New Relationship between Sales & SPE – Seeking Your Feedback

For many years, virtually every study that I worked on that dealt with profitability and productivity strongly indicated that smaller $$$ volume firms, as a general rule, tended to be more profitable than larger $$$ volume firms, at least in terms of percentages.

As an example, 10 years ago, the top 25% of the industry (in terms of profitability) reported average sales of $961,500 and owner’s compensation of 23.3%. The SPE of this group was $125,644.

The bottom 25% in terms of profitability reported sales of $1,098,541, owner’s compensation of 4.2% and an SPE of $109,689.

Move forward to 2013 and the top 25% reported average sales of $925,849, profits of 24.6% and an SPE of $142,372.

The bottom 25% reported average sales of $1,070,548, profits of 4.81% and an SPE of $114,858.

Data Indicates Possible New Trend?

However, in a recent survey dealing with time management that we just completed, it appears that firms who classified themselves as high profit firms reported significantly higher sales and SPE than their peers who indicated they were at the bottom in terms of profits. I can’t help but wonder whether this is a fluke, or a real trend based upon various factors.

Here are the three breakouts we recently reported in our Time Management Practices article that appears as a free download on our National Printing Research Council website at www.printingresearch.org. (Three tables below)

allfirms

lowprofitfirms

highprofitfirms

Comparing Profit Leaders vs. Laggards

basic-data-sheet-time-mgmt_8108_image003

It was interesting to observe that out of the 207 participating firms, an almost identical number of owners described themselves as low profit as opposed to high profit firms. We appreciate the candor of the former in that their input is often just as important as what we receive from “profit leaders.”

Granted, there were only 20 participants in each of our ‘Top” and “Bottom” groupings, each representing 10% of our total respondents. Nonetheless, the data was clean with no unusual outliers that we could detect.

So the question that seems to arise is whether or not there is a good explanation for what appears to be a significant, and quickly developing trend that suggests there is a direct, though not necessarily linear, relationship between sales per employee and annual gross sales. Analyzed a bit further, we could examine two possibilities:

  •  Do highly trained & productive employees naturally facilitate and make it easier for firms to achieve higher and higher sales?
  • Do firms with higher sales naturally tend to acquire more productive equipment thus leading to higher SPEs?

The response rate was very good, and the data was exceptionally clean, so the question remains – has there been a significant turn-around, almost a reversal, in this industry whereby firms with higher profits tend to be larger firms as well.

We tend to believe that the level of sophistication and higher levels of productivity offered by a variety of digital devices (printers, copiers, creasers, collators, available software,etc.) has enabled printing firms that have upgraded their equipment to achieve levels of productivity almost unheard of just a few years ago.

Conclusion

We welcome your feedback and would love to publish your comments on our website. Tell us what you think about the relationship between sales per employee and the production equipment currently available. Another question – should a company struggling with relatively low levels of productivity and only modest sales take a major financial risk and upgrade to more expensive and hopefully more productive equipment? Send us your comments and feedback to: mailto:www.printingresearch.org

With your permission, we will append your comments to this article. Don’t be bashful… share with us your thoughts and opinions.

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Hiring Someone to Shop Competitors

(Members Only) Hiring a Professional To Conduct a Pricing Survey

Over many, many years I have, for various reasons, hired or retained an individual to conduct surveys of my competitors to determine specific pricing as well as to obtain an “outsider’s” valuation of my competitors.

As a consultant for more than 25 years, I also found myself on various occasions encouraging my clients to conduct such surveys as well. Sometimes, if for no other reason, than to dispel the owner’s sometimes misinformed ideas as to where his or her pricing stood in comparison with other printers.

As a publisher of dozens and dozens of pricing studies over the years, I have often told folks that the greatest variations in pricing in this industry occur not from one section of the country to the next or from one market to the next, but rather within individual markets. While prices for specific products might vary by 5-7% from one section of the country to the next, statistically it is not uncommon whatsoever to find prices for a specific product and quantity to vary by +/- 25-35% from the average.

Great Variations Within Individual Markets

As an example, in you take a relatively small town or city where there are 10 small format quick printing operations, and you price out a specific product such as 500 #10/24 white envelopes in black ink, you will likely find an average price of approximately $80-85. However, if you price that product out among 10 different printers in that town, you are likely to find prices ranging from $59 to $108.

You may find even lower prices and higher prices depending upon the day of the week you are shopping and who you happen to talk to at the time. Interestingly enough, the printer who may charge the highest prices for envelopes may be the lowest for matching letterheads. If you are looking for logic and consistency in pricing in this industry you’re probably looking in the wrong place!

Put simply, while I would never allow my competitor’s pricing practices to dictate my own, I also believe it is important to keep informed as to what is going on in your market area. It is also important to get a better feel about your competitors from the eye of a typical consumer or printing buyer.

Hiring a Professional Shopper

The first mistake many printers make when considering shopping their competitors is to do it on the cheap. Spend as little as money as possible and do it quickly. Well, as is often the case, you get what you pay for. If you’re going to hire someone to call and visit other printers and evaluate what they offer and what they charge you have to do it the right way!

That pretty much means going outside. You don’t want to assign this task to a CSR or graphics person or maybe someone in bindery. You probably don’t want to have your grandmother or mother-in-law tackle this either.

First, you need to set up a real world scenario for your shopper. You need to select a reasonable number of closely related products that you would like to have shopped. Ideally, these should be the types of products (and services) that you like to get yourself. Look at your existing list of key customers, and try to develop a fictionalized company that closely matches real world customers that you tend to deal with.

Establishing the Proper Scenario

Let’s imagine that you consider the healthcare field a lucrative source of business for your firm. Maybe you already print for a couple of walk-in clinics. So let’s imagine a scenario where a secretary is sent out by a team of doctors who are considering opening up a new walk-in clinic and they are going to quickly need six specific items….

  • 500, 1M and 2.5M 2-sided, 4C 4 x 9 Rack Cards on 100# Coated Cover
  • 500 ea. Of four different 4C business cards, 1-sided
  • 1M Letterheads and Matching Envelopes 2C
  • 1,000 and/or 2,000 patient information sheets (blk)
  • 100 pads of 50 each prescriptions forms, 4 x 5.5” on Security Guard paper

The above list is strictly off the top of my head. You will have to come up with your own. If you make the list too long, with too many variables, you are going to encounter reluctance and delays. Obviously, there are many other products and variables that could be applied. You could ask about the additional cost of numbering, or if the letterheads where only one color instead of two.

Hiring a “Professional”

Remember, you are not the person that is going to be doing this shopping. Someone else is, and they have to actually believe and play the part of a secretary for this fictional firm. So, you need to check around with your employees, friends and family and let the word out that you are looking for someone to tackle and take on a special 3-4 day project.

You need to be willing and able to pay someone a decent fee of $12-16 per hour, and you probably need to expect that this project could easily take 20-30 hours to complete. Once you have established the scenario under which you want this person to operate, they need to be provided with a written list of products (like above), a list of printers you want them to visit, as well as specific questions or observations you would like them to make with each visit. What does the place look like, how professional where the people who helped the shopper, how fast did they get back with prices, etc., etc.

So What Does Kathy Do?

Let’s say you have hired Kathy. Kathy needs to dress professionally and should probably carry a small briefcase to play the role. You might or might not even supply her with her own business cards, but in that case the name of the business might be Medical Office Experts, Inc. and of course the phone would have to be her own cell phone. Whoever you hire has to be enthusiastic. Kathy needs to be smart, but she shouldn’t have to know much about printing, nor do you want her using an unusual terms that might set off alarm bells at the firms she visits.

You need to expect that Kathy will make at least one and possibly two visits to each of the ten firms. She should also probably have reason to call them once or twice as well…. Maybe for no other reason than to check as to why she hasn’t heard back from the company. She truly has to be willing to play the role and believe in it if this is to be successful.

Personally, I would tell Kathy that I don’t really expect to hear from her until she is finished with the project. You should expect, at the very least, an excel spreadsheet and a written report within 1-3 paragraphs written up summarizing her visits to each firm.

The one added touch, but rarely done because of the circumstances, is to have that same shopper shop your own firm. That means hiring your shopper and discussing the project either outside of normal office hours or hiring the person off-site.

Stressing Professionalism

I cannot emphasize enough that this project, if it is to be done at all, be conducted professionally, and not just thrown together by having someone make secret, quiet calls from some office in the back of your firm.

I can assure you that once you get the final report, and that’s exactly what you want to receive and expect, is a formal report with pricing, analysis and possibly even graphs. If you can get something like that and it takes 25-30+ hours to complete it is well worth the $300-$450 you might end up spending on this project. Quite naturally, I would expect that you would also be able to sit down with your shopper and get some one-on-one observations to fill in some of the possible blanks.

I will assure you, if this survey is conducted properly, you will be absolutely amazed at the differences in pricing, quality and general overviews that you will receive from your shopper, and that in turn should be of great benefit to your firm. All the more so, if your shopper is able to shop your own firm and be as brutally honest about your own employees and operation as you expect her to be about the competitors she shops.

John Stewart, Executive Director, NPRC
Email me with your questions at: mailto:membership@printingresearch.org

FREE Sample Pages from Just-Released Pricing Study

Four Free Sample Pages – Would you like a very brief glimpse of what’s contained in the latest 2016-17 Digital Printing Pricing Study? All you have to do is click on the artwork below or click here to download a FREE 4-page PDF demonstrating the tip of the iceberg as to what is in store in the complete study.

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This brand new 114-page study is one of the most comprehensive pricing studies we’ve ever published.

2016-17-digitalcoverolnprcDedicated strictly to pricing of digital products and services, this new study is now available for immediate shipment (hard copies and PDFs). Retail price of this study is $229, however NPRC members are entitled to a 50% discount on this and all other publications listed in our bookstore.

PDF orders are shipped/transmitted same day as received. Hard copies are mailed within 24 hours. Click on the Bookstore tab above or Click Here to place your order.

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2016-17DigitalCover-sm NEWThis brand new 114-page study is one of the most comprehensive pricing studies we’ve ever published. Dedicated strictly to pricing of digital products and services, this new study will be available for shipment (hard copies and PDFs) no later than Sept. 6, 2016. Retail price of this study is $229.

However, if you place your order prior to the formal release date, you can take advantage of our pre-publication discount price of ONLY $171.75 a 25% discount! To take advantage of this offer you must place your order prior to Sept. 7, 2016. Your order will be shipped automatically on or before the scheduled release date. Visit our Bookstore today to place your order.

 

Early Stats from Digital Printing Survey

Preliminary Results at a Glance… 

With less than 12 days to go before the July 18th deadline, we can report some very brief, preliminary results from early participants in our 2016-2017 Printing Industry Digital Pricing Survey.

2016-17-digitalcoverolnprcAverage Sales – If you think you’re too small in terms of sales to participate think again. Survey participants report their average 2015 sales at $1,444,900 and are projecting sales of $,1,556,340 for 2016, an increase in sales of 7% – 2016 compared to 2015.

Median Sales – Median sales, a probably more reflective picture of our survey participants, for 2015 was $854,480 and projected to be $935,000 for 2016, or a 9% projected increase in sales for 2016.

Independents vs. FranchisesIndependents account for 75% of all our respondents with franchises accounting for 22.5%. Another 2.5% are In-plant operations. Continue reading

“Are my labor costs too high,” asks client

I recently received a call from a former client. He and I have been corresponding on and off for many years since my first visit to his firm back in 2003. His firm is located in the far northwest. “John, I was going over my ratios the other day and noticed that my total payroll ratio is almost 31% and that seems much higher than it should be. Do you have any suggestions?”

Yes, under normal circumstances, 31% for total payroll costs, assuming all other financial ratios for the company were typical and average for the industry, would be high, but not in this case. Based on additional data he provided, Bob (not his real name) told me they had just finished their best year ever in 2015 with sales of $1.6 million. “My manager earned $105,000 last year and he is very happy. He and his wife just bought a house, and their first child is on the way, and he couldn’t be happier. The rest of my employees are also being paid well above average wages, especially for this market area,” Bob added. Continue reading