How to Assess Financial Levers

Managing a printing business is a difficult task, period. I’m sure that there are other businesses that are as equally difficult, but the custom manufacturing, high technology, high client touch and transformative business is not for the faint of heart. When it’s going well, it can be a very rewarding business. When it’s not, well, that’s another story. Let’s talk about when your results are not where you want them to be and the areas you should be evaluating.

When results are not good, we typically see two things out of alignment — sales and costs. No surprises, right? So, just increase your sales and all will be right is easier said than done. Also, while a sales increase can relieve the financial stress of the operation, it can also mask the symptoms that still remain.

In most print operations, the single highest variable cost is labor. That’s usually the first place I’ll look when trying to diagnose a situation. This isn’t to say that you merely cut your way to greatness, absolutely not. What it does say though, is that your labor costs need to be aligned with the sales that you have today. Some companies experience a cyclical wave of business with ebbs and flows of volume, while others may experience a decrease in business, yet not adjust their labor force accordingly.

The difference between those who always perform well and the others, is that they staff at near the troughs of the business cycle and make up for the increases in sales through managed overtime, outsourcing and sometimes saying no. The non-performing businesses tend to staff near the peaks of the business cycle, always wanting to be able to say yes. That may seem like a nice thing to do but it can contribute to major losses during the valleys of the cycle.

There’s no magic answer here, no silver bullet. Over the years, you could look at some strict industry labor to value-added ratios to determine your position. I believe that those have changed, due to the varying nature of the increased breadth of services that most printers offer these days. One benchmark is simply to go back in time, for your specific business, to a period when the results were where you wanted them to be and look at the labor to value-added ratio at that time. How do they compare to today? What is different and what has changed? Go through department by department to better identify the variances and your opportunities for improvement could become very clear.

Let me know how you’re doing and remember, doing nothing is not an option.

Mike Philie can help validate what’s working and what may need to change in your business. Changing the trajectory of a business is difficult to do while simultaneously operating the core competencies. Mike provides strategy and insight to owners and CEOs in the Graphic Communications Industry by providing direct and realistic assessments, not being afraid to voice the unpopular opinion and helping leaders navigate change through a common sense and practical approach. Learn more at www.philiegroup.com, LinkedIn or email at mphilie@philiegroup.com.