Learning to start again – Print21 magazine article

Having been in a bit of funk lately about the state of the economy, Harry Brelsford now has reasons to feel rather more chipper. So much so that he’s starting to get those entrepreneurial juices flowing again. What would it be like to start a new print business now, just as the economy starts to pick up, and what lessons can be gleaned for those who have survived the downturn? Just imagine …

I was proud of my team. Everybody in the shop was working away, moving up closer to their keyboards, focusing intently on their computer screens as I moved around the shop. This continued for a while until I realised that they were actually trying to avoid engaging with me in conversation. I think I then heard something about midlife crisis and other uncomplimentary descriptions, possibly about my state of mind.

That hurt. I did not have a midlife crisis problem as I had been through that some years earlier, but I have to admit to experiencing swings between total optimism and dour pessimism. One day I would be proclaiming that the economy was out of the woods and we were on track to buy that new Canon digital press we are aiming for, then the next day I would be predicting the imminent demise of the free enterprise system as we know it.

Fortunately I realised that my outlook was not helping. My bad mood was not going to change how the economy panned out by one iota and it was not helping morale in the shop either. What I did in reaction to the changing economy could, however, make a difference to the success or otherwise of our business. We make our decisions based on information received, and very often this information is not relevant and may even be biased.

We may also be getting more information from one source than another which can lead to lopsided conclusions. We receive a high percentage of our business news from the USA and the UK simply because we have always done so. Besides, they produce more news in English than our newer but larger Asian trading partners. We take note because, traditionally, the US and UK economies have had a major bearing on our economy, and if what we keep hearing is how bad it is over there whilst hearing that our economy is in fair shape over here, it causes indecision.

What really matters is the state of our economy so I attempted to figure out what is really going on, what is really affecting us in order that we can make more rational judgements about the future of our businesses. Are we coming out of recession and how will other economies affect us?

Cause for optimism
I become optimistic when I see that, according to the NAB quarterly business survey, business confidence in Australia recently jumped to a seven year high. This is reinforced by the printing and local business media espousing a definite air of optimism that the economic clock has passed through the bottom of the hour and we are once again on our way back to a more sustainable rate of economic growth.

The stock market has made an excellent recovery from its lows in March of this year. Myer and David Jones have both shown sales and profit growth over the past reporting period while News Corp reported an 11 per cent profit rise. I don’t see many empty tables at popular restaurants around town either. These are all positive indicators.

If the worst is over then I can report that I have lived through recessions far worse than the current ‘crisis’ which, to my mind, is no more than a mild economic downturn with the ‘crisis’ part being in sympathy with America and Europe. Based on our current unemployment figures of 5.8 per cent, it has nothing on the 21 per cent rate of unemployment that we lived through back in the early 90s under the recession we had to have. That was a recession! In fact, back then, home mortgage rates rocketed to 18 per cent compared to the current rate of around 6 per cent.

The fact is, it is hard to have a recession whilst there is high employment and low interest rates, no matter how many times the word ‘crisis’ is used to push through some legislation or stimulus package.

I would concur that the printing industry has taken a hit, especially at the bigger end of town, but there are other factors affecting printing such as a shift to other media as well as the war on paper. Things will never quite be the same again in printing, that is for sure, but that is nothing new either; we are accustomed to change and many of us like it that way, which is why we are in this industry. Meanwhile, some smaller digital operators have fared reasonably well during the downturn. At Varsity Graphics, our shop on the Gold Coast, we are weathering the storm reasonably well.

Looking at the bigger picture, two of Australia’s major trading partners, China and India, continue their pursuit toward a more materialist, capitalist society and still have a long way to go before reaching our levels of saturation. In addition, Japan, with a flat economy for well over a decade, is still one of our major trading partners. This all bodes well for our coal, natural gas and iron ore exports used to build their infrastructure as well as manufacture goods that will then be exported back here and to other non-manufacturing countries. Our future looks bright for as long as demand keeps up and we are able to continue to ship out our raw materials.

Reasons for pessimism
Being realistic, there are claims that unemployment along with interest rates will continue to rise for some time. Meanwhile any ‘green shoots’ in the US economy seem more a result of short-term taxpayer-funded car and home buying incentives than any real growth in the private sector. In fact, their rate of unemployment has jumped to over 10 per cent even though the US President assured the nation earlier this year that if they approved the multi-billion dollar stimulus package, unemployment would not rise above 8 per cent. Critics are therefore claiming that the stimulus package has failed and solely grown the size of government, that you cannot spend your way out of debt and that the US is headed for economic Armageddon.

The cause of much of my pessimism is the fact the US, UK and some European economies seem hell-bent on economic self destruction with out-of-control government spending of taxpayer money, the likes of which we have never seen, yet we see no plans about how they are going to turn around their headlong charge to the edge of the cliff. The value of the US dollar is tumbling whilst gold soars in value, which some commentators argue shows growing investor insecurity.

The bottom line is that there is very little reason to be optimistic about the American and British economies. But does it matter?

A moment of truth
It took a while, and many have been saying it for some time, but it finally dawned on me that our economy is in fact disconnecting from the American and European economies. During the ‘crisis’, there has been constant comparison to the Great Depression which started in America and resulted in Australia having a higher rate of unemployment than the US. The big difference back then was that England and the US where our major trading partners.

This time around, our major trading partners are in Asia while the US and the UK are like old mates in denial before going into rehab for their out-of-control spending habits. Perhaps we should check back on them later.

The bottom line in this downturn is that our economy is doing better than just about any other in the western world. Why?

The fundamental reasons are that two of our major trading partners are now China and India with rapidly growing economies creating a need for our raw materials, plus the fact that our Government was the only one that went into the ‘crisis’ with cash in the bank. We also have a sound banking system with rules in place that prevent the banks from cannibalising each other.

The US mortgage crisis is the root cause of the current crunch but with crucial differences that prevented a similar situation from occurring here. Our mortgage lending in general has tougher rules and, whilst we are not happy about the current interest rate rises, one of the reasons for them is to prevent a housing boom and bust similar to what happened in the US. The bottom line is that our economy is sound compared to most and we need to grow our businesses in the light of this fact.

So how do we go about growing our businesses as the economy gains momentum?

Starting out again
During the ‘crisis’, I think many in the printing industry entertained thoughts of selling their businesses, but there were few takers. It is during the good times that we need to go about selling. But what if you had sold to a willing buyer a year ago, say you sold to a professional, business-savvy husband and wife team who paid you a fair price? I don’t often embark upon hypothetical situations so bear with me.

Let’s say that, after selling, you went on your trip around Australia and New Zealand and have now returned. Out of curiosity you drive past your old business and are amazed to see just how prosperous it appears. Don’t forget, many businesses have grown during the downturn. You stop in for a chat with the new owners to confirm that they are doing a roaring trade and you now regret selling. You have had a good break, you are feeling refreshed and figure that you could have done the same. After all, running a successful business is not rocket science; you have got the basics down pat and just needed to make a few changes, the same as the new owners. So here’s the hypothetical question: what would the new owners have done to turn your old business into a successful new enterprise? Could you do the same now as the economy starts to recover? It should be even easier in a growing economy.

Most of us know what needs to be done but our ideas go back out the door the moment we step through it as we get bogged down sorting out that job which is running late, the machine with a technical problem or the key staff member off with the flu. We are too busy putting out fires to do any fire prevention and need to create the mental space necessary to bring about the required changes. Not easy but it is the only path to growth; that old axiom holds true that if you keep on doing what you have always done you will keep on getting what you have always got. Make plans and implement them regardless of other distractions.

Here is a synopsis of some of the things that I believe a clued-up new owner would do to grow an old business.

First impressions. They would have evaluated the appearance of the premises, cleaned it up, modernised it, brightened the lights and the signage, taken the sticky handwritten notes off the walls and replaced them with professional signage. In other words, they would have made the place look new again, like a new franchise. At the very least, a new coat of paint and having the windows cleaned would have freshened it up.

Take a look at your premises from the outside and see what first impression it would give a new customer contemplating using your business. Would they be filled with confidence or would they have doubts? Even worse, would they get the impression that you are a low-dollar operation they could beat down on price? Walk in the door and what do you see? Does the business look professional, is it a like a new car dealership or a wreckers yard?

Equipment efficiency. The new owners would have reviewed equipment for functionality and obsolescence. Machines that are unreliable and difficult to operate would be considered for replacement with newer models. Unreliable equipment can cost more in repairs, lost orders and lost credibility than the monthly payments on new equipment. There would also be a review to ensure replacement equipment meets changing market needs. Now is a good time to buy new equipment with interest rates still low, but buy what you decide is right for you, equipment that will provide a viable return, not what the salesperson assures will make you a fortune. Consult with your peers and get stories from the field before signing.

The most viable equipment is not always the latest top-of-the-range model. Also separate out the costs by determining the cash price of the machine, the cost of finance as a separate issue, value of any trade-in and cost of maintenance. Do not buy equipment based on an all-in monthly payment and remember that rental agreements with easy upgrades to the latest model are never-ending.

Review client base. The new owners would also have reviewed the customer list and categorised it by annual spend. Key customers would be contacted and their needs discussed with assurances given that dependability and the ready-on-time rate would be improved, that quality standards were being raised and that prices would be maintained where possible. They would also advise these key clients that they are environmentally-responsible, recycling any waste and using paper made from sustainably-managed plantations where possible.

Customer needs would be reviewed with an attempt to establish future needs. New profit centres could be introduced such as mailing/VDP services, vinyl printing and cutting, large format printing, in-house graphic design, web design, marketing services.

Review staff skills and abilities. Staff skills and abilities would also be reviewed. Square pegs would be put in square holes, round pegs in round holes. The objective would be to build a great team in order to embark upon future growth. An incentive program based on growth would be considered. Without the right people you cannot grow.

Improve systems. Systems and efficiencies would be reviewed. If not already in place, management information systems would be introduced and existing systems simplified to cut out unnecessary administration work by production staff. If external sales reps were in place, a system would be implemented to draw leads and manage their appointments in order to keep them in front of prospective clients rather than spending valuable time chasing late jobs in the factory.

Raise quality and service standards. Quality standards would be raised in order to reduce customer dissatisfaction through substandard work. Service standards would be improved to increase on-time delivery rates and provide consistent customer feedback when delays are encountered. Remember that dependability is one of the key ways in which customers rate the performance of a printing business.

Implement a marketing system. Marketing strategies would be assessed and, if no marketing system was in place, one would be introduced such as monthly postcard mailers to local catchment areas and direct mail to existing and prospective new customers. Current customers would be analysed and similar sectors targeted. The company website would be reviewed and updated. Online ordering facilities may be considered.

Positive outlook. Most of all, running and growing a business during challenging times requires a positive outlook and confidence in our industry even though it is challenging and in a constant state of change. Printing has been around for a long time and is not going to go away anytime soon. It is simply a case of increasing your share of the available market. It can be done. Hewlett Packard and many other industry leaders started from scratch during the Great Depression. Surely we can grow our businesses as the economy climbs back to a more prosperous rate of growth.

Maintaining a positive outlook and motivating your team is probably the overriding factor in growing your businesses into the future. Practice optimism and avoid pessimism – the latter only results in you being called unpleasant names by your friends and it is bad for business.