-pages in length and illustrates the latest pricing for digital products and services.

To read more about this study’s content or to read “real-world” testimonials from folks who have already purchased this study visit the NPRC Bookstore here.

Download a free, 4-page PDF from this report by clicking here.

Improving SPE Can Add $200,000 to Bottom Line


Like it or not, there is an enormous chasm between printing firms when we measure them based upon their sales per employee (SPE).

On the one side, we have firms reporting average SPEs of $160,000 or greater while on the other side we have firms reporting average SPEs of $126,000 and below – sometimes much lower!

Although the differences in SPE between those at the top and those at the bottom are significant, the differences in profitability reported by each group are even greater. When we take a close look at the numbers and how they play out in terms of various ratios related to profitability and productivity, we quickly observe that relatively modest increases in SPE can lead to increasing “excess earnings” by  as much as $200,000!

It is also clear that moving an additional $200,000 to the bottom line can increase the value of a firm by $700,000 to $800,000 or even more, since a typical multiplier used to arrive at valuations will typically be in the 3.5 to 4 range. Mind you, when we talk about firms producing “excess earnings” of $200,000, we are not talking about firms with sales of $3-4 million, but rather about firms who reported 2016 annual sales of just about $1 million in 2016.

SPE – A Quick Definition

Although we’ve done it seems like a thousand times, let’s quickly define SPE in the simplest of terms. Sales Per Employee (SPE) is arrived at by dividing total annual sales (or monthly sales annualized) by the equivalent number of employees required to produce those sales. The latter would include all working owners and partners as well as outside sales representatives. Technically, it also includes a spouse who may work in the business but does not even draw a salary or paycheck.

SPE can be calculated quickly and is used to compare overall productivity between one firm and the next. SPE is an expression that allows someone to compare, in relative terms, the productivity of one firm against another.

Let’s take a look at two firms each producing $1 million in sales and each relying on approximately the same sales mix. When we calculate our SPE for each firm, we will discover that one company will be able to produce $1 million in sales with approximately 6.5 employees, while another firm just down the road or across town, producing the same mix of products, will require almost 9 employees to produce those same sales?

By the way, every time we initiate a discussion of SPE we consider leaving the definition of SPE out of the article, assuming everyone already knows what we are talking about. And yet hardly a time goes by when we don’t get at least one or two private emails asking us to define the term. That happened recently when I released a column titled “Stewart Shares Key Takeaways Uncovered In Latest Financial Ratio Report.” (See NPRC Blog at

The ink was hardly dry on the column when we received two private emails asking us to explain the term. We answered the emails privately, but couldn’t help but wonder how many other basic financial terms such as “current ratio” and “excess earnings” did these owners not understand as well?

The Lack of Financial Oversight

There are worse things than not knowing what SPE stands for. I am still appalled by the number of owners who do not receive monthly financial statements. Almost as bad are owners who do receive monthly financial statements but give them only a cursory 15-minute look before heading back to the bindery to resolve some problem with the booklet maker.

Equally challenging are owners who receive monthly financial statements that fail to provide a column of ratios expressing each expense item as a percent of total sales. You cannot properly or adequately manage a business of any type by simply looking at a column of raw dollars – You need ratios for each expense item if you wanted to make informed decisions.

 “I think I am ranting now, so I have to move on before my blood pressure rises to the dangerous level.”

How the heck an owner can analyze his or her operations without having access to an adjoining  column of financial ratios is beyond me. When I receive financial statements and ask owners why their statements lack ratios some just shrug their shoulders, while others tell me they don’t know how to get Quickbooks or some other accounting package to generate them!

Every accounting software program can produce these ratios, you just need to know where to click. Shame on owners who don’t get this basic type of information. I think I am ranting now, so I have to move on before my blood pressure rises to the dangerous level.

Comparing (2) $1 Million Dollar Firms

Let’s use data obtained directly from the latest Financial Benchmarking Study published by the National Printing Research Council (NPRC), and translate a few of the ratios we’ve already mentioned into real world examples. Let’s examine what we already know…

We already know that firms in the top 25% of the industry (the Profit Leaders) in terms of net owner’s compensation reported average sales in 2016 of approximately $1 million. We also know that these firms reported an average SPE of $156,000. Using those two numbers and working backwards it means that the average firm in the top quartile employed approximately 6.4 employees to produce that $1 million in sales.

Relying on similar data for firms in the bottom profitability quartile, we know that these firms actually averaged slightly more in sales ($1.1 million) in 2016 but reported a SPE of approximately $125,000. Once again, working backwards, we can calculate that firms in the bottom quartile employed an average of 9 employees (or 2.6 more employees) to produce almost the same level of sales!

“The only noticeable difference is that the firms in the bottom quartile report brokering out significantly more in sales (18% to 11%) than do firms in the top quartile…. somewhat ironic considering the fact that companies with more employees still end up turning to outside firms to help them produce some of their annual sales!”

So, now we have two groups of printing firms with one group falling into the top quartile and the other group falling into the bottom. One group is able to produce its annual sales with approximately 6.4 employees, while the other group requires approximately 2.6 more employees to produce only slightly more in sales – $1 million vs. $1.1 million!

Breakout                                SPE*                   EXCESS EARNINGS*
   Top Performers                    $156,000                      $200,000
   Bottom Performers              $125,500                     $(3,100)
* $$$ amounts are approximate. See study actual entries.

We also know that firms with the highest SPEs (those in the top quartile) also report “excess earnings” of almost $200,000, while firms in the lowest SPEs actually report negative “excess earnings.” By the way, it is “excess earnings,” and not the net value of assets, that plays the primary role in determining the value or worth of a company. If you are reporting little if any “excess earnings” then your company is worth very, very little to others!

What about profits per employee? It’s the same story as above. Companies who find themselves in the bottom in terms of profitability oftentimes report negative profits per employee, while those at the very top produce profits per employee of $30,000 or more! (Note, these terms are clearly defined in the 2017-2018 Financial Benchmarking Study.)

By the way, it is interesting to note that the job mix (source of sales) for these two quartiles is almost identical, meaning that each of these groups report approximately the same percentages for sales in terms of sales for pre-press (graphics), offset printing, digital printing (color and BW) and even mailing services.

“The latter is somewhat ironic considering the fact that companies with excess employees still end up turning to outside firms to help them produce some of their annual sales!”

The only noticeable difference between those firms in the top quartile and those at the bottom is that firms at the bottom report brokering out significantly more in sales (18% vs. 11%) than do firms in the top quartile. The latter is somewhat ironic considering the fact that companies with excess employees still end up turning to outside firms to help them produce some of their annual sales!

Should Employees Wear Signs?

Wouldn’t it be great if employees were required to walk around with signs on their back identifying their levels of productivity or competency? Signs like, “Bad Apple,” “Generally Expendable,” “Somewhat Lazy,” “Company Gossip or Trouble-maker,” “Many Personal Problems,” “Pot Head,” or “Family Member – Can’t be Fired.” Ok, I will admit that might be a bit extreme, but wouldn’t be great if those problem employees were “tagged” with signs like that, if for no other reason to remind the owner who he needs to terminate! Start with a family member!

Not to be too simplistic, but sometimes the most obvious cause of low SPEs is in fact the result of employing too many employees to produce the work in question. Yes, it is that simple. I believe I have consulted for more small to medium size companies in the industry than any other consultant, and I can tell you that “excess employees” was and continues to be near the top of the list when it comes to reasons for either low profits or low productivity.

Although the sample “employee signs” mentioned above are somewhat “tongue-in-cheek,” they are in fact the types of signs (figuratively speaking) that I encountered in many of my shop encounters. Take me to a firm employing approximately 8-10 employees and I will almost guarantee that the company has at least one “bad apple.” How do I determine that? Hell, in many cases the other employees will tell me, if not directly then in answering “Yes” when asked if the company they work for employs at least one bad apple employed!

“Of course, one of the worst causes of low SPEs in this industry is the employment of family members who otherwise couldn’t get a job as a ticket taker at a local cinema.”

There’s almost always an employee with serious personal problems, all of which seem to be brought to the workplace. Some employees have abused drugs and alcohol in the past, which of course is Ok, if they have sought treatment and are “cured.” It’s the employees who continue to show up high for work each day or repeatedly come in late or call in sick that need to be terminated, but owners too often seem reluctant to take these types of remedial steps.

Of course, one of the worst causes of low SPEs in this industry is the employment of family members who otherwise couldn’t get a job as a ticket taker at a local cinema. Sometimes it is a brother-in-law, uncle or worse case of all a son or daughter who joins the firms with a heightened sense of entitlement! Arrggg! I would never, never, never hire a family member unless they had at least 3-5 years of on the job experience working for someone else.

The biggest problem with employing family members is that the basis for their pay is often different than for other employees. Most employees are paid on the basis of their value to the company. Family members are often paid based upon what they need or are entitled to, not on what they contribute to the business.

Your Employees Already Know

Believe me when I tell you that your employees already know if you have an employee (family member or otherwise) that should have been terminated months if not years ago. They’ve seen the favoritism, the coddling and they’ve heard all the excuses offered up by the owner about why Cathy or Mike have not been terminated. After a while, they too start caring a bit less and maybe not working quite as hard as they used to because they perceive, rightfully or not, that if the owner doesn’t seem to care why should they.

It is a rare company indeed, certainly those with SPE levels in the $120,000 – $130,000 range, that doesn’t have at least one excess employee! Assuming we are talking about an $18 per hour employee, his or her termination would free up more than $38,000 in excess cash – some of which could be distributed as raises of $2,000 for each of six or seven remaining employees and still put $24,000 into savings, or available for lease payments for that digital press you’ve been looking at.

Pricing & Equipment Can Produce Low SPEs

It is important to note in this discussion that excess employees are only part of the problem. Pricing techniques and practices can also play a role in contributing to lower SPEs. No matter how good a team and no matter how hard they work, if the prices they are quoting are lower than they should be it will automatically result in a lower than expected SPE.

However, while firms with higher SPEs do in fact typically report charging more for their products than do firms with low SPEs, the differences in pricing remain somewhat subtle.

Low SPEs can also be the result of poor equipment selections or the unwillingness of owners to listen to their employees when it comes production problems and suggestions for fixing them. Owners who insist that their employees “make do with what we have” or owners who simply fail to reinvest in their businesses are almost always going to end up with lower SPEs than some of their peers in the industry.

Knowing Which Ratios to Use?

Owners who have come to rely on the biennial financial benchmarking studies turn to different sections of the study depending upon their experience and expertise. However, you don’t have to be a financial wizard or former CPA to benefit from the study.

The 2017-2018 NPRC Financial Benchmarking Study is basically divided into four key sections.

  1. Executive Summary by Larry Hunt – The summary written by industry author and financial guru Larry Hunt is a great “short” read about this industry, including where it has been and where it is going in terms of profitability and other key ratios. Spending 15-20 minutes reading this section alone will advance your knowledge of this industry ten-fold.
  1. Profit & Loss Statements – Broken down into various breakouts based upon sales, product mix, and profitability (including profitability quartiles), this section is packed with useful profit and loss statements that can be used to compare your firm’s performance against others. Compare ratios for expenses such as depreciation, rent, interest, accounting & legal and a dozen other expenses as depicted in the study and compare them to your own P&Ls.
  1. Balance Sheets – Similar in breakouts provided for profit and loss statements, this section includes a variety of balance sheets allowing you to compare current and long-term assets, in both really dollars as well as ratios, against current and long-term liabilities.
  1. 2016 Key Ratio Extractions – This section of the study provides a number of breakouts, each of which provide 29 key ratios that you can compare against those for your own firm. Ratios and breakouts include average sales, COG, payroll and overhead expenses, as well as owner’s compensation, excess earnings as well as discretionary income.

Interested in reading more about the new 2017-2018 Study? Visit the NPRC website at This just-released study is available at a record low, low price of ONLY $115 and includes S&H. It is sold on a 100% money-back guarantee.

Sorry, this study is only available as a hard copy – no PDFs! Even though it is considerably more expensive to provide and mail hard copies, we believe this study is simply too valuable to be transmitted and stored electronically. This study needs to be printed and readers need to be encouraged to use paperclips and yellow highlighters to truly benefit from this study.