Print Manager
June 2010
Take control: a new series for turning a business around
Are you still struggling to get your firm back in order after the recession? Are you one of those owners who are holding on by their fingernails to make payroll and pay the bills every month? Do you avoid taking phone calls for fear it might be the bank? Are you depressed, cranky, and having relationship problems at home because of the stress? Are you sick to your stomach because an operating line of credit is secured by a personal line of credit that’s secured by your family home? Well don’t feel like the Lone Ranger—many printers are struggling through this. In fact on April 25, 2010, Bank of Canada chief Mark Carney warned that a faster-than-expected recovery doesn’t mean the financial crisis was less severe than advertised. Carney says that the recession was monumental and that the drastic government interventions will have long-lasting consequences. In fact, printing consultant Dr. Joe Webb contends that, “Managers will actually have to be geniuses to navigate what lies ahead.” And Jeff Taylor, president at Hemlock Printers, has often said that, “This is not a time for the meek.” I don’t want this to turn into a long economic debate but whatever side you take, there are still fundamental things that you should do to get your business in order.

Bill Vancelette, owner of U.S.-based Catalyst Consulting, points out that turnaround management is typically about saving a company that’s having acute financial difficulty—negative cash flow, extended receivables, low or no profits, decreasing net worth. These headaches grip many printers who are dealing with declining sales volume without a drop in expenses, overhead, and costs. Without addressing financial realities, much of the advice you hear about becoming efficient, improving customer responsiveness and quality, and adding new equipment or systems will simply not help save a business.

With this column we’re launching a new series devoted to turning a business around. Over the next few issues I’ll outline how to reverse business fortunes and set out strategies for going forward when you’ve turned the corner. I’ll use real-life examples drawn from various case studies. The top areas I’ll deal with are Getting costs under control, Developing a lean machine, How to fire your worse clients, Developing a sales and marketing strategy, Partnerships, Innovating and changing the game. In putting this series together I’ve had amazing support from many people in the printing industry and will quote them extensively throughout the series. Here’s the first installment.

Getting costs under control and protecting your cash
The first step in turning around a dire financial situation is getting your cash under control. And this has to start NOW. There’s just no room for getting around to it tomorrow.
Dave Flach, from the Bassett Printing Corporation in Viriginia, says that if you don’t know how to manage cash, find someone who does, and who can also make the difficult decisions you’ve been having trouble with. Good cash management is critical and the lack of it is probably the catalyst for needing a turnaround in the first place. Dave also recommends that you look at your relationship with your bank. Granted, you should have been working on this long before the turnaround became inevitable, but unless you’re flush with cash, you’re going to need your bank on your side. Work with it so it will work with you. Get all the help you can. Pulling off a successful turnaround alone is a bad decision, unless you like doing it regularly.
Paul Wenum, president of U.S.-based ­Central Mercantile Collection Services, sent me a note about credit during these times. He states that “One point that must be stressed, that I see daily, are companies in distress that will sell to anyone to put a receivable on the books as a “sale.” In stressful times, granting credit wisely is one of the keys to getting back on track. A sale is only a sale, if the customer pays. If not, your time and associated expenses involved in the sale are wasted. Consider a credit advisor that understands credit/collections in your industry. It may sound simple and basic but your accounts receivable is one of the most important assets of your company. Keep a sound credit/collection system in place and it will keep you profitable if sales brings in quality business.”
Right size
Take a really hard look at your staffing levels immediately. In most companies that I work with, wages make up about 50% of the costs. You can work with various ratios on this to come up with sales per employee. Hopefully you’ll have been tracking that and you can determine what that ratio was when you were profitable. It won’t be exact, but you can use it as an indicator of your staffing levels. One of the companies I work with found its sales down almost 25% to $2,500,000. If you estimate that approximately 50% of your costs are labour then doing the math on this one is pretty easy. The reduction in wages should be in the area of $1,250,000 just to keep you in the game. I know these aren’t easy things to do but you just don’t have any choice. You have to make very, very difficult decisions and take action to keep your company alive.
Hard decisions on spending
You’ve got to postpone major spending until you’ve firmed up your finances. One of my clients was looking at getting into digital and was almost to the point of investing in a major piece of equipment. We couldn’t quite make the numbers work, but the vendor was clearing the machine out and the price was discounted by almost 50%. Of course the vendors’ sales reps made it look like we could make money on the acquisition, but it was another bite into cash flow that just had to be put on the back burner. The moral here is that no matter how good the deal looks on paper, I think you’ve got to slow down your spending until your cash situation is stable and predictable.
Paying down debt
Many of the firms that I work with or chat to are just way too leveraged. Banks look at their balance sheets and have to pass on even accepting applications for loans. One firm I know tried to get its loans refinanced and wasn’t able to get anyone to take a serious look at its request because of very poor financial ratios.
One of my favourite people in the print industry is Warren Werbitt, CEO of Pazazz Printing in Montreal. As Warren puts it “We had just finished a major expansion in late 2008 and I was feeling on top of the world. Who could have anticipated what was coming in 2009? 2009 brought the recession and absolute panic. The business world changed and the brakes were put on. Businesses stopped spending and people were laid off out of fear. This resulted in a chain reaction, causing other businesses difficult times. Banks got nervous and credit became scarce. Businesses were burdened and forced to act as banks for their clients. The pressure on the system was unbearable and Pazazz Printing got caught in the loop.”
I contacted Warren and Lori Cohen, his marketing director, and they gave me this “rear view” mirror advice. So here’s a closing quote from a team that is a­ living the cash crunch reality along with the rest of you. “There is no simple formula to remain profitable especially in the midst of a recession. Instead, I suggest you keep your eyes open and watch everyone and everything around you. Watch your clients and their payments closely. A few of our clients went bankrupt in 2009, which hurt our cash flow. Make sure you do not give anything away, keep your margins high and aim to be profitable. Run your plant lean and error free—every mistake costs. We need the banks to support our investments especially in tough times, but we have to remember that the banks need to protect their investment as well. A colleague of mine recently shared a quote with me by Mark Twain that I think is fitting: A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.”
Lorne Patterson saw managing director of Bowne's financiak printing operations across Canada. Since 2006, he has been a consulant to the printing industry. He lives in Vancouver, but heads to his second home in Puerto Vallarta whenever he can. Reach him at
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