5 Steps to Selling a Commercial Print Shop
The printing industry is making a comeback. setting business owners up for the perfect time to sell.
As a business owner in the commercial printing industry, this is something you have probably been hearing for a long time – print is dead. Marketers around the globe have transitioned into digital advertising as the primary form of reaching prospects and are no longer willing to waste precious marketing dollars on print. We’ve been hearing this for years, but recent reports show something exciting for the printing industry – it’s making a comeback. In the third quarter of 2015, commercial printing shipments rose 3.5%, marking the highest growth rate in almost 20 years, according to the U.S. Commerce Department. Experts are predicting a 3% growth rate for the industry over the next couple years and for the market to be worth as much as $980 billion by 2018. Numbers like these are inspirational for the small business owners of a slow-moving industry such as this, and with that in mind, it’s a good time to start making a plan for your future and the future of your business.
A flourishing market is one of the defining factors that go into determining the value of a business. If your print shop has seen rising financials and growth over the past couple years, it may be the right time for you to consider selling. If the last couple years have been stagnant or tough, industry growth may set you on the right track to building the value of your business over the next couple years. Whatever path you choose, it’s never too early to begin planning your exit strategy and taking steps to increase the value of your business so that when you are ready to sell, you are able to reel in a fantastic sales price. The first step to planning an exit strategy is finding out what your business is worth. While only a professional business broker can tell you the true value of a commercial print shop, these are some commonly used multiples that may give you an idea.
- 2-3x SDE includes inventory
- 2-4x EBITDA, 4x EBIT
- 40-55% of annual sales + inventory
Now that you have an idea of how valuations are calculated for businesses in your industry, you will want to begin implementing measures to ensure your business secures the highest multiple possible. You can also check out some of the tips below that will help you boost your sales and increase the appeal of your business to potential buyers.
In a world where we have constant access to the internet, it’s tough to stay competitive when you don’t have a web presence. If you have been putting off implementing a detailed marketing plan, the time to do so is now. No buyer wants to invest in a business that doesn’t invest in itself – take the time and money to give your business the extra push it needs. Keep in mind that digital marketing does not yield instant results; it takes a couple months before the leads start coming in so you will want to take this step long before you start to experience burnout. A few ideas to get your digital marketing plan going include designing a website, setting up social media pages, create an email campaign, and improve your SEO through Google Adwords or Pay-Per-Click.
Quality is critical in the commercial printing industry and if you’re technology or equipment is more than a few years old, you may be struggling to keep pace with your competition. New technology is released all the time in this industry so while it may be impossible to always have state-of-the-art machines, updating every couple years is a good idea. We understand that new technology can be a financial burden but when you decide to sell, inventory is a huge factor in determining the value. Buyers are going to pay more for a business with new technology, especially when that technology contributes to rising sales and a growing client base.
Occasionally, business owners can get comfortable with their business model and lose sight of the changing times. In an industry like yours, it’s really important to adapt to the trends as much as possible so that your business is always modernized and able to stay profitable. While it’s no secret that commercial printing has suffered in the past, the future has promising opportunities. Trends show that consumers are using print shops to create labels as opposed to traditional printed items, which is expected to generate millions in revenues over the next year. Consider expanding your services to include printing signage or even offering additional marketing services such as website upkeep to increase your sales and bring in extra cash. Buyers will be attracted to a business that shows multiple streams of steady revenue versus a business that focuses on a core item and has uneven cash flow. Even if it’s something small such as mailing services, it can really help boost your bottom line and appeal to buyers.
One of the biggest motivators that push consumers to seek out a print shop is design. Many consumers do not have the skills or creativity to design new items, nor do they want to. Having a skilled designer on your team to help clients put their vision to paper will do wonders for your bottom line and create a secondary revenue stream. Design services also breed repeat customers; if they are pleased with the first item, they are more likely to return so that the next item will match and have the same look. Designers are expensive but depending on how big your firm is, even one skilled designer could bring in a good amount of money and clients. It also gives your firm something to advertise and sets your apart from other print shops.
As with most service businesses, long-term contracts are the bread and butter of the industry. Buyers love businesses with long-term contracts because it basically ensures steady revenues even after the owner has transitioned out of the business. The flipside to this is that at some point, the buyer will have to renew those contracts and that can be tricky if the relationship was with the former owner. To get the biggest benefit out of this tip, we recommend channeling all contracted client relationships through sales people or head managers so that when you decide to sell, client relationships will not be affected. Also keep in mind that while annual contracts are fabulous to have, they are difficult to obtain. Clients may be hesitant to sign on for an entire year, especially if the relationship was with an owner who is no longer there. While we definitely recommend annual contracts to lure in buyers and even out your cash flow, these are the things to keep in mind while implementing this tip.
Industry trends and market analysis show that the best time to sell your commercial print shop is within the next 1-3 years. Taking these steps to increase the value of your company will not only set you up for a higher sales price when you are ready to sell, but will also help you find the perfect buyer. The professionals at Viking have appraised commercial printing businesses, just like yours, for 20 years and for no charge, we can value your business and advise you on when the best time to sell is. Prepare yourself for the future; take these steps to increase the value of your business so that when it comes time to sell, your years of hard work will all be worth it.