Prepare for the boom and insure for the bust – magazine feature
If we knew what the demand for our services was going to be in the future then our businesses would be much more prosperous. If demand was to increase we could expand, if it was to stay the same we could improve efficiency and if it was to decline we could consider handing the keys to somebody and check out the employment section of our newspaper.
We always hear that saying, "if only we had known," when someone missed out on an opportunity such as not purchasing their premises or not buying that five- colour Heidelberg at auction last year. This is why it is always worthwhile to keep an eye out for indicators to what the future might hold.
Predicting the future is big business, it's worth billions of dollars each year. The whole stockbroking industry exists through trying to predict how certain shares will perform. The gambling industry exists because of people who think they can predict how fast a horse will run, which poker machine will pay out or where the ball will fall on a roulette wheel.
Of course the biggest winner in all of this is the Government through raking in billions of dollars in tax on stock market and gambling profits.
Is it all roll of dice?
Some would say however that the printing business is a bit of a gamble too and many continue in the hope that some new business is soon going to arrive through the door, and mostly it does. There are times when not enough new business lands in the in-tray but at other times we can't cope with the workload.
When not enough business comes in over an extended period we run into financial problems. A reduction in sales can occur through printing going to other media but those of us who survived the Internet and customers purchasing their own printers have adjusted to the new market. In a steady economy it is unlikely that the demand for printing will decline any more than its present level. In fact, there is growth in short run digital and offset colour printing, finishing and design services in the fast turnaround sector.
The future really does not look that bad. One reason we can run into trouble though is through increased competition but not many new printing establishments have opened in recent times. The major reason sales may decline now is through customers going elsewhere for reasons of slow delivery, poor quality or outdated equipment.
What goes down must come up
If we provide good service and our technology is reasonably up to date then we have a fair chance of surviving for the foreseeable future; that is unless we are hit by an economic recession. If we could accurately predict when the next recession is going to occur it would provide us with an advantage to counter the impending doom. With high oil prices, interest rate increases on the cards, war in Iraq, terrorism, avian flu and more, the mainstream media feeds us a diet of gloom, but what if an economic boom was just around the corner?
Changes in the economy often tend to happen when they are least expected. American multi millionaire John D Rockefeller is quoted as saying, "The way to make money is to buy when blood is running in the streets."
Many of us will recall, from just a few short years ago, the stock market technology boom and subsequent bust of gigantic proportions. We saw many who got burned and some of us got burned ourselves. "Stay away from tech stocks," is now the order of the day but it could be that we are writing technology off too soon, we may well be on the verge of a second technology boom.
If Google can do it, you can too
In 2004 Google went public and raised sums of money reminiscent of the recent tech boom but it looked like an isolated incident, they may simply be one of the few survivors from the late nineties who finally came through. Around the same time as the Google launch, Hewlett Packard shares took a dive and their CEO moved on but during the middle of this year HP's shares suddenly lurched upwards again. More recently I saw Rupert Murdoch's Newscorp hot on the trail of a number of technology companies. This was starting to look like a trend so I decided to dig a little deeper.
Some years ago I read a book by American Harry S Dent called "The Great Boom Ahead." I remember thinking that his predictions were the most accurate, if not the most publicised at the time, so I decided to find out what he is saying right now by doing a Google search. It was no surprise to learn that Dent has a new book but the title got my attention, "The Next Great Bubble Boom - How to profit from the greatest boom in History, 2005 - 2009."
Dent is predicting a second technology boom, stating that the same thing happened in the past with steam, electricity, the telephone and more.
What he says is there is an eighty year cycle in the emergence of radically new technologies, new economies, ways of living and doing business. He calls the 1920 - 21 crash (that lead to the great depression) a "tech wreck" because it occurred through the collapse of stocks involving technologies of the time such as rail and electricity. That crash was followed from 1922 to 1929 by the greatest stock market advance in history.
Right now Dent is predicting that the stock market will power ahead until around 2010 with technology stocks being a major player. In fact he predicts that the value of the stock market will more than double during that time. What follows is not pleasant, a prolonged economic recession from 2010 to 2020. That is ten years of tough economic times if he is right. More importantly, if he is on the money it means we have four years to build up and fortify our businesses for the long winter ahead.
The science of prediction
What Dent says is that predicting probable outcomes is becoming a science. With computer modelling we are much more able to predict variables such as the economy or the weather as we are seeing with predictions of where hurricanes will strike days ahead in the USA. There have been major breakthroughs in many types of science over the last 20 to 30 years brought on mainly by the computer revolution and the creation of massive databases which allow more accurate predictions.
One of the major tools used by economic futurists is demographics and one of their sources is data from consumer cards such as Fly Buys and more which allow modeling programs like US based TAPESTRY to project consumer spending down to neighbourhood blocks. Much of the data is based on our spending patterns at different ages and we all know that the baby boomers have high disposable income right now but we also know that they will be cashing in their "Super" in the not too distant future. Most superannuation investment is in shares so when the baby boomers cash in they could start a run on the stock market.
Harry Dent may or may not be right but in either event we could do worse than to prepare for a buoyant economy followed by a recession. This is enough reason to get our businesses performing at maximum efficiency.
What to do
If we believe that we are in for four years of prosperity then we need to implement measures to capitalise on increased demand.
Handling increased demand when we expect sales to fall off just a few years down the track calls for a firm resolve. The problem is when we are prosperous it is hard to imagine that tough times will ever come around again and we tend to expand with increased staff, new equipment and larger premises.
We have to expand to some degree or will watch the boom go by from the sidelines. The goal at the end of the day though is to increase margins rather than solely increase sales. This often means we need to focus on what we do best which is normally our most profitable area.
At the top of my list is firm pricing in the areas where we offer an advantage such as fast turnaround printing, urgent artwork and high quality short runs including matt coated business cards, gloss coated labels and more. In essence, we won't be in a hurry to succumb to pricing pressure.
We must also consider that during times of economic growth our customers increasingly demand faster turnaround times. This stems from new ventures with customers rushing to get their products and services to market ahead of their competition. This is where short run digital printers will benefit, especially if they can also provide fast turnaround design services.
There will also be increases in the call for finishing services as businesses continue to purchase their own high speed and colour copiers. Most find that the machines can deliver the required number of prints but then somebody has to collate, staple, fold or bind the documents and this is too much like hard work so they drop it off at their local printer. This work commands full price as there is no printing job involved.
Another thing we will be striving for is to keep our equipment and software up to date and debt free by the year 2010. Importantly, regardless of whether Harry S Dent is right or wrong we are going to stand firm and make our prices stick while the economy is strong.
There can't be much wrong with striving for these goals regardless of which way the economy turns.
Harry Dent may or may not be right but in either event we could do worse than to prepare for a buoyant economy followed by a recession. This is enough reason to get our businesses performing at maximum efficiency.
What to do
If we believe that we are in for four years of prosperity then we need to implement measures to capitalise on increased demand.
Handling increased demand when we expect sales to fall off just a few years down the track calls for a firm resolve. The problem is when we are prosperous it is hard to imagine that tough times will ever come around again and we tend to expand with increased staff, new equipment and larger premises.
We have to expand to some degree or will watch the boom go by from the sidelines. The goal at the end of the day though is to increase margins rather than solely increase sales. This often means we need to focus on what we do best which is normally our most profitable area.
At the top of my list is firm pricing in the areas where we offer an advantage such as fast turnaround printing, urgent artwork and high quality short runs including matt coated business cards, gloss coated labels and more. In essence, we won't be in a hurry to succumb to pricing pressure.
We must also consider that during times of economic growth our customers increasingly demand faster turnaround times. This stems from new ventures with customers rushing to get their products and services to market ahead of their competition. This is where short run digital printers will benefit, especially if they can also provide fast turnaround design services.
There will also be increases in the call for finishing services as businesses continue to purchase their own high speed and colour copiers. Most find that the machines can deliver the required number of prints but then somebody has to collate, staple, fold or bind the documents and this is too much like hard work so they drop it off at their local printer. This work commands full price as there is no printing job involved.
Another thing we will be striving for is to keep our equipment and software up to date and debt free by the year 2010. Importantly, regardless of whether Harry S Dent is right or wrong we are going to stand firm and make our prices stick while the economy is strong.
There can't be much wrong with striving for these goals regardless of which way the economy turns.