Little guys punch above weight: Print21 feature

For years it looked as if the small- to medium-sized printers who make up the bulk of the industry were down for the count, beaten to the punch by the low-hitting tactics of the ‘big boys’. But now that these heavyweights have been knocked out of the ring, it’s time for the little guys to rise once again and show that, when it comes to printing, they are the strongest of all. Andy McCourt salutes the power of the plucky little SME.

Statistics from Printing Industries show that 85 per cent of Australia’s and New Zealand’s printing companies employ less than 20 people; only 4 per cent employ over 100. The rapine of well-run and profitable SME printing companies that began in the early 2000s focused attention on mega-conglomerated printers. With over 1,000 employees, these private equity-backed behemoths turned SMEs into VLEs (Very Large Enterprises), and then into SNEEs (Stuffed Non-Existent Enterprises), with most of the fragmented wreckage being turned back into SMEs again by receivers.

Some industries are just better off being majority run as SMEs, and all of the evidence points to printing services as being one of them. For sure, the top-end of web printing benefits from scale and press power, so IPMG and PMP are well-suited to be in the ‘4 per cent’. The franchises, Snap, Kwik Kopy and Worldwide Online, operate under a different model but at the heart of it is the ethos of SMEs, each branch being its own business with a ‘Mom and Pop’.

What is an SME?

The definition of SMEs in Australia and New Zealand varies according to who sets the criteria. The ATO looks at turnover while the ABS looks at number of employees. However, the following combined data is a pretty reasonable guide:

• Micro-enterprise: Zero (i.e. ‘one-man-band’) to 9 employees; assets under $200,000; annual sales below $2 million.
• Small enterprise: 10-49 employees; assets under $5 million; annual sales up to $15 million.
• Medium enterprise: 50-200 employees; assets up to $20 million; annual sales up to $30 million.

It is important to note that SME definitions can vary between industries and countries. In the USA, for example, a company employing 500 or fewer people is considered ‘small’.

Before digital presses, the printing industry could be more easily defined by the types of presses deployed. If you were running AB Dick, Itek, Heidelberg TOK or Gestetner presses, you were definitely a ‘small offset’ printer limited to SRA3 sized sheets. Australia had its own small offset trade association, magazine and exhibition (INSOprint) up until the mid 1990s.

The origins of print franchise chains is to be found in small offset. When Stephen Penfold started Kwik Kopy in 1982, the franchisees would install Itek presses and either paper or Silvermaster plate making as the print runs were rarely above 5,000. Before that, a former Kenyan colonial police officer named Paddy Thompson helped establish and grow the Snap Printing chain in WA, ironically a spin-off from a large printer – Imperial Printing Company. Many will recall their advertising featuring cartoon rabbits and the slogan: “Only Snap Can Reproduce Faster”. By 1990, Imperial was sold off and Snap stores proliferated across Australia and internationally.

In some cases, fortunes were made with ‘instant’ printing and many jumped on the bandwagon, such as Pink Panther Printing, Posh Print, Minuteman and others. These print stores all had one thing in common – they were micro and small enterprises run by the owners under an umbrella franchised brand and, in the main, they were very successful.

 Size doesn’t really matter

The printing industry’s obsession with size and grunty big equipment has blurred its financial vision to a considerable degree. Medium to large printers who are smart enough to make profit from their output employ sophisticated costing methods and are well aware if they are making or losing money as the sheets or webs fly through the presses.

On the other hand, those who chase growth, market share and the latest, fastest presses above fiscal sense, end up exactly where we have seen them arrive in the past 12 months. A recent quote from the man, Andrew Price, who is currently re-engineering PaperlinX into a profitable company, is a pearl: “When I can pay my electricity bill with market share, I will consider it a reasonable statistic.” What Price is saying is that he would prefer a smaller but profitable PaperlinX to a huge but unhealthy one.

Which brings me to a remarkable discovery: SMEs are actually stronger than large corporates – if they play their cards right. We are in an era that favours SMEs and the printing industry is no different. No longer are people impressed by a sales approach from ‘HugeCo Print’ based on its size and capacity. The market is responding to relationships, passion, service levels and, of course, competitiveness – all of which are strengths of a well-run SME.

Six SME strengths

Passion: SME teams are typically passionate about what they do because they have to be. Houses, livelihoods and self-respect are on the line. It’s hard to be passionate about a corporation that has just fired 500 of your colleagues. Check out the book Killing Fairfax by Pamela Williams for example. What happens all too often in larger corporations is that the ‘manure’ rises to the top, we end up with overpaid time-serving dickheads in control, a toxic work environment, conflict and then failure. A well-run SME will inculcate passion into his or her team and everyone will be happier. It’s also a fact that sickies and bludging are rarer in SMEs, or at least they are discovered sooner.

Industry knowledge: Large corporates are expert at hiring someone for their experience and knowledge and then telling them to forget everything they know and ‘do it our way’. SME operators are invariably knowledgeable in their field and also share that knowledge and encourage employees to upskill and gain more knowledge. Leveraging this knowledge is an art form.

Speed to respond: SMEs are by nature fleet of foot and can, or should, be much faster to respond to customer requests. Often the buck stops with the person speaking with the customer, or they are empowered to make a decision. Large corporates often create an atmosphere of fear that prevents good decision-making “in case it costs me my job”.

Better cash-flow management: Unless you are a reckless SME, you should be able to hold a much leaner balance sheet than bigger corporates. Banks like lending whopping great wodges of cash to big companies because they make so much profit out of it but it burdens the balance sheet, dries up cash flow since most resources go into servicing the debt and starves the organisation of needed investment. A good, sound SME will know their financial position as well as they know what they owe on their home mortgage and how much is left over each month after essential expenses. Dealing with many smaller accounts is better than getting stung by a major one that goes broke owing you heaps. In printing, W2P, PayPal and other online trading is an absolute Godsend – do it!

CRM: Customer relationships are always closer with SMEs. You can have all the fancy CRM software in the world but “Good morning George, how’s the new house going?” will go much further because customers are people first. Because printing is such a personal service, CRM should be the foremost priority for SME printers and it is something large corporates find hard to maintain. Advantage SME.

Technology adoption: SMEs can adopt new technologies – not just in print production – almost immediately. I’ve seen representatives of larger corporates using five-year old laptops and plain vanilla phones because update expenditure for tablets and smart phones is ‘not approved’. There is technology now available to SMEs would only have been accessible to large corporates 15, 20 years ago. Computing power to run a business is available from Harvey Norman and you don’t need to establish a troublesome IT department. Sorry, but many IT caged animals I see in large corporates are uncooperative, arrogant, neglectful of the needs of marketing and sometimes downright rude and unfriendly. Small networks work better than mega-networks; in an SME, everyone is their own IT department and can work with the most efficient applications.

Small is beautiful

The generally accepted advantages of large companies are shrinking. Thanks to social networking sites, such as LinkedIn, finding and building relationships with decision-makers is becoming easier. Cloud computing can minimise overhead and infrastructure constraints and thus favour small businesses.

With effectively deployed CRM tools, the ability to keep your customers connected to your business no longer requires a large support staff. You no longer need to hire a full-time accountant, lawyer or marketing professional to be competitive. There is huge growth in outsourced professional services and many are very experienced as mentors, coaches or guides.

These changes are to SMEs’ advantage. The playing field is becoming more balanced. Your unique strengths, however, are what make you better than the rest. Play on those.