Ancillary or essential?

February 1, 2007

Johnson’s World by Steve Johnson

Recently, I compared printing to railroading, to caution readers about the dangers of claiming to be something you are not. Here’s the first response I received: “Awesome column in the December issue! Loved it. I’m so sick of the ‘communications business’ and printers insisting that they’re not printers—as if there’s something wrong with being a printer.”

Thank you. My sentiments exactly.

Call me ‘Mr. Hogwash’

At the National Printing Equipment and Suppliers (NPES)’ regional meeting in Chicago this January, I served as a panelist with three other printers. The audience raised the inevitable topic of “ancillary services.” Buoyed by the encouraging response to my column, I jumped on my soapbox and the fun began.

When I branded the present-day fixation with ancillary services “hogwash,” I assured attendees they wouldn’t soon forget that morning session. Of course, I might never be invited back; if I am, doubtless I’ll be introduced as “Mr. Hogwash.”

Where does your new service fit in?

I shared with the audience that only eight percent of my firm’s revenue is generated from ancillary services. The next panelist estimated 35 percent. Another declared 65 percent (!!) of his income to be from nonprint, or ancillary, services.

Our printing companies are all very different, but the real chasm in the percentages was caused by the way we each define and measure ancillary services.

I’m no longer sure what anyone means by “ancillary.” I can’t speak for others, but I can clarify what I mean and why I urge caution before embracing ancillary services as a quick fix for sagging profits.

Will the ancillary service increase your printing success? Is it a natural extension of things you already do well? Will your clients order more print because of the new service you’re providing?

To know for sure, you need to develop a clear business plan for your new service or product offerings, including feedback from current clients and prospects. You also have to analyze your costs and invest the necessary time and resources to do it right.

If after taking those steps, you can answer, “Yes,” to the above questions, great! I support and encourage such moves. Of course, if something fits that well into your current business, I wouldn’t call it an ancillary service.

Defining ‘ancillary’

My fellow presenter (of the 65 percent nonprint revenue statistic) shared a case history in support of ancillary services. He spoke of many of the usual topics we hear at conferences: creating a Web portal for a customer to order printed products, replacing a manual phone order system; automating order and print processing; warehousing finished customer product; picking, packing and fulfilling orders direct to the end user.

His point? Print was secondary to all these others services the customer was looking for. Oh, yeah, he almost forgot to mention that print volume for the client in question increased tenfold as a result of these “ancillary services.”

This story is a great example of doing things right. I’m 100 percent in agreement with every step this printer took. In fact, my own company does all of the above.

Where we diverge is in accounting. My fellow panelist will report nearly all of the above activities as “ancillary services.” The only print he counts is the actual presswork done under his own roof.

When engaging in the same activities, I book nearly all as print, because it is all part of my print workflow stream. The only activity I’ll separate in the above scenario is warehousing and inventory management.

Same project, same results. Two very different statistics used for ratio studies and financial statements.

Are you considering adding an ancillary service, or more than one? Start by asking questions. If a service fits into your business as well as the example shown here, it isn’t ancillary. It’s essential.