State of large format printing businesses

[naqviak]

Hi
i am currently looking into acquiring an existing independent large format printing business in Houston TX. I have no prior experience and shop has declining revenue. The business has high end equipment including flat bed printer.

another thing I noticed is that there are many such businesses for sale and most of them have declining revenues

the he owner does most of networking and marketing and sales. It I want to bring sales person to handle that part.

I am seeking a general advice from forum members On general trend in this business. Things to consider, thing to watch out for etc
any insight will be really appreciated

 

[player]

I am not trying to be rude, but what do you bring to a highly skilled, insanely competitive industry that you have no experience in? Could be a tough go. The current owner has experience and all the contacts and business is down. He leaves, so do many of his clients, now what do you do? Hiring 1 marketing guy will mean your whole investment rides with him.

 

[rossmosh]

1. Right now the owner gets paid a salary and hopefully has some profit left over at the end of the year. If you can't take over his role and have no work experience, you're basically going to have to take a big chunk of that salary and use it to pay someone else. Can you live on that on top of your monthly note payment?

2. Doubt everything. "High end equipment" could be 10+ year old machines that potentially are near the end of their life. Be very very very careful when evaluating the value of these machines. Also remember many types of machines have gone down in price over the last 5-10 years. So trying to pawn off a 10 year old flatbed printer as a 100k piece of equipment is let's say misleading.

3. Don't trust the numbers. If he says he does 500k in sales and nets 110k, don't believe it. Assume they actually do $400k in sales and net $75k. Make sure you get a W2 from the owner. See his actual salary over the last 5 years. If they own the building, find out how that's being paid for. Sometimes people don't charge themselves rent and just treat it all as general income. Now you're stuck spending thousands extra a month that you expected as income.

4. In many ways, you seem to be the ideal buyer for less than honest seller. He could tell you whatever he wants and you wouldn't know better. I had a local shop contact to buy him because he wanted to retire. I emailed back basically saying "Send me your numbers and I'll look them over." I don't care about his story. I don't care about anything but the numbers. His response was something along the lines of "I'm a small business. I don't have that info. I'll call you in a few days." Never called. Why? Because I actually know the industry and know how to value his business. I'm not buying it on the "if you build a better website and are more active going after sales you can increase sales by 30%!" pitch. Show me the numbers. Then I'll consider the other variables.

 

[naqviak]

I am not trying to be rude, but what do you bring to a highly skilled, insanely competitive industry that you have no experience in? Could be a tough go. The current owner has experience and all the contacts and business is down. He leaves, so do many of his clients, now what do you do? Hiring 1 marketing guy will mean your whole investment rides with him.

Thanks for the reply - I have general management experience and technical background. I know its a steep learning curve. My major concern is if this large format printing industry is saturated to a point where small shops are getting squeezed out of business. Are major players killing the mom and pop business.

 

[naqviak]

Thanks for your response

1. Right now the owner gets paid a salary and hopefully has some profit left over at the end of the year. If you can't take over his role and have no work experience, you're basically going to have to take a big chunk of that salary and use it to pay someone else. Can you live on that on top of your monthly note payment?

--- Yes the guy pays himself a salary and still have money left to pay for note and potentially a sales person.

2. Doubt everything. "High end equipment" could be 10+ year old machines that potentially are near the end of their life. Be very very very careful when evaluating the value of these machines. Also remember many types of machines have gone down in price over the last 5-10 years. So trying to pawn off a 10 year old flatbed printer as a 100k piece of equipment is let's say misleading.

--- The flatbed printer is 4 years old and under contract. Additional equipment is older but running well.

3. Don't trust the numbers. If he says he does 500k in sales and nets 110k, don't believe it. Assume they actually do $400k in sales and net $75k. Make sure you get a W2 from the owner. See his actual salary over the last 5 years. If they own the building, find out how that's being paid for. Sometimes people don't charge themselves rent and just treat it all as general income. Now you're stuck spending thousands extra a month that you expected as income.

--- His numbers checked out but looking at tax returns, P/L and bank accounts so that is not a concern

4. In many ways, you seem to be the ideal buyer for less than honest seller. He could tell you whatever he wants and you wouldn't know better. I had a local shop contact to buy him because he wanted to retire. I emailed back basically saying "Send me your numbers and I'll look them over." I don't care about his story. I don't care about anything but the numbers. His response was something along the lines of "I'm a small business. I don't have that info. I'll call you in a few days." Never called. Why? Because I actually know the industry and know how to value his business. I'm not buying it on the "if you build a better website and are more active going after sales you can increase sales by 30%!" pitch. Show me the numbers. Then I'll consider the other variables.

--- I met him and he is an old guy who is hard to hear. I did not see any issue with his honesty

As I mentioned in my previous post, my concern is the general state of this industry. Is it getting too crowded for smaller shops to survive?

 

[particleman]

There is money to be made, but I'd be more concerned with your lack of experience in the industry. Walking into a shop that has large format equipment including a UV flatbed with no experience is a recipe for disaster in my opinion. If you are confident in your hiring abilities to hire people to run this equipment then I suppose it could work. You should really be critical of what type of equipment they have, especially the flat bed.

Just based on my experience in the industry pricing on the national level has become a race to the bottom for common items like decals, banners, wraps, etc. The market has reached a point for a lot of shops it is cheaper to buy a wrap or banner wholesale than to print it on your own smaller equipment. If you can focus locally and perhaps build out a niche product or reputation then you could succeed.

 

[naqviak]

There is money to be made, but I'd be more concerned with your lack of experience in the industry. Walking into a shop that has large format equipment including a UV flatbed with no experience is a recipe for disaster in my opinion. If you are confident in your hiring abilities to hire people to run this equipment then I suppose it could work. You should really be critical of what type of equipment they have, especially the flat bed.

Just based on my experience in the industry pricing on the national level has become a race to the bottom for common items like decals, banners, wraps, etc. The market has reached a point for a lot of shops it is cheaper to buy a wrap or banner wholesale than to print it on your own smaller equipment. If you can focus locally and perhaps build out a niche product or reputation then you could succeed.

Thanks Particleman
Its an existing business with all staff in place. Seller pays them well and most of them are with him for 10+ years. I will be replacing seller who runs business op day to day and do sales and networking. I am thinking of adding a sales person to facilitate with some marketing and sales while also doing it myself.

Do you think this is do-able?

 

[naqviak]

You should really be critical of what type of equipment they have, especially the flat bed.

Its Agfa Anapurna Mw Flatbed - do you have any opinion on this one?

 

[2B]

its possible to make it, it is best to find a niche market. Like others have said the national E-commerce sights are driving the pricing down and you will get people wanting you to best those prices

depends if the current customers are buying from you because of the boss or the products/services you produce.
Is the boss leaving under good terms, did he burn any bridges with customers, is he going to another graphic company and taking his contacts?

have all of the equipment been tested? are they in working order.

 

[particleman]

Its Agfa Anapurna Mw Flatbed - do you have any opinion on this one?

It is old technology compared to the other UV machines out there like the HP FB series. The W model also has white ink which if you don't use it frequently can become another headache to keep the system and heads clean. I have a lot of experience with the Agfa M4F, our shop owned one for over a year. Agfa is a service company, they rebrand the Dilli Neo Titan series and sell it as their own. The also bought Gandi and rebranded their machines as Agfa. They charge incredibly high prices for parts like lamps and heads compared to other companies, their service contract was outrageous if I recall. We had especially bad luck with ours, ink curing issues, lamp issues, static issues, belt walking, several major components failing like the belt drive gearbox ($5,000+ part). It was also slow compared to other offerings out there and could not meet our production requirements. The shop moved to an HP FB500 shortly after release and we never looked back. There are several people on this forum that run Agfa and Dilli machines generally with success, but I would not consider it a positive that they have one of those. On the positive I always liked Agfa service techs I got to know them really well and they were good about shipping parts overnight (we used this a lot).


To your other question,to be honest though it is impossible for anyone here to give you an informed business decision without all of the facts (due diligence). Most of us here are in the large format digital print business so of course it would be do-able.

 

[OldPaint]

i am on the downside of this business now, retired(over 65)and still working BUT am not out looking for work. if it comes here, ok.....but other then that.......iam not gona last many more years. i am 71. so NOW that being said, and being in this business most of my life......i can tell you the worst part of this once "profitable" trade.......has become a as someone else put it a "race to the bottom".
i came into this with a brush and can of paint and ability to draw. so all i needed was some one who needed me to work for them.....COST OF OPERATION, brushes, paint, cleaning supplies and the talent.......so you understand i was not paying suppliers, leases, store front & mostly everyting i charged for a job....... was PROFIT. sorta like this, stock car lettering, 3-4 hours and $250-300 in my pocket. maybe $10 cost of materials. life was great. i dont need to explain any further as you must know NOW...... its suppliers(vinly, ink)storefront, equipment get $200 of that $250.00-300.00 i got, and now you get maybe $50- to $100 per job..........OR LESS......
i do printed vinyl sales........same as i do yard signs and banners.....i can not buy the material, produce these FOR AS CHEAP AS I CAN SUB THEM OUT!!!!
i still paint stuff.....BUT GET THE SAME PROFIT I ALWAYS HAVE MADE))))

 

[T_K]

You can always learn a new trade, that's not an issue. The big question is whether or not you can AFFORD to learn it. Unless his existing customers are loyal to the company, or to employees who are staying, don't expect to naturally keep the dwindling client base.

Also, if you're keeping on the experienced staff, you've got a lot of ground to cover before you earn their respect. Sure, you're the boss, but you don't know the industry. I've talked with enough people in the printing industry, and most of them hate working for a guy/girl who doesn't know what's going on. It makes life harder for the whole team when the boss is clueless and acts like he/she is in charge. The fact is that you would be dependent upon these experienced people to keep the business running AND to train you. If you come in on some high horse, you'll lose them as soon as they find other jobs. If you come in with a respectable amount of humility and a learner's attitude, then you have a better chance of retaining good people.

As others have said, don't rely on the numbers supplied. You've already said this is a sinking ship. Unless you think you can turn things around - for instance, with a new stream of capital, changes in advertising, etc. - then this is a high-risk investment. That doesn't mean it wouldn't be something you could get a good return on in the future, but you'd probably be bleeding money for a while as you transition. Make sure your valuation of the company takes this into account.

 

[netsol]

You can always learn a new trade, that's not an issue. The big question is whether or not you can AFFORD to learn it. Unless his existing customers are loyal to the company, or to employees who are staying, don't expect to naturally keep the dwindling client base.

Also, if you're keeping on the experienced staff, you've got a lot of ground to cover before you earn their respect. Sure, you're the boss, but you don't know the industry. I've talked with enough people in the printing industry, and most of them hate working for a guy/girl who doesn't know what's going on. It makes life harder for the whole team when the boss is clueless and acts like he/she is in charge. The fact is that you would be dependent upon these experienced people to keep the business running AND to train you. If you come in on some high horse, you'll lose them as soon as they find other jobs. If you come in with a respectable amount of humility and a learner's attitude, then you have a better chance of retaining good people.

As others have said, don't rely on the numbers supplied. You've already said this is a sinking ship. Unless you think you can turn things around - for instance, with a new stream of capital, changes in advertising, etc. - then this is a high-risk investment. That doesn't mean it wouldn't be something you could get a good return on in the future, but you'd probably be bleeding money for a while as you transition. Make sure your valuation of the company takes this into account.

client retention is going to be his problem

one of my largest clients has done at least a dozen acquisitions. generally the reaction from clients is "what the hell do you mean i have been sold?" there is a little speech about how you paid the old owners, they have an obligation to you, i do not.

if you, or your sales person is REALLY GOOD WITH PEOPLE this will not be a problem...

 

[Ldireprophil]

Go work for a shop for a year, learn everything, then go buy a business.

 

[White Haus]

FYI this original thread was from over 5 years ago, and the OP never came back. Guess he came to his senses!

 

[White Haus]

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