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Printing Industy Blog

“The 7 Most Overrated Businesses”

By Patrick Henry
Published: September 2, 2009

Printing most definitely isn’t one of them, but be careful of a certain business model within which many printing businesses are started up. An article by Kelly K. Spors and Kevin Salwen at the Yahoo! Small Business Answers Center counsels would-be entrepreneurs to look before they leap into independent ventures that may well fall flat. “Many people do a lousy job of picking businesses they can realistically turn into a profitable operation,” say the writers, both longtime contributors to The Wall Street Journal. Entrepreneurs go wrong, they claim, by picking businesses that seem cheap and easy to launch or glamorous to be associated with. Here’s their list of traps for the unwary: 1. Restaurants. (They have a high failure rate and are “among the toughest businesses to run.”) 2. Direct sales. (The only way to make real money in home-based sales: recruit junior reps and take a cut of their commissions.) 3. Online retail. (Selling on eBay isn’t what it was 10 years ago.) 4. High-end retail. (These days, conspicuous consumption is ashamed to show its face.) 5. Independent consulting. (The valleys may be deeper than the peaks are high. We can only sigh in agreement.) 6. Franchise ownership. (Franchise terms often stack the deck against the franchisee. Contracts that go bad are hard to get out of. Besides, “It's a myth that franchises are far more successful than independent businesses.”) 7. Traffic-driven web sites. (Think your blog is going to turn into the next Facebook? Think again.) Are there realistic opportunities for those who hope to make it on their own? “Aspiring entrepreneurs should create firms in which they have professional experience so they have a competitive advantage in the market,” the authors say. That certainly would explain the success of printing firms launched by ex-press operators, sales reps, and others who learned the business by working for others.

Patrick Henry, Executive Editor for WhatTheyThink.com is also the director of Liberty or Death Communications, a consultancy specializing in research, education, promotional, and editorial support services for the printing and publishing industries.

Patrick Henry is available for speaking engagements and consulting projects. To get more information contact us here.

Please offer your feedback to Patrick. He can be reached at patrick.henry@whattheythink.com.

 

Discussion

By Michael J on Sep 02, 2009

Hi Patrick, From what I think I've seen Alpha franchises do pretty well. I've always been impressed by what looks like their emphasis on biz professionals with experience. If there is any real info on how the competing franchise shops are doing? I think the 95% of printers might find that useful. From where I sit, I'm thinking that moving into a franchise might be a reasonable path. The competition from web based outfits like Printing4Less and their look alikes plus the Consolidated Graphics networks and the franchises themselves is not a pretty picture. I think there is no getting around the fact that the industry is getting organized into powerful delivery networks. The big money is circling again. I wouldn't be surprised to see a new version of the "roll-ups" we saw a couple of years ago.

 

By tom Koceja on Sep 03, 2009

What's the background that you have concerning CGX companies; i don't disagree i was curious what you mean "not a pretty picture" above. Thank you for your comments Tom

 

By MichaelJ on Sep 06, 2009

hi Tom, To give you some context, I'm a retired printer whose day job is managing my IRA. In that role, I've put together a "printernet" portfolio of investments. If you take the click to my blog and look at the sidebar, the companies in the portfolio are listed there. "Printernet" is shorthand for a user network distribute and print capability. While the web plays are interesting, eventually the cost of shipping is going to take a real toll on whatever margins they have. Given that the cost of manufacturing can be replicated in most shops, depending of course on the nature of the particular product, the defensible advantage is location. Re CGX. From everything I've seen from the outside looking in, they are the natural backbone of a "printernet." Their network is resilient in that their "companies" are independent. That allows each one to figure out how to get to sustainable growth in their particular market. On the other hand, their centralized data storage and admin functions, takes that cost out of the hands of the local shops. I would think that it would be relatively easy for them to execute on a couple of million print pieces locally delivered in a couple of days. The value then is not in the individual print products, it's in being able to deliver at a scale and time frame that the global brands need. CGX's recent job for Nat Geo, I think, is just a small harbinger of what's next. To be clear, I think Staples, AlphaGraphics and the other franchises have potentially a similar ability. RRD has the scale, but in my opinion, with their centralized org structure, they are too slow to respond.

 

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