Crouser & Associates Performance Group program helps printers prosper through
on-site assistance and twice yearly group meetings. 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. Current reports are on the WWW at http://www.printusa.com.

Question: Which Way To Go In Panama? Other Topics

Crouser Report OnLine April 24, 1996
Transmitted from San Francisco, California We found a bigger room, but we re still just about full. So, if you d like to be with us this Saturday morning, April 27th, in San Francisco call Clark at (304) 342-5100 right now. The session is FREE, but we you must PRE-REGISTER. If you can t make it, be sure to sign up for one of our other sessions: DETROIT, May 11th; ATLANTA, May 18th; CHICAGO, June 1st; MIAMI, June 22nd; and COLORADO SPRINGS, August 24th. Fax (304) 342-5187 or call (304) 342-5100 if you want to attend any of the sessions. See end of this message for more details. We start off with a request. Eugene Altieri of Panama City, Panama, wants to know which way to go concerning upgrading his imaging equipment. Please send me your suggestions for Eugene and we ll pass them along.

To: TomCrouser@aol.com
From: ealtier@pan.gbm.net


Tom - I am in a dilemma concerning which way I should go concerning new technology.

I now have a 600 dpi printer and a layout section which has a 20x24 vertical camera for making film negatives for metal plates and an electrostatic platemaker. Due to new obligations with my clients, I have to make simple color separations in house. I want to streamline and economize my graphics output to press, but I am not sure what technology I should use. I am told that there are various roads to follow. I will express my thought and I would appreciate your comments and ideas.

1) The cheapest appears to be getting a 1200 dpi, 11x17 printer and using it to make color separations. If I do this, I would like to take advantage of the laserplate technology to also reduce costs in output to press, but I don t know what printers you would recommend for this and I don t know how. Well, Laserplate technology works. One printer told me he had no luck with this but it was pushed at the graphics show in Miami.

2) A second method could be the installation of a silvermaster platemaker. I imagine this is the middle road as far as costs go, but I am not sure and I don t know what this technology is capable of and the better machines in this area.

3) Third might be an Imagesetter which I know is the newest technology, but I don t know anything about this technology nor what it is capable of or the costs involved. I m told it is the most expensive of these alternatives listed here, but I am also told that the technology is not well defined yet. I was looking at some table models such as the LaserMaster Imagesetter, but when I went to a printer who had one, I was not convinced concerning the quality of the output. However, the poor output may have been due to the knowledge limitations of the owner I how to use the equipment correctly.

Please let me have your frank input on this and let me know if there are alternatives that I am not taking into consideration and the cost benefit factor of each with your recommendations.

Eugene Altieri
Arte Grafico Impresores, S.A.
Panama


I dunno. Seriously, give us your input and we ll pass them along. Meanwhile, back in Kentucky, one printer wanted to know about refinancing loans. Now, that we do have an opinion on. . . .

Subj: notes what to do?
To: TomCrouser


Look at these options and tell me what you think I should do. The payments on the note for $38000 will be $850 per month for 60 mo.

Option 1 -

Option 2. - Refinance all 3 existing loans with note total $85000. payment would be approx. $1901.16 per month for 60 months.

Option 3 - Refinance loan 2 and 3 with note total 75000 payment would be approx. $1677.50 for 60 mos. Loan 1 of 508 per mo. plus 1677.5 would be 2185.5 per month for 11 months then 1677.5 for 49 months. Which option would be best for me to do? I believe I can get the bank to do which ever one we want.

What option would be best for our current ratio. Thanks and have a nice weekend. Which Option to choose? Option 2.
Here s why quickly and using some rough estimates.
Option 2 total payback $114,060.
Option 3 total payback about$106,000. Purpose is to get your payments down as far as you can go so you can conserve working capital.
Option 2 does this for you.


Option 3 has about $27,900 of current liabilities for the next 12 months then drops to $20,124.
Option 2 has $22,812 of current liabilities for the full term. It appears a wiser thing on the surface to take option 3 for you end up paying back less and not materially affecting your working capital ratio.

I see it differently. Your first year payback on option 3 is $27,900 and $22,812 on option 2. Go with the smaller payback. Get the loan payments down as low as you can go. When in doubt which is lower (as in this case), look at the first year payback.

Now, once the loan payments are down as far as you can go, accelerate the payments. Make more than one each month. This gives you the joys of paying off early and saving money. . . .but when times are hard, your payment is as low as you can get it. Option 2 is the one, in my opinion. Tom While we re talking about finances and stuff, Len takes exception to my comments about Equipment and Gambling. Specifically, Len questions whether I was talking about a current ratio or a quick ratio.

Subj: Quick Ratio - Current Ratio
From: LenPrntPlu
To: TomCrouser


Tom - Connecticut talked about quick ratio. You re answers were about current ratio. Did something get lost in transmission, or has the definition changed from 40 years ago when I was in school? If they are still two different things, how about a clarification. I think a 1.3 quick ratio is good enough for some(!) gambles. 1.3 current is a different apple of mango. Happy travels, Len Factor

Pardon the oversight. Yes, Connecticut did say quick ratio instead of current ratio. Different between the quick (or acid test) ratio and the current ratio is that inventories, pre-paids and some other current assets are removed from current assets before they are divided by current liabilities to obtain the ratio. However, even with a 1.3 quick (acid test) ratio, I don t feel this alters the jist of my comments since our target ratio for the acid test (quick) ratio is 1.5:1 which the company does not have. Here s Carl, who also comments on the same subject.

Subj: Re: Equipment and Gambling
From: CGERHARDT
To: TomCrouser


Tom - I have some comments regarding the equipment investment questions from the person in Conn. I think the analysis/cost justification needs further review. I just recently made a decision to add an Agfa system similar to the ECRM. The cost justification is based more on the time savings (1/2 person stripping and another 1/2 person in the press dept.). I talked to several people that have all but eliminated metal plates by going to the Imagesetter/computer to plate system. Most all of the service bureau cost is eliminated and if you are presently shooting silvermaster plates you save that time as well any internal stripping/platemaking. Further, most that have done it will tell you about the intangibles .....improved quality.......more competitive or greater margins (depending how you charge for former metal plate jobs). These intangibles are probably more important in the long run than the cost savings .

I have a $1500/mo. payment (bank financed $45,000). I figure the learning curve will mean negative cash flow of $500 to $1000 per month for 2-3 months. We should break even by the 4th month and be in a positive cash flow by the 5th or 6th month. We save $1000-1200/mo. in service bureau costs and another $1000-$1500/mo. in labor costs(stripping and platemaking/make-ready). There is also an argument for improved quality on half tones/screens and being more competitive (or keeping better margins) on former metal plate jobs.

I will really interested to see how others will respond to this subject. Other stuff I read in your previous newsletters were a big help to me, especially after a few well placed phone calls. Carl G.

Okay, upon further review (wasn t that cancelled in the National Football League?), equipment decisions based on labor (time) savings of people are only real if you actually reduce your payroll (less people). Otherwise, you are only investing money in equipment to allow people longer coffee breaks. (Very similar to the logic some salespeople use in convincing printers that they can justify equipment by taking work off of presses and putting it on copiers.) Any out of pocket expenses such as cost avoidance at a service bureau are real. Direct material cost reductions (eliminating metal plates and substituting lower cost material) is also real. As I indicated, we would look to other costs which would change such as direct materials; utilities; maintenance contracts and add them. . . . So, although I think I covered the further review items, your point of other considerations are valid. Unchanged, however, is risk is related to the ability of the gambler to lose. With an acid test ratio of 1.3, the company needs working capital. And, the proposed purchase wasn t solving the problem. The company s problem and greatest threat is that it doesn t have adequate working capital, not that they don t have a piece of equipment.

Bill Farquharson has written a book on digital printing. He makes you a unique offer:

From: BFARQ
To: TomCrouser


Tom - I would be interested in getting my book in the hands of some of your subscribers who are considering the purchase of digital print equipment. I would like to know if the book is of any value to them. I offer free books to the first five people who send me their addresses in return for honest appraisals and the right to use their comments. Thanks for your help.

Bill Farquharson, Print Tec Network
bfarq@aol.com


Send Bill a message directly should you wish to take him up on his offer or reply to me and I ll forward your information. Please include your mailing address and telephone number with your request. Here s a printer who is buying another printer. The other printer happens to have a fairly substantial business in office supplies. Here s his inquiry.

Subj: Office Supply
To: TomCrouser@aol.com


. . . .My question is regarding a valid Cost of Goods Sold for Office Supply sales. I ve segmented accurately the Office Supply Sales from Printing Operations Sales and can effectively calculate the target COG Sold for print operations between 28 and 32% ...but haven t been able to locate a valid range of COG Sold for the Office Supply side. . . .

Regarding the office supply cost of goods sold, I see them in the 60%+ range, but I don t know if that is really valid. The place I would start would be with an office supply trade association or talk to the office supply wholesalers who supply the company. Usually they have integrated systems and keep track even of dealer financials in some cases. Nevertheless, I see too much action in the office supply arena to be feeling it would be a good place to put money. Even the contract office supply business is getting hotter with the bigs buying up various contract office supply suppliers. Looks to me like the little guy will be low on the food chain.

At What Price New Technology?

In a message conversation this week, I talked with an owner concerned about what profitability would be like after his addition of new technology. He wrote The labor ratios I have been used to with a smaller center (lower sales), no outside sales and only conventional desktop publishing may not be attainable with the new model with new technology.

I understand the concept. In practice, I have found that the numbers don t vary that much, even up to the $2 million+ range. You are, of course, adding a new dimension with new technology, however the ratios should, I would argue, stay at least as good as they have been assuming we are not screwing up our pricing. Reason: the technological advances are labor savings devices (i.e. direct to plate as opposed to a more manual method). Now, what is done a lot is illustrated by a Kentucky printer who asked me, Been buying separations for $100 and charging $200. Now I can do it in-house and it only costs me $25. What should I charge? My response is $200. That will actually improve your labor/price ratio not reduce it. Now, I know you know this part. So, my question would be, Why wouldn t your new model be less costly for labor? Anyway, just a thought for you. Tom

Andy wanted to let Cy know that he could take care of those cookbooks also. Check this out, Cy.

Subj: Re: Hotline Cy: Door Openers to Books
From: Dependable
To: TomCrouser


Cy: Just to let you know that we also can produce cookbooks of the style you list. We specialize in short runs (under 2000 copies). In addition to Xerox 5090 work, we also have 5 Multi s and 2 AB Dicks (one of which with T-51 head). This enables us to offer color headings, etc. that are generally not offered by many copy shops. We also do our own GBC plastic comb, Velobind, wire-o double loop, and perfect binding. A great deal of flexibility for small quantities.

Hope this can help.
Andy LeWinter, Dependable Lithographers

(212) 675-0953



Steve Blatman asked about applying labels last week and we now have some answers. Here they are.

Subj: Mailing Hardware

From: LaserTed

To: TomCrouser



In response to the questions from Steve Blatman about applying labels. This is an area we are developing this year as well. A couple notes: He is exactly correct in his assessment that for automated installation pin-fed, one-up labels are the only way to go. If someone brought laserprinted labels I charge a significantly different fee. There is no good way (that I am aware of) to automate the installation of such.

For pin-fed labels as described above (printed from our Mac on our Imagewriter II - yup it s a little slow but at least it lets us participate in the market and offer the service) We use a RENA brand label installer. Our intent is to purchase an ink-jet direct printer in the future. This would eliminate the need to use labels as often. At that point the RENA will still have a function installing tabs.

Furthermore, if the client provides the data in disk form (with the printer s purchase of appropriate software and the use of the printer s Bulk Mail Permit) you can save them significant sums on the postage - Helping your client recoup some of the costs of having you prepare the mailing for him - as well as freeing them from the drudgery of hand-preparing the mailing and then shipping it at the much higher first class rate.

Additionally, with the POSTAL RATE REFORM (billed as the greatest restructuring of the postal rate system in over 100 years) now in the works, there will be additional drive toward having professionals prepare bulk mailings. Essentially there is going to be a greater spread between bulk mailings prepared by individuals and bulk mailings prepared by professional Mailing houses. (Which Quick Printers should become - I can say that here as I see none of my direct competitors read these missives). The main difference, as I understand it now, is that mail prepared using more sophisticated software that adds the +4 Zip and Bar-codes the mail for automated sortation will get a lower rate than it does now and bulk mail without the bar-code will get a higher rate than it does now. Thereby creating a wider margin for mailing houses to work with.

Additionally there will be fewer rates, thus hopefully, simplifying the whole process. (would that be asking too much - for the government to actually make something simpler?) However it will be a mess during the transition. It is supposed to start hitting the ground July 1, 1996 with full implementation to take 18 months.

More info? Ask questions and I ll respond to my level of experience - and what I don t know I ll make up :)... Ted

Thanks for your input Ted. Here s another. Subj: Labels

From: Carolyn12

To: TomCrouser



Re: continuous v 33 up--we charge double for 33 up labels if we can t get the labels on disk. I don t know of any equipment that will handle laser and I ve asked every vendor I ve come in contact with and I ve attended Postal Forums looking for that type of equipment. Carolyn Grieves

And we have had a few comments on the subject of the folder raised last week. Here s the feedback.

Subj: Re: Folder Needed

From: RayANDREWS

To: TomCrouser



For $6,000 we picked up a reconditioned/used Baum M1 17 x 22 floor model folder with a roll away right angle. Like good presses, these folders just don t show their age. After struggling for 5 years with both the friction and air version of the 714 (bought new, for about the same money, to get right angle folding), I would strongly urge this way of going. It works so smoothly that waste is significantly minimized. It offers so many more options (perfing, scoring or slitting with the folding operation and 48 different ways to fold a sheet of paper) we were truly amazed. It perfs, scores and slits with the flow of the paper, of course, but recently we ran a large order for an 8.5 x 11 C-folded 65# vellum 2-up on an 11 x 17 sheet and slit as we folded saving appreciable time and effort. PLUS, it gives a much more precise and neat fold that produces visibly increased customer satisfaction. Also, it will fold any cover stock that goes through the press (scored for most, unscored for things like 65# bristol). Especially, if you can get the Rollem setting controls, it is easier to set up precisely than the 714 (these are the adjustments where you simply slide a sheet of the paper you re folding into slots and it sets up for that thickness (2 sheets for the second fold, etc.). And it won t bump out of adjustment, short of an earthquake. This is one area I found (the hard trial-and-error way) where it s easy to be penny wise and pound foolish.

Subj: Re: Folder Needed
From: Mussalli
To: TomCrouser


Tom, I have Baum 714 air and there friction feed right angle both work fine. Fact is I upgraded from the friction feed to the air feed. Your client should look at their folding requirements, meaning the size of folding jobs, type of stocks run etc. before deciding the type of folder. Saleem

Subj: Re: Folder Needed
From: JeffAtGPA
To: TomCrouser


I have a Baum 714 friction feed that I will probably be selling in the next few months. It has been a reliable piece of equipment, but we are going to buy a floor-model folder. Interested? Give me a call.

In Conclusion. . . .I couldn t let this week go by without this little sales call send off about cold calls. I know cold calls get a cold shoulder in the printing industry, but any sales person who is a professional looks for every chance to throw themselves in front of people who buy printing. Here is comments from one client we visited two weeks ago. Pamela, the blonde grandmother who accompanies me on-site, works extensively in this account with the sales rep and they happened to have been doing some of those dastardly cold calls.

Our friend reports. . . .

Tell Pamela that one of the cold calls the one to the (Name) Truck Lines ordered 3 jobs today at full price. Boy did (the sales person) dance tall. Thanks again.

When I told the blonde lady about the good news she said, And just think. The customer told us he was buying printing from the printer who we knew was the lowest priced printer in town. The sales person felt there was no chance they would get any business- - -but they did. Morale: MAKE THE DARN CALLS and you get business.

Happy Trails, Tom Crouser

1996 Power Pricing Seminar Featuring Tom Crouser s Pricing Systems With Special Comments On the 1996 NAQP Price Survey sponsored by Crouser & Associates.

Especially For Shops With Less Than 14 People Coming to:
Atlanta, May 18th
Chicago, June 1st
Detroit, May 11th
Miami, June 22nd
Colorado Springs, August 24th


Spend Saturday morning (8:30 -12 noon) with Tom Crouser and learn:

The 5 Strategies Of Printing Price Competition! These are the only ones available to you! Learn what they are and begin using them to increase your profit!

The Real Secret To Making Money In Print Shops- how to make lots of money with either a high or low price.

How the Printing Price Calculation Keeps You Poor - Using production standards for estimating, as most computer estimating programs do, keeps you from earning a decent living.

Calculating Your Costs the Easy Way - Learn two rules of thumb which allow you to quickly estimate a cost rate for anything you do!

Why Pricing Is Screwed Up In Printing - Why the price paid depends more on your negotiating skills than on your job cost. See how you do.

Cost, Pricing and Estimating - See how the differences in each may be costing you lots of money.

Plus! How the Crouser Method gets better prices! Throughout the session, Tom will use tools he has especially developed for the printing industry. See the new Crouser s Quick Estimator in action!

Using Customer Service To Get A Higher Price - An example of non-price competition you can hear.

Learn Where Printing Prices Come From - Tom relates a brief history of pricing in the printing industry. You will find it fascinating.

Also Hear Tom s Own Analysis of the results of the 1996 NAQP Price Survey sponsored by Crouser & Associates.

TO REGISTER: Email TomCrouser@aol.com with your name, address and telephone. You will be contacted regarding the meeting site. Or fax your reservation request to (304) 342-5187. Or call (304) 342-5100. The session is FREE but a ONE WEEK ADVANCE registration is required. Act now. BACK ISSUES May Be Found at the National Association of Quick Printer s America On Line Site (keyword: NAQP, publications, Crouser Report) or on the internet at the PrintUSA web site (http://printusa.com/articles/crouser.htm) or on PrinterNet. Hey, do we get around or what?

Crouser & Associates - Helping Printers Prosper Since 1985

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.

Return to Crouser Index at http://www.printusa.com/articles/crouser.htm

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