Crouser & Associates Performance Group program helps printers prosper through on-site assistance as well as twice yearly group meetings. Reply to this message for more information by Email or call (304) 342-5100. Crouser Report OnLine is the Copyright Thomas P. Crouser. Material may not be reproduced in whole or in part without written consent.

5 Reasons Printers Stay Poor

Copyright Thomas P. Crouser, November 20, 1995 Crouser & Associates - Helping Printers Prosper Since 1985

Had the opportunity to keynote the New Jersey Association of Quick Printers Northeast Regional Printing Expo last Saturday. Here s some of the highlights of the speech.

5 Reasons Printers Stay Poor - We don t understand that we are a Family-Based, Life-Style Business Engaged In Monopolistic Competition.

Family Based - the assets which create this business come from the family, not from selling stock on wall street. Our family s savings, our family s future, our family s time, our family s patience. Whether or not you work on a daily basis with your spouse or children, the leader of the business is in charge of the family business and he or she must be accountable to obtain a good return on investment. And, by the way, if you haven t recently thanked your spouse then do it now. Cowabonga dudess, I couldn t have done it without you.


Life Style - There is not a pot of gold at the end of the rainbow. The way to get the most for a printing business is to sell it to someone who is not in the printing business. We regularly ignore the ending value of the business in retirement planning. And, if we get a lot, then that s a happy surprise. But, we don t count on it. This is a Life Style business. We must take the money and time now, not later. It doesn t come later. If you have a problem with respect to money or time, then fix it. Fix it now. You are in charge. Don t deny your family the time and money they deserve because you won t confront the challenges of the business.


Monopolistic Competition - Most people don t know what the battleground looks like, therefore they don t succeed. They have bought into the misconceptions of the law of supply and demand. They say as price goes up, volume goes down. Therefore, you have to sell for less in order to succeed. This is not only not true, it is not even what the economic theory says.


There are supply and demand THEORIES, not theory. Each theory relates to the KIND of competition inwhich we are engaged. PERFECT COMPETITION is the one where the price has a direct relationship to the volume (and even that is imperfect). We use wheat as an example. It assumes the product is the same (homogeneous), all buyers and all sellers know all prices as they occur (perfect information such as a stock market ticker tape), and no scarcity. Well, not all printers can print well, buyers and sellers don t know of all prices and there is plenty of scarcity when a customer needs the job printed by tomorrow afternoon.

There are other conditions as well, such as MONOPOLY and OLIGOPOLY. Monopoly is like the power company. There is only one supplier. Well, it is interesting, but certainly doesn t describe our battleground. OLIGOPOLY is where there are only a few folks fighting over the entire market (do you realize there are only three multinational corporations controlling the entire Turkey market!). The example used here is automobiles as there are only a relative few providers. Certainly this condition does not exist in the printing industry.

Well what does describe printing? MONOPOLISTIC COMPETITION does. It is characterized by some entry barriers but there is a relative EASE OF ENTRY and exit into the market (if you want to get into the printing business, there are many vendors waiting to help you with equipment and supplies on an easy payment plan). It is also characterized by SIMILAR COSTS. Right, I know everyone says they are different. But, what price advantage do you get really over the next guy in buying equipment? How about paper? Do you have such a price advantage, or is most people in the same market paying roughly the same amount? How about rent? How about labor? There may be some slight advantages, but not many. Face it, our costs are similar to our competitors. In addition, our PRODUCT IS SIMILAR while not exactly the same.

The reason this lack of information keeps printers poor is WE ASSUME WE ARE DEALING WITH A DIRECT PRICE VOLUME RELATIONSHIP WHEN WE ARE NOT. We don t usually understand the battleground.

In Monopolistic Competition, there are ONLY THREE SHORT TERM STRATEGIES one can use to compete. They are:

It is the COMBINATION of PRICE, PRODUCT and SALES ACTIVITIES which is your price strategy. There are good strategies and bad.

High or Low Price, Adequate to Excellent Product and NO SALES ACTIVITIES is a strategy for disaster. Lowering the price from High to Low without a change in sales activities simply reduces the total dollars you take in without reducing your costs. It is not the high or low price which is important.

High or Low Price, Adequate to Excellent Product and A HECK OF A SALES EFFORT is the strategy for success.

REASON ONE: Printers are poor for they do not understand they are engaged in MONOPOLISTIC COMPETITION and do not know how to compete in this arena.

REASON TWO is printers think the price has to do with profitability. It does not. No study to my knowledge has ever claimed this. Build a $500,000 box of overhead and labor and fill it with $300,000 of printing, and you will lose money. You will lose a lot of money,. Fill it, through sales activities, with $500,000 in sales and you will make money. Fill it with $600,000 in sales and you will make lots of money. And you are in charge of the box you build. If it is not working now, fix it. You are the leader of your company.

REASON THREE is we stubbornly refuse to learn the truth about WORKING CAPITAL and use it to our advantage. As people die of mostly of pneumonia even though they have other diseases; businesses die when they run out of working capital. Find all of the assets in your business on your balance sheet. See what the CURRENT ASSETS are. If you don t see them on your balance sheet, then tell your accountant you want a CLASSIFIED Balance Sheet. If you don t have an accountant, get one. If you have one who doesn t know what I am talking about, then get another one. Once you find the Current Assets, then divide that by your CURRENT LIABILITIES. That, too, should be showing automatically on your balance sheet. Here you are dividing the amount of cash you will have during the next year by the amount of cash you have already obligated yourself to pay during the next year. GET THE RATIO TO 2.0 to 1 and keep it there. Businesses die for lack of working capital. It is more important than profitability. It is more important than equipment. DON T SPEND YOUR WORKING CAPITAL FOR EQUIPMENT.

REASON FOUR is WE DON T JUSTIFY EQUIPMENT, we desire it. Buying equipment is an investment decision. WE MUST COMPARE ALTERNATIVES in order to see what is the best investment. As such, we must compare all alternatives at the same time, usually once or twice per year. The operating budget tells us how much cash we are spinning off. If we are not building cash, stop and fix it. Do not go forward. If we are building cash, then we look at working capital. Do we have a 2.0 to 1 ratio. If so, we can spend the amount of money which is above the 2.0 on equipment or whatever we want. If we don t have a 2.0 ratio, then stop here. Do not go forward until your current ratio is 2.0 or better.

Then we put into play a couple of other factors. Retirement savings. Educational savings for the kids. Additional income for the owners so they can buy the bigger house. And equipment. That s what is competing for the money being spun off by the business. Each of us must decide what is most important and prioritize. We prioritize based on what will be the best investment and there are mathematical ways to do that.

To justify one piece of equipment at a time is to lust after it and your justification is no more than investing in a dog at the dog track.

THE FIFTH AND FINAL REASON printers stay poor, in my opinion, is that WE HAVE TOO MUCH MANAGEMENT and NOT ENOUGH LEADERSHIP. Too many printers try to build a perpetual motion machine which allows them to earn lots of money without doing real work. We look for a silver bullet incentive plan which will make our slovenly employees do their best without us having to actually supervise and lead anyone. We look for that specific price which will allow us to maximize our income without having to really sell anything to anyone. The silver bullet isn t there. You can t manage people into battle, you must lead them. That leader is you. Never give in on a worthy cause.

Tom Crouser

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Crouser & Associates Performance Group program includes two on-site evaluations by Tom Crouser each year along with two group meetings. Management training is held during the group meetings along with participation in a meeting with non-competing printers. Join others who have decided to run their business instead of the business running them. Reply to by Email to Tom Crouser for more detailed information or call Clark Workman at (304) 342-5100. Or fax (304) 342-5187 or contact crouser@ibm.net.
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