The green, green pastures of home

August 1, 2005

Johnson’s World by Steve Johnson

The year is 1985: Two plumbers prowl through a print shop where their task is to install new piping for compressed air. They’ve just entered the pressroom of foreman Steve Johnson. The plumbers stare at the busy operation.

"You mean these guys just stand around all day watching the paper come out?" one asks. "Gee, what a life!"

While the plumbers install copper tubing, a pressman approaches me. He has been struggling all morning with paper that’s more suitable for training puppies than for offset printing. "Just look at those guys," he says, indicating the pipefitters. "All they do is stick tubing together all day. Gee, what a life!"

The year is now 2005: A print broker sits at a conference table in the office of digital printing executive Steve Johnson. "It’s really competitive out there," he shares. "So, I’ve been doing research. It will be a lot easier to sell variable digital printing. That’s where all the action is now. From what I’ve read, the profits are huge!"

I smile faintly at this remark, the same silent smile I gave the plumber twenty years before. The grass is always greener on the other side of the fence. And the other side of the fence generally is in someone else’s pasture.

Nonprint wishes and ancillary dreams

A great misconception haunts the printing industry. It returns as regularly as Halley’s comet but wears a new disguise each time. Call it "Green Grass Syndrome." Its basic premise is that you just can’t make money in printing, so you must make it doing other things. This belief currently masquerades under the guise of "ancillary services."

The misconception is as old as printing itself, dating back to the days when Ben Franklin became an almanac editor, or even to when Gutenberg entered religious publishing—all in the name of keeping the presses busy. (I wonder if overcapacity was a problem for old Johannes?)

Profits? What profits? It’s true, our industry’s margins are abysmal. The PIA ratio study "profit leaders" are basically those who managed to turn any profit at all. This is why publicly-held printers are ignored by Wall Street. Profit margins that look good to us simply aren’t worth the time of most investment bankers.

To Wall Street, our "big guys" are very small, with marginal returns in good years and staggering losses in bad. High risk, low reward ... Say, why do we do this, anyway?! No wonder credible experts espouse nonprint services as the only hope for profitability.

Done properly, adding services works. But before you jump the fence into those greener pastures, consider a few factors. Everything has a cost. Have you computed the true cost of services you are adding or currently providing? Often, ancillaries are given a "free ride" on the back of printing operations.

It begins: "We have 2,000 sq. ft. of empty warehouse. We’ll offer longterm storage at a reduced rate, then add fulfillment and distribution services. The cost of this space is already figured into our overhead, so any money we make filling it is gravy."

True, sort of. If your print pricing is accurate, the cost of the empty space is being carried by your prepress, press and bindery activities. Warehousing printed goods for customers will bring in money you didn’t have before. Cash flow improves. End of story? It is if your goal is to grab market share in the warehousing business.

That space isn’t free. Once you decide to offer this service, overhead charges must be rebalanced. This means your print and bindery costs actually should go down. This isn’t price cutting, it is reallocation. The newly offered service of warehousing must carry its full weight, making you more competitive on the press. That is the idea, isn’t it?

Driven to distraction

Adding services often is a pet project of the CEO, and it benefits from highlevel involvement. Any new initiative requires much time and attention from top management to succeed. Before proceeding, be sure this is a good thing. What if the president dropped the idea of ancillary services and instead devoted his or her time to making the core business of print more profitable? Now, there’s an idea.

What is going to be different? If management can’t figure out how to make money in printing, what is going to be different about ancillary services? There is no magic service or product line guaranteed to enhance profits.

Inept management can render profitless any ancillary service—be it creative design, asset management, variable information, or inventory and fulfillment. Conversely, if company leaders have the skills to make ancillary services profitable, why not bring these skills to bear on the company’s core business?

Postponing ventures into seemingly greener pastures means the time and resources saved can be focused on cultivating your own fields.