Reader asks if I have any thoughts on their situation. Well, yeah, I do. Owners shouldn’t retire in place and they shouldn’t retire and expect someone else to run the place successfully either. Here are the details:
Reader writes: Tom, I’ve been getting your emails for some time now. The topic “When to Quit your Business” hit home and made me delve into your information.
I work/manage a small commercial print business for 16 years now. My husband’s uncle, who is retired, is the owner. He is old school commercial printer, getting in with greeting cards, desk calendars and holiday labels and then expanding the line to include financial products sold nationwide to financial institutions.
Well I can always remember him telling us (group of 4 full time and one part time employee – well over 50 years of experience) that if the financial industry was ever in trouble ….
Well 3 years ago what happens? Yep those folks are folding all over the place. We basically sell “advertising” marketing pieces … What gets cut when times are tough? Yep, advertising.
We still utilize offset printing in our shop. We have yearned to get into the digital printing end, however financially we just could not sustain the investment needed. We currently run at around $250,000 in sales and yearn for the days of $500-$750,000.
Realistically much of the product we have sold is now being done digitally much cheaper than we could possibly compete with. (Vista Print comes to mind) We have a firm plan of going back to each customer in approximately 8-10 months after their order to ask about a reorder.
In our heyday we did a lot of direct mail marketing, but our budget and the results could no longer be sustained. We now do much more email marketing and discount promo emails are our favorite way to entice immediate orders. We’ve learned a direct and personal email does much better than the bulk type we started with. So, that’s the story in a nutshell.
Any thoughts?
Tom’s Response: Well, yes. I have some thoughts. Let’s break this down into smaller pieces.
<< I work/manage a small commercial print business for 16 years now. My husband's uncle who is retired is the owner. >>
Well, that’s a problem in my book. He’s retired and he’s the owner. Now, I’m not advocating this but what if everyone quit or at least key workers quit? Would he unretired or just shut it down? Usually, that happens after a while and the owner just shuts it down.
A better choice would be for the retiring uncle to sell the business to the successors (someone usually in the shop who he has trained to run the business) even if he had to finance it himself. At least that’s better than having to come back into the business when you’re 75 etc. which, of course, he still might have to do if the new owners default, so he’d better make sure they’re trained to run it well.
<< He is old school commercial printer, getting in with greeting cards, desk calendars and holiday labels and then expanding the line to include financial products sold nationwide to financial institutions. Well I can always remember him telling us (group of 4 full time and one part time employee – well over 50 years of experience) that if the financial industry was ever in trouble .... >>
Actually this isn’t old school thinking. He was (is) pretty advanced for his age group because he targeted a market (financial products). He also added other lines of things to sell. I don’t know whether that is good or bad – depends – if it ends up being trinket business, then it’s bad. If sold in bulk to the same folks (financial market), then it’s good. I suspect the latter is what he did.
<< Well 3 years ago what happens? Yep those banks are folding all over the place. >>
Wasn’t that a kick in the pants for everyone!
<< We basically sell "advertising" marketing pieces … What gets cut when times are tough? Yep, advertising. >>
Good for you. You have a firm grasp of your customer in mind. Makes an awful lot of things simple … beginning with the fact you can get a targeted list of your prospects. Now, question comes to my mind would be over what geographic area are you selling? County-wide, state-wide, regional, throughout US etc.?
<< We still utilize offset printing in our shop. We have yearned to get into the digital printing end, however financially we just could not sustain the investment needed. >>
Hum. Well, problem here is ya don’t just yearn to add efficiency and productivity to a business. What probably happened was the owner stripped the cash out of the business OR the sales drop (see below) resulted in dried up cash and you didn’t have enough cash left to update your capacity. That caused the business to stall out in the slow lane and others to zip past you based on keeping their equipment, software and offerings up to date….
<< We currently run at around $250,000 in sales and yearn for the days of $500-$750,000. Realistically much of the product we have sold is now being done digitally much cheaper than we could possibly compete with. (Vista Print comes to mind) >>
Yup. That’s the cost of planting the same crop year after year. Pretty soon the land (capacity) is so poor that it yields less and less sales. And I doubt that it was Vista Print that ate all the business since you were focused on the financial sector and Vista seems to be a generalist for small businesses (although their specialization is growing all the time). Anyway, really doesn’t matter. I just bet there were some others in there competing for your sales and (here’s another guess), you didn’t (or don’t) have a very active or aggressive selling campaign.
<< We have a firm plan of going back to each customer in approximately 8-10 months after their order to ask about a reorder. In our heyday we did a lot of direct mail marketing, but our budget and the results could no longer be sustained. >>
Similar to above. When the results dwindled, we should be looking at why. A hypothetical would be that you have a hot product; people buying like crazy; cash flowing in great; owner goes FIGMO (retires in place) or just retires and let’s someone else run the business; then the results are thinner but the owner keeps taking a good amount; industry changes (goes digital) but there’s no money to spend on updating because the retired and non-productive-by-now owner is eating it all; so the results dwindle even more and you stop doing direct mail (the one thing that made you the money) because you didn’t have cash to do it; and sales are down to $250k from $750k …. next thought will be to cut prices to induce sales. Well, this here be the business equivalent of the concept of circling the drain … or draining a cash cow until the business is nothing and then just closing the doors and walking away.
<< We now do much more email marketing and discount promo emails are our favorite way to entice immediate orders. We've learned a direct and personal email does much better than the bulk type we started with. So, that's the story in a nutshell. >>
Well, yea email marketing is good but email marketing will NOT replace direct mailing EXCLUSIVELY because one heck of a lot of it doesn’t get through. Anyway, you are now discounting your same old (I’m assuming here) tired product line because you can’t get your price out of it anymore because new and better processes have been purchased by others and they’re eating your lunch.
<< Any thoughts? >>
Hum. My biggest thought is whether or not you have any questions? Fact is, after reading this, what do you think I would say is the biggest problem in the scenario from top to bottom? What do you think my advice to you would be IF you asked me something like, “What should I do?”
Lemme know and thanks for asking.
Tom Crouser
