Part 3 in the "Things to do better" series

In the first article in this series, Getting Better All the Time, I shared some of my background as a buyer, designer, validator and implementer of print (and non-print) communication projects to persuade you that I know more than which inkjet printhead fires the most drops. As we move on from talking about the sales process to the important topic of determining the most profitable “products” to sell, I have had the benefit of seeing some of the the best and worst decision making in our industry up close and personal. To paraphrase the slogan of Farmers Insurance, I know a thing or two because I’ve seen a thing or two. In the print industry, a lot of it came under the “you can’t make this stuff up” category. Here are just a few examples:

• My previous company developed the code for a financial firm’s quarterly retirement statement and installed it on their print provider’s mainframe. It ran like a top for a year with no down time or code changes. The printing company’s IT ops wanted to optimize use of mainframe CPU time and storage so they wrote a program that deleted any programs that had not been changed in the past year. The “cost saving” program deleted the client’s quarterly batch process off the production and test regions. Luckily we had everything backed up. Guess what? They did it again a year later.
• A printing company landed the business to run seven million monthly brokerage statements. They purchased web-fed printing equipment and underbid the current vendor who was running sheet-fed equipment. About 20 percent of the volume included “invest by mail” slips with multiple perforations. This was not accounted for in the bid, but necessary for the contract and effectively sucked all the profit out of the deal since a large chunk of volume could not run on the web press. Eventually, they were able to invest in dynamic perforation technology.
• Multiple printing companies have told me that they didn’t bother to either profile the papers they use or do any ink estimating as part of their bidding process. This has the double whammy of not optimizing print quality and potentially using way more ink than necessary to achieve the necessary quality. In research published back in 2021, 81 percent of respondents indicated that that there were particular types of jobs where ink estimating has helped them compete more effectively¹.

In my previous post, we talked about getting the sales team to sell what senior management decides are the most profitable and maintainable services for the company. But sometimes there isn’t a very good process for determining what is profitable, or the process is only sporadically applied. Profitability is like skin care, you can’t do something once and expect the results to last forever.

The profitability process

It’s not possible to measure profitability if you aren’t measuring all of the components that go into it. That includes production costs and choices about pricing. On the cost side there are key factors, and some are measured more effectively than others:

• Onboarding costs. Getting a new client up and running can eat up profits if not managed effectively. This is an area where documentation, time tracking, templating and software can all help. When services are not charged to the client they are often not tracked. Estimates used in the sales process could be wildly high or low and no one is held accountable.
• Servicing costs. Shoddy onboarding often leads to higher servicing costs; as does poor documentation. Sometimes a failure to understand, and charge for, customer requirements such as proofing, sending multiple files, emailing changes to messaging or disclosures or data manipulation can eat away at profits.
• Production costs. The level of automation is key. Anything less than 100% automation drives up costs. Equally important are material costs: ink, paper, coatings, maintenance, etc. Measuring these costs for inkjet is complicated enough that I devoted 3 posts to it back in 2017. The ability to measure, manage and pass some level of increases in material cost to clients can make or break profitability – particularly with inkjet presses.

Planning for change and managing risk

Because your printing company doesn’t exist in a vacuum, outside influences are constantly shifting your profitability calculations. Material prices change, labor costs change, and your client’s production volumes change. If you are running inkjet, your running costs should improve simply by increasing the volume on the press (the reverse is also true!) At the same time, your competition is changing. You may be able to price services higher or lower on any given project. Tracking pricing approaches and understanding how clients perceive pricing is important if you want to avoid leaving money on the table. Continually lowering prices to win business comes with huge risks, particularly if there is no factor for inflation-based increases. The bottom line is, if you don’t understand what is most profitable, your sales people won’t either. You may be better off with few clients of a certain type rather than a raft of new business that barely breaks even. Keeping up with changes and maintaining, or growing, profitability requires regular evaluations of costs, pricing, product mix and target markets.

• Can you sell post coating? Embellishment? Messaging/content services?
• Can you add complementary e-services? Design?
• Can you sell development services, or print, or mailing services to other printers?

Understanding what makes you profitable requires a lot of tracking and application of the dreaded maths. It also requires a lot of thought about where risk comes from. How can you minimize the risk, insure against risk or share that risk with the customer? Anyone who survived the past three years in this industry should have a renewed appreciation for the importance of de-risking every possible aspect of the business. The broader your client base is, the less risk you have from changes in any one market. We will look at this more closely in my next post on the “Pirates of Profitability.” Stay tuned (and afloat.)

1. At Inkjet insight, we actually recommend that companies take the time to create multiple profiles for their most commonly used papers. This allows you to manage ink use for a range of acceptable color levels based on client color and price sensitivity. Tip: always make the profile name part of your job definition.