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![]() The Intersection of Volume and Profit
Would you rather be bigger, in terms of sales volume, or more profitable? Your answer is most likely "both," but that's not the normal state of affairs in the printing industry.
By David M. Fellman, David Fellman & Associates
Yes, there are large and highly profitable companies in every segment, from those who print on paper to those who print on fabric, board or any other substrate. But there are also less/not profitable companies in every industry segment, all of which either want or need to be moving in a more positive direction.
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There are many things to be considered on the cost side of the business: payroll, cost of goods sold, technology, etc., but all of that is a topic for another day. Today is about volume, profit and the sales side of your business.
Playing by the Rules
High Volume, High Profit Customer contact is an important element in this equation. There's a tendency to think that your customers will let you know if there is a problem. That theory has been disproven many times in the marketplace. The fact is, good customers aren't usually lost over one huge failure - more often, it's the cumulative effect of two factors. The most obvious is a series of minor quality or service failures. The more dangerous is when a customer starts questioning whether you truly value their business. Give some thought to the nature of the contact between your company and your customers. How much of it is your salesperson looking for orders? How much of it is the back-and-forth of processing those orders, involving your customer, your salesperson and possibly your customer service/project management employees? How much of that contact involves some stress on one or both sides? Now, how much of it is senior-level contacts reaching out to your customers to assure the health of the relationship and reinforce the value you place on their business? I don't know about you, but I like when someone in a senior position reaches out to me, especially when there's been some stress in my day-to-day interaction with lower-level employees. And, as a senior manager, I like knowing - not just thinking or hoping - that my company is doing everything necessary to maintain those happy customer relationships. The best way to know is to be an active participant!
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When evaluating your customer service and contact, it's important to understand your customers are in fact talking to your competitors. At the very least, they are hearing from them, and your most visible customers (i.e., big, well-known companies) are getting plenty of attention. As you know from your own prospecting, there can be a significant gap between "talking to" and "buying from," but that gap diminishes if the level of satisfaction with the current supplier does the same.
The Power of Prospecting If you're in the high volume, low profit category, you should also be prospecting. The biggest reason high volume printing companies fail is because they have bad customers and don't work hard enough to find better ones. They take all the business they can get from people/companies who won't pay for value and who further drain profit by obstructing production schedules and impeding cash flow. An example is my area's current largest printing company, which gained its status after acquiring three large customers from a company that closed two to three years ago. While its sales have grown dramatically in that time, its profits have suffered, and I'm not sure the company really understands why. To me, those "new" customers are like serial killers - they've killed at least one company in my area and now this one may not survive them. But even if that happens, someone else is almost certain to welcome their business. If I were in the printing company's shoes, I would take their business, but only on my terms. In other words, they would have to change their behavior. This is the cardinal rule of high volume, low profit situations: When you have bad customers, do something about it!
Bad Customers The good news is there's usually a chance to change bad customer behavior before it "kills" your company. In my experience, changing bad behavior begins with talking it out with customers. Give some thought to exactly why they're more trouble than they're worth, and then reach out to set up a meeting. It's not something you should approach with just a vague feeling. Based on my experience, your success with this approach may hinge on the two main reasons people can fall into that "more trouble than they're worth" category. They could either be jerks - which there's not much you can do about - or they're civilians, meaning those who don't have professional knowledge of our industry. They simply don't know how best to work with us to reach their own goals. Civilians can't always be trained, but it's always worth a try. When it comes to customers, there are three rules for high volume, low profit:
Low Volume, High Profit This is a perfect example of a low volume, high profit situation. My advice to the son-in-law has been pretty direct: Don't take on any bad customers in order to inflate your top line. The perfect strategy is to scale the business up using his father-in-law's model. Seek out a few new value-oriented customers. Give them - and charge them for - a premium level of service. Along those lines, we've set this year's goal at $600,000 in sales and $150,000 in owner's compensation. With the right focus, both of those are doable. For what it's worth, I also think $800,000 in sales and $150,000 in owner's compensation is doable, but what's the value of an additional $200,000 in sales that doesn't produce any more profit? From my perspective, it's just 33.3% more work!
The Coffin Corner Albert Einstein is credited with defining insanity as "doing the same thing over and over again and expecting different results." Every printer who has failed probably passed by a point where changes could have been made, and a different result gained. The bottom line is to look at where you stand in relation to the intersection of volume and profit and take the necessary actions to put yourself on the right side of the road. David M. Fellman is the President of David Fellman & Associates, Raleigh, North Carolina, a sales and marketing consulting firm serving numerous segments of the graphic arts industry. Visit his website at davefellman.com, and contact him by email at dmf@davefellman.com.
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