Commentary & Analysis
How to Lose Money in DTP and Prepress
By John Giles July 20,
By WhatTheyThink Staff
Published: July 20, 2006
By John Giles July 20, 2006 -- I have been thinking about desktop publishing a lot lately. Quick printing consultant Larry Hunt (www.larryhunt.com) recently published a special report on desktop publishing (DTP) productivity in his popular High Speed and Color Copying newsletters. His conclusion was that desktop publishing productivity for the quick and small commercial printer continues to be dismal and the desktop publishing department is the "black hole because of its propensity to suck out the profit dollars from other parts of the company." Most print shops still post a 20 percent loss in their DTP/prepress department. This doesn't have to happen. Hunt found that while DTP productivity has improved since 2003, most print shops still have a 20 percent loss in the department. Wages and costs continue to rise, but printers are slow to adjust their hourly rates to compensate for the increased costs. This doesn't have to happen, yet too many printers are trying to fool themselves into thinking that losses in DTP are a natural part of doing business. They say they have to give prepress charges away in order to get the work to keep their presses and digital printers running. With the growth of digital printers and computer-to-plate equipment, the majority of all work goes through the DTP department. It becomes critical that this department be profitably. Printers have to understand that they have to cover the costs of the prepress department if they expect to make money for the company. I have yet to find a company that collects the DTP time and converts that time to a selling price. Small printing companies fool themselves into thinking they are making money with desktop publishing by lying to themselves about their budgeted hourly rate. They have an hourly rate for desktop publishing and prepress but they don't use it. In my experience, most employees can only tell you what they "think" the budget hour rate is when asked. Most can't explain how they arrive at a DTP price. Some think the computer calculates the price automatically. Others say they guess at a price and hope the prepress staff will tell them if it is too low. I have yet to find a company that collects the DTP time and converts that time to a selling price. I have found companies that do collect time, but they never compare the time to the actual selling price because the CSRs feel that using the actual time would cause the price to be too high. Printers can make money in their prepress departments if they develop a pricing procedure and stick to it. The smaller print shops seem to be scared to charge the price required to make money for the department. They need to develop a pricing backbone that lets them do the work for a reasonable profit. I fear that the prepress staff will bear the brunt of the productivity criticism. When the DTP department loses money, the person who gets blamed is the prepress employee. The finger for DTP failure needs to be pointed at the owners and managers who ignore the DTP department. They don't give the staff the tools they need. They don't give them the pricing procedures required to have an understandable profitable pricing scheme for the company. They don't give the DTP staff the authority to question pricing. They don't train the CSR and sales staff how to price prepress work. They don't place any value on the design skills their prepress staff has. Printers can make money in their prepress departments if they develop a pricing procedure --and pricing backbone-- and stick to it. From my observations, productivity in the DTP department is much higher than that shown by reports comparing a hypothetical budget hour rate to the DTP sales. It isn't that the work isn't being done. It is that most printers won't charge for the work that is done or that they are undervaluing the work of their DTP staff. If print shop owners would stop giving the work away the DTP department wouldn't be the black hole. Back to Basics If printers expect to stop losing money in their DTP departments they better start with the basics. They need to charge for the work they do and charge more for the design services they offer. They need to charge for fixing customer files and getting them to print properly. Printers have trained their customers to expect free DTP services, especially when dealing with the customer's own file. This hurts their business today and can cripple it in the future. Printers will have to begin charging for these services if they expect to charge for the more detailed prepress work required by VDP services. In fact, unless they charge appropriately for the work they do, most print shops aren't remotely ready to add VDP services. Printers have trained customers to expect free DTP services. But they will have to begin charging for these services if they expect to charge for the prepress work required by VDP services. Studies continue to show that the majority of a printer's business comes about 25 top customers. Many times the number is even less. If a printer would just start charging the other customers the proper DTP fees, the prepress department might start showing a profit. Customers don't buy because the price is too high. They don't buy because they can't afford it. Printers need to find out what the total budget is for the order. Most printers could add $10 to $25 to a print order without losing the job. A printer who added $10 to 10 orders a day would see $100 more sales. That would mean $2000 extra in the prepress department for the month. What if he added $20 to every prepress job and he got 10 jobs a day? For no additional work, the printer could add an extra $4000 in sales. Providing DTP and prepress services costs money. There is equipment and software to buy and upgrade. There are salaries and benefits to be paid. There is overhead to cover. Printers have to realize that offering DTP and prepress services is part of doing business. Customers have to pay for the services. Hunt's report showed that in three years printers cut losses in the prepress department by five percent. Is it going to take three years to see another positive change? Printers can start making money tomorrow in their prepress departments if they just charge real prices that cover costs and provide a profit.