Page 53 - Print21 May-June 2020

Business Intelligence
especially B, as most business proprietors are used to running their own race. However, when one considers the
facts, the need to survive and to move to a sustainable new model, collaboration may be the best alternative for most commercial printers.
Why the need to collaborate?
We must accept that the world has changed and that nobody can predict what it is going to look like on the other side.
Opinions vary widely – what the decline may be, how long it will last for, and how fast and complete the rebound may be. NAB’s predictions have a wide variance between best- case and worst-case scenarios. Even one of Australia’s largest banks can’t predict the extent of the economic fallout of Covid-19.
The basic maths
If you have 50 per cent less commercial print, as per the figures cited earlier, you will not need all the staff and machinery that you currently have.
In fact, you need less than half because we already have an industry with under-utilised plants and staff. We also know that sitting
and waiting for anticipated volumes is one of our biggest dis-economies of scale.
Some may argue that when things return to normal the commercial print pie will be the same size. However, given the year-on-year decrease in volume over the past 10 years, we have constantly had our pie size reduced. I also contend that Covid-19 will only accelerate the reduction of the pie size even more.
This is because throughout the crisis, printers’ customers will have found other means to promote their goods and services. They will either not come back or come back with lower demands for print.
The effect of this could be shorter run lengths, reduced pagination, or a smaller range of printed products. Also, some markets will return to print faster than others.
The new norm, post Covid-19, may be a 30 per cent smaller commercial print pie.
The other reality
Many businesses were sailing close to the wind even before the pandemic. In my experience in conducting around 20 commercial
printing business appraisals over the past year, 80 per cent were trading
at less than a 10 per cent EBITDA (expressed as a percentage of sales). Any significant drop in volume will push such firms into the red – some significantly into the red and right out of business.
“These collaborations may not be easy
but can provide a business model that produces good profits and is sustainable, and at the end of the day, at the proprietor’s choosing, is a lot more saleable.”
and understand that there will be a lot of give and take to achieve joint success. Both need to understand that without each other, at some stage down the track, they may not have a business at all.
Summary
Most commercial printers are experiencing decreases in revenue of between 30 and 90 per cent. We don’t know how long this will last, how fast each business will recover this lost sale revenue, or whether sales will ever return to pre-pandemic levels.
Businesses will take advantage of help from government, and perhaps from landlords and suppliers. However, this may not be enough to avoid being unprofitable and they may have to tip more money into what may already be an unsustainable business model.
For those who want to avoid sale or closure, they need to consider entering into collaborations with other printers. These collaborations may
not be easy but can provide a business model that produces good profits and is sustainable. This model may also result in a business that is ultimately more attractive to buyers.
In these Covid-19 times, collaboration should at least be on the table as a strategy or a possible new business model. 21
What are the alternatives?
There are three main alternatives to collaboration.
First, businesses with good pre Covid-19 profits, that right-size their business throughout the crisis and trade through, may buy the distressed businesses (or parts of businesses) that will inevitably come onto the market to even out their sales.
Second, businesses with low/ marginal profits, or worse, beforehand might tip in more
money and punt again. However, post Covid-19 they may still have an unsustainable business model. Some of these businesses will then fall into the final category.
Third, businesses may merge, sell, close, or liquidate – some forced, some by chance, some voluntary.
There will be slight variations to these options above, but these will be the main alternatives.
Taking these points into account, isn’t at least an earnest discussion about, and analysis of, how best
to collaborate with other printers and producers worthy of serious consideration?
The end game
The main objective of collaboration is for each party to have a profitable and sustainable business. This
would mean they have a better chance to either pass on the business via succession or to achieve a much higher value when ultimately selling the business. With choice B the most logical purchaser may be the JV partner.
The difficulty with B is to get the two proprietors to put their egos aside. They need to be aligned with each other’s interests and objectives
Forward thinking
in new era: Richard Rasmussen, Ascent Partners
Need help? — What Ascent Partners offers
Ascent Partners is well placed and credentialed to facilitate collaborations, mergers, business sales, and acquisitions in the printing industry.
Track record and experience – Ascent Partners has delivered 80 business transactions, conducted more than 200 business appraisals or valuations, and has the means to dispose of surplus plant and equipment.
Network – The company has a highly developed a network of 2500 businesses in its database. It knows who’s who in the Australian print market.
Objective assessment – Ascent Partners can provide an objective assessment of your business, determining whether, and what type of, collaborations or other strategies should be considered. The company can also facilitate the matching process to other suitable businesses in this spirit of collaboration.
Next step – Register your interest for Ascent Partners’ matchmaking collaboration programme.
To register interest in finding a suitable business match, contact Richard Rasmussen at richard@ ascentpartners.com.au or on 0402 021 101. All discussions will be held in the strictest confidence.
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