The Business “Annuity Trap”

A common business phrase is, “We are in the razor and blades business.” This often refers to an equipment manufacturer having a consumables business. This comment is also heard from many Wall Street analysts, as they qualify whether or not a company is worthy of investment. It doesn't always make sense, and making a diversified business work can be challenging.

I have been involved with these types of businesses, both when I started my career and through the years as a consultant.  I have seen them work well, and I have seen them cause significant financial pain. While it may seem that these comments are most appropriate to vendors, they are also appropriate to print businesses looking to expand their businesses. When being encouraged to add “ancillary services” as a means of ensuring survival in difficult times, one must ask if these services are strategic to the business or just billable tasks. If they are strategic, they mesh with the skills and capabilities of the business today and in the future and do not detract from them. Any good ancillary business should be viewed as having the potential to one day stand on its own.