Reprographics 101

PRESS RELEASE

PLP Digital Systems is expanding its Blueprint for Change program to help reprographers meet today’s demands for Construction Information Management (CIM). This four-month marketing strategy program, which piloted in 2010, is now accepting applications for the 2011 session.

Construction technology represents a significant opportunity to companies with strong relationships in AEC, but whose services have been commoditized and whose volumes are dropping by as much as 30 percent year over year. The Blueprint for Change strategy program is designed to guide these print companies into a new market position, and change their brand to increase sales.

“Changes in the construction industry in the way digital content is managed, shared, and distributed is challenging our customers to stay relevant and strategic to their AEC customers. PLP has always worked to help our customers succeed, and we’re excited with the progress our pilot B4C participants have seen,” said John Cronin, CEO of PLP.

PLP Digital Systems has partnered with PLS Launch Solutions, a marketing strategy firm, to offer the Blueprint program. President Michele Gleber said, “It’s tremendously satisfying to help these businesses change and to measure their progress, not in just a new look or tagline, but real revenue growth from technology and CIM services.”

Pilot participants were leading companies like Duncan-Parnell, Lynn Imaging, and Barker Blue, who each have completed major rebranding efforts and seen improved technology sales in 2010.

One of my blog-visitors sent me a pdf file containing the Quick Print Industry’s “Top 100 Shops” for 2011 (based on 2010 Sales revenues).

“Kinda out-of-category”, there was one “reprographer” I found on the QP Top 100 List, Rapid Blueprint of Tampa, FL, one of my former competitors in the Tampa Bay Market Area.

Rank – 70

Company – Rapid Blueprint Co.

City/State – Tampa, FL

Owner/CEO – Chris Zametz

2010 Sales – $ 3 million

Growth: – 35%

Number of Locations – 5

Number of Locations Planned – 1

Number of Employees – 16.5

Sales per employee – $182,000

Sales per location – $600,000

Year founded – 1978

Joel’s comments:

A growth rate of 35% year over year? If real, quite impressive!

Sales per employee of $182,000. If real, totally awesome!

I’ve posted the Top 100 list at this internet address:

https://docs.google.com/viewer?a=v&pid=explorer&chrome=true&srcid=0B81al4kFAU9JNzQxNTM4YzctOTQ0OS00MmJkLTlkMjctNzlmODhhYTdiNTll&hl=en_US&authkey=CIPTzeIK

There’s an article on the Digital Nirvana web-site, this morning, that should be of interest to reprographers who are either considering an expansion of their wide-format color businesses or who are considering getting involved, for the first time, in offering wide-format color services.

Here’s the title of that article, and, below the lead paragraph, I’ve copied the “topics” covered by that article…..

Wide Format Means Big Opportunity…Selling it Right

By Guest Contributor on June 6th, 2011

The wide format printing business is unquestionably a great business opportunity for commercial printers, quick printers, and graphic arts firms. You can still get an excellent profit margin if you produce good work, develop your customer account base, and deliver the goods reliably. Because the wide format digital printing market is also highly fragmented, there is no “one way” to sell wide format print that suits all types of wide format printing organizations.

Strategies for Success

Know your product

Know your market

Know your customers

Know your competition

A good pricing strategy is critical

The Bottom Line

To access the complete article, go to:

www.thedigitalnirvana.com and then

scroll down to the article with the title

I referenced above.

I “heard on the street,” this morning, that ARC completed an acquisition of a U.S. reprographer earlier this week.

If this is true, then it should be good news for reprographers who are interested in selling.

I will post more about this as the news comes out.

In a brief note on www.marketwatch.com this morning…..

June 8, 2011, 9:19 a.m. EDT

China says U.S. “playing with fire” on debt delay

By Greg Morcroft

NEW YORK (MarketWatch) — Li Daokui, an adviser to the People’s Bank of China, said Wednesday that the U.S. is “playing with fire” by even considering a brief technical default on its debt in order to force more spending cuts at home, Reuters news agency reported. Reuters said Li made the comments at a meeting in Beijing. “I think there is a risk that the U.S. debt default may happen. The result will be very serious and I really hope that they would stop playing with fire,” Li said, according to the report.

There are two different articles in this post; both are related to “recovery” – in the non-residential construction sector and in the commercial real estate industry, and, of course, those sectors are closely related to each other.

FIRST ARTICLE:

On June 1^st, Mr. Basu, Chief Economist at Associated Builders and Contractors (ABC) posted an article on ABC’s web-site, under the construction economics section of ABC’s web-site:

Private Nonresidential Construction Spending Up 0.5 Percent in April

Summary

At the beginning of his summary section, Mr. Basu says….

In a reflection of the weak overall economic recovery, private nonresidential construction spending increased 0.5 percent in April, according to the June 1 report by the U.S. Census Bureau. Year-over-year, private nonresidential construction spending is down 8.5 percent.

Analysis 



Towards the end of his “analysis” section, Mr. Basu says…..

“However, cyclical private segments have not been able to recover in earnest. Both commercial and office-related construction spending were down for the month, a reflection of a still weak overall economic recovery and excess capacity in many real estate segments,” Basu said.

“While it is true that the pace of economic recovery has slowed significantly, it appears that much of this is due to temporary factors such as rising food and gasoline prices. However, if those factors turn out to be permanent rather than temporary, the economic recovery will continue to stall, darkening what has been a benign outlook for 2012,” said Basu.

Here’s the Internet address for the complete article:

http://www.abc.org/Hot_Links/ConstructionEconomicsIndex/Spending_June_2011.aspx

SECOND ARTICLE:

I found an interesting article from March 2011, and I’d like to share that article with my blog visitors.

Delusional Commercial Real Estate Predictions

March 23, 2011

• Analysis by: Robert Canter

• Analysis of: Deal Volume to Drive U.S. Commercial Real Estate Recovery, PWC Survey Says

• Published at: http://www.bloomberg.com

Summary

Delusional (A false belief or opinion: labored under the delusion that success was at hand) Commercial Real Estate Predictions The subject article can only be considered wishful thinking at best or a blatant disregard to the reality of the overall economic situation facing the USA and the World and its impact on commercial real estate.

Analysis

There have been several articles published recently which are touting a commercial real estate recovery. Many are based upon recent investment grade office properties bought by institutional investors many of whom are foreign.

For example, on Wednesday, Bloomberg published an article based on a report by Pricewaterhouse Coopers LLP to say the commercial real estate market will be improving due to increased sales of investment properties. This is totally absurd. There are factors that cannot be avoided which put this prediction in direct conflict with the reality of what is happening in the USA and Globally. Commercial real estate does not operate in a economic vacuum. Nor does investment sales tell the entire story of what is really going on in the commercial real estate sector.

The article refers to the MIT Center for Commercial Real Estate Statistic which shows a 19% increase in commercial prices in 2010. So how does that square with the fact that Moody’s (NYSE:MCO) just yesterday released their report which shows commercial real estate prices have decreased for the second consecutive month? “Commercial property prices in the U.S. dropped 1.2% in January, marking the second straight month of decreases, according to Moody’s/REAL Commercial Property Price Index. Despite the drop, prices remain 4.2% higher than Augusts’ eight-year low.” Which means prices have yet to recover beyond the amount of debt they are under for the most part.

Why would you use a small number of transactions to base your statistical results? They have no choice since real deal volume is still very low in comparative standards. There is no doubt there have been some very eye popping sales lately. This supports the fact the market by all indicators is what the Data Tracking Companies of the industry are calling a “Bifurcated” marketplace for investment sales. However, one has to take a very close look at the sales that have closed recently.

Many of the sales were bought with foreign money, so what may look like a great price here, is actually a cheap deal for the foreign investor taking into account the currency exchange. And because the Fed has helped keep the Dollar low to other currencies there is overseas demand for buying a good yield with well tenanted long term leased Class “A” properties. The only properties being traded at all are the in the Major “Gateway” cities which are leased to high credit worth companies on long term leases in buildings that are almost 100% occupied. In addition no one knows where the institutional investment firms are actually getting their investment dollars. The investment community is chasing yield which is not a good thing since that is one of the main factors that helped create the last bubble and this is directly due to the Federal Reserve keeping interest rates artificially low. Does this sound familiar?

CMBS delinquencies have not decreased rather they continue to increase. Banks are as fragile as ever, despite words to contrary by the Feds. “Commercial mortgage-backed securities are showing signs of recovery, but investors remain concerned about the quality of the securities. Many of the bonds are backed by shopping malls and office buildings, and the lack of diversity worries some investors. “That’s a concentration people may be concerned about because there has been no turnaround in this sector, said Darrell Wheeler, senior managing director of strategy at Amherst Securities” and further reported last week… “Moody’s: CMBS Loan Delinquencies Rise to 9.18%; The delinquency rate on loans included in commercial mortgage-backed securities (CMBS) conduit and fusion transactions increased 17 basis points in February to 9.18 percent, according to Moody’s Investors Service. Moody’s noted that while still rising, increases in CMBS delinquencies have been moderating since June 2010.

Gee that flies in the face of all the optimistic reporting going on!

The unemployment problem is still a major drag on the economy and will continue to be so. There is excitement over the fact the unemployment rate dropped to 8.9%. Sorry but that is nothing to get giddy about. The real unemployment rate is still hovering around 17% as the Government statistics don’t take into account those that have left the workforce and/or who have stopped looking for work. The retiring Baby Boomers will be left out of the employment numbers, but they will be counted in the entitlement payment obligations column. This is the Pink Elephant in the room which nobody wants to discuss never mind try and solve, and that is the unfunded pension liabilities and the Social Security entitlement obligations which are about to explode with the aging Baby Boomers.

The Federal Reserve just last week revised downward the last quarter’s GDP. Is the Federal Government gaming the numbers? You decide, but take in account after every major economic report by the government there is a subsequent revision most times downward.

The rate in which the unemployment rate is dropping is not enough to impact vacancy rates, and certainly not enough to make a dent in the overall economy.

Now you have gas prices skyrocketing which is contributing to skyrocketing food prices. We all know that higher oil prices seep their way into almost every corner of the economy. Add to this the continuing fiscal irresponsibility of the Federal Government, the States and local governments slashing jobs due to their own budget woes, and you have a perfect mix for what, a recovering commercial real estate market. I don’t think so!

The retail industry had a good Christmas sales season, but it’s over and retail sales are dropping once again as people go back to their “new normal” spending habits. Consumer confidence is dropping once again. With the housing market in a double dip and about 25% of all homes under water with their mortgages, folks are just not going to go out and spend at the level the economy has been used to in order to sustain economic expansion.

The ICSC (International Council of Shopping Centers) is pushing Congress to enact a law which would require all states to charge sales taxes on internet purchases. This is their way of social engineering; by enacting Internet sales taxes they feel it levels the playing field and it will push people back to shopping in brick and mortar stores…That is not going to happen, and the lack of sales taxes are just a small part of the increased use of the Internet for retail purchases. Therefore if enacted there will be more money taken out of the consumer’s pockets to go towards taxes; that will really help the economy how? If you think there has not been a major paradigm shift just take a look at what has happened with Border’s and Blockbuster and look at Best Buy’s new store configuration strategy released today…smaller stores because people are buying their flat screens and computers etc on-line. They don’t need as much display area is their thinking.

The Internet taxation issue is a red herring.

Manufacturing is supposedly on the rise, the reality is this is due to a drop in inventories, and as soon as sales reflect lower demand, which they will, this sector will also slow down again. Today it was reported that the durable goods orders dropped for the second straight month. Just look at the ever increasing size of the USA trade deficit. Gas prices have much to do with that statistic, but nevertheless we aren’t producing enough.

The Federal Reserve and several of the “so called” economists, you know the ones that the media always refer to by the name “many economists” think the Fed has created what is now being called a self sustaining economic recovery. When the Federal Reserve ends its QE2, which has kept interest rates artificially low, interest rates will once again increase. Inflation is already a factor. But the Federal Reserve and the “Economists” discount this because they say if you take out the volatile Fuel and Food items inflation is relatively moderate. Well folks, how can you disregard these two of the most important ingredients of the CPI? What do people purchase most often just to live and work, right Food and Fuel?

The problem with the type of reports which are being released by such firms as Pricewaterhouse Coopers LLC is the fact they are not reflecting reality. They are providing a view of the market from a 30,000 mile distance from Earth. They are not reporting as to what is going on at the Street level of the commercial real estate industry. Investment sales are only a small part of the commercial real estate business. Leasing is one very major component which is most times discussed in passing. Vacancy rates have all to do with leasing, employment numbers and subsequently investment sales. The office vacancy rate has dropped by not even 100 basis points Nationally which coincides with the decrease in unemployment, except for maybe in a few of the major “gateway” markets such as Washington DC. But that is about to change as well. As reported by the WSJ on Wednesday…” In Washington and elsewhere, government leasing has helped prop up demand in tough times. But now cash-strapped governments are moving to cut back on office space, even as commercial real estate struggles to recover. The Office of the Comptroller of …” What does this say about the commercial market? It says much more than a few high profile sales by large institutional investors.

Now add to all the above what has recently and tragically happened to Japan and the upheaval going on in the Middle East and you get more uncertainty which businesses just hate.

So how can the fundamentals be in place for a commercial real estate recovery of any sort? They aren’t in place is the short answer despite what the media, large advisory firms or large brokerage firms say otherwise. It is not in their best interest to tell it like it is.

We all would like to see the economy get back on its feet, that being said, the amount of damage done by Wall Street, The Rating Agencies, the “Too Big To Fail Banks”, along with the complicity of the Federal Government and the Federal Reserve, has created a sum total of problems which have been too great to expect any sort of quick recovery.

I know this recession is the longest since the end of WWII, and it will take a few more years for the economy to get back to a fully functioning mode and that is a big Maybe! Perhaps the “New Normal” is here to stay. Therefore any hint of good news is being taken as we are in recovery mode, instead of we’re just continuing to be bumping along the bottom.

But to say Commercial Real Estate is on the road to recovery is completely delusional.

As I read this “press release” I wondered, “how many employees of printing companies in the private sector, who were let go the past three or four years, received ‘buyout’ and ‘early out’ payments?” Probably very few and, “very few” is probably an understatement.

This is a great example of how “government” can do things with “taxpayer money” that “private sector” companies can’t do.

I urge Congress and the Office of Personnel Management, to “act like” they don’t have a blank check from taxpayers.

GPO To Offer Employees Buyouts/Early Outs

Wednesday, June 08, 2011

Press release from the issuing company

(Press Release “from a Government Agency” would be more accurate)

WASHINGTON – In response to overall Government cutbacks and projected reductions in appropriated funding, the U.S. Government Printing Office (GPO) informed employees today of its plan to send a request to Congress and the Office of Personnel Management (OPM) for authority to offer buyouts and early outs to the agency’s 2,200 employees. GPO’s goal is to achieve a personnel reduction of 15% (or 330 positions), including a reduction in management and supervisory levels of 25%. Once GPO is given authority, employees can be offered lump-sum payments up to $25,000 as an incentive to voluntarily separate from the agency. The actual amount of the payout is based on a formula. GPO will use current funds to conduct this program, which needs to be concluded by the end of the first quarter of FY 2012 to achieve the needed savings for the coming year. In combination with a careful workforce restructuring plan, GPO management believes these reductions in personnel can be achieved without compromising the agency’s ability to carry out mission critical operations. 

”GPO has restructured and reinvented itself numerous times throughout the last 150 years to carry out the critical mission of meeting the dissemination and information needs of the U.S. Congress and Federal agencies,” said Public Printer Bill Boarman. “These challenging economic times have no boundaries and are forcing many Federal agencies to seek ways to survive. GPO is open for business. We are an agency with a dedicated workforce that will continue to reengineer itself in the 21st century to serve as the digital information platform for the Federal Government.”

I read an excellent article on www.whattheythink.com, this morning, and wanted to share that article with my blog visitors.

Here’s the beginning of that article …..

Commentary & Analysis

Legacy Decisions and Facing Uncertainty

By Jennifer Matt Published: June 7, 2011

A few years ago I met a friend of my father’s who was a top executive at IBM, he had a forty-year career with the company. I asked him of all the incredible changes that had happened over the timespan of his career, what was the greatest change to his day-to-day job? He went on to say that during his initial leadership positions at IBM he made a few decisions a month. In the last twenty years he was literally making a few decisions a day.

Pace isn’t a surprising comment on what’s changed over the last forty years, but his follow up was even more interesting. He said his batting average (good vs. not so good decisions) had definitely suffered under the increased velocity, which led him to have to develop the courage and skill of reversing, letting go, and backing out of previous decisions.

You can read the complete article at this Internet address:

http://whattheythink.com/articles/51218-legacy-decisions-facing-uncertainty/

This is a current RFP opportunity for someone in Chicagoland:

Request for Proposal (RFP) #SH1102

COPIER, PRODUCTION REPROGRAPHICS EQUIPMENT AND SERVICES DISTRICT- WIDE Required for use by: CITY COLLEGES OF CHICAGO

Responses must be received no later than 11:30 a.m. local Chicago time, on Wednesday, June 29, 2011

City Colleges of Chicago (“CCC”) invites the submission of proposals from firms (“Proposers”) that wish to provide following to CCC: Lease of Output Device Equipment [MFDs (multi- functional devices), and medium to large reprographics devices (collectively referred to in the plural as either “Products” or “Equipment”)] and (b) maintenance and training Services to CCC (collectively referred to in the plural as “Services” and in the singular as “Service”). CCC is also inviting proposals for Managed Print Services. CCC reserves the right to (i) select one or more Proposers to provide the Services or Products or any portion of the Services or Products outlined herein; (ii) reject any and all proposals; (iii) identify any areas where a conflict of interest may require limitations on a Proposer; and (iv) exercise other rights as described in Section VII of this RFP.

All questions regarding clarification or verification of these specifications should be referred to Sherri Hutcherson, Senior Buyer II, at 312-553-2509 or via email, procurementservices@ccc.edu. Questions relating to MBE/WBE compliance procedures should be directed to Harriet Neely, Office of Contract Compliance, at 312-553-3232 or via email, hneely@ccc.edu. The deadline for submitting questions is Monday, June 13, 2011, by 12:00 p.m.

RFP is posted at:

http://tinyurl.com/3bcv8b2

Over a period of more than ten years, when ARC was very active in acquiring companies, many reprographers looked at ARC (selling out to ARC) as their “exit strategy.” But, as the A/E/C economy continued to drive south, ARC discontinued its acquisition program. Even though ARC management, not too long ago, made statements that implied that ARC would resurrect its acquisition activities at some point, I’ve not yet heard of any new ARC acquisitions. So, on that point, we’ll just have to wait and see.

The past four years have been difficult, to say the least, for many reprographers; probably for the majority of reprographers. It’s not easy to sell a reprographics business, even when times are good, and, when times are not good, it is extremely challenging to sell a reprographics business … but not impossible. One sentence ago, I said that it’s not easy to sell a reprographics business even when times are good, and that’s “simply” because the reprographics business is not very well known. Most people outside the reprographics industry “think that” reprographers are no different than printers. And, because of that, most people compare reprographers with printers (such as comparing CGX with ARC). But, inasmuch as the reprographics business is heavily tied to the A/E/C business/economy, whereas that is definitely not the case with the printing business, there really is no basis for a comparison. Reprographers are different, for sure.

Well, I managed to get slightly off-topic, so let me get back on-topic. The topic is “exit strategies.”

For older reprographers considering “exit strategy” (and, certainly this might apply to less-than-older reprographers) …..you’ve worked most of your adult life, or, in some cases, all of your adult life, building a company, and, for many, many years, times were good. For most of your years in the business, you earned excellent compensation, benefitted from perqs,etc … “life was good.” But, over the past few years, business has been very challenging; you’ve seen your compensation drop and have had to reduce perqs, as revenues declined, in some cases quite sharply, and as expenses have continued to climb. Hopefully, you’ve managed to “right-size” your business to the point where your company is still earning a bottom-line profit.

Staples’ CEO believes that there will be consolidation in the office supplies market space (see previous post on this blog). I believe that there will be further consolidation in the reprographics market space. I think there’s going to have to be further consolidation. The larger “Printing” Industry is continuing to shrink and we are seeing further consolidation in that industry. The reprographics industry may not still be shrinking (best case, the reprographics industry is now drifting along the bottom of this horrible business cycle and things won’t get any worse), but, still, the future outlook for “printing” for A/E/C projects does not look as rosy as it looked coming out of previous recessions. As we’ve said in several previous blog-posts, the A/E/C industry will recover and its recovery will be robust (at some point), but, due to changes in business process, the A/E/C industry’s recovery does not guarantee the reprographics industry’s recovery. As to the reprographics industry’s recovery “mirroring” the A/E/C industry’s recovery, In the past, that was a given, but, in the future, that is not a given.

Possible exit strategies for reprographers:

1) Consider merging your company with a competitor (or with more than one); work into the merger agreement an agreement for a future buyout and retirement, based on a formula-price, after the merger has been in effect for a few years. In other words, give the merger a few years to work, give the merger time to effect elimination of duplicate expenses, give the merger time to work from a marketing and sales perspective. Two (or three or even more) can live cheaper than one. Joining your business with a competitor’s business won’t be easy, but it is certainly a doable thing. (I’ve done that myself, and on more than one occasion, and it worked out fine in the long run.) Your “merger partner” does not necessarily have to be one that’s in business in your present market area. In spite of the lingering A/E/C recessionary environment, there may still be companies looking at geographic expansion or at market-consolidation (ARC, Thomas Repro, NRI, ABC Imaging, Gill Reprographics, Service Point, etc.)

2) Consider selling your company to your employees, using an ESOP format. That’s how Paul Koze, former owner of BPS Reprographics (San Fran, CA based company) exited his company. Later on, ARC bought the company, but that was a few years after Paul sold BPS to the company’s employees. (Bank lenders have an incentive to fund ESOP purchase loans, and there tax benefits to the company as well. You will need a knowledgeable accountant to help you better understand this exit strategy.

3) Consider selling your company to one or two of your key, long-term employees or selling your company to a new person, new to the business and industry (or two more more new people, new to the business and industry), under a “phased” approach, meaning, over time. You continue to work for a couple of years, they to immediately begin working with you at deal implementation. This is the approach that the owners of Lellyett & Rogers (Nashville, TN based company) took.

4) Find a “printing” company that’s interested in diversification and diversifying into the “reprographics” business. The lines have been blurring between the printing industry and the reprographics industry, and there may well be “printing” companies who are interested in diversifying beyond their traditional services and customers.

5) Consider finding a “private equity” company that’s interested in getting involved in the reprographics market space. That’s how ARC got its ball rolling, well prior to ARC going public. ARC’s owners sold a good slug of their stock to a private equity company, and the rest is history.

6) Consider finding a non-traditional merger partner, such as a large distributor/dealer of imaging equipment, or an MPS enterprise, one who is interested in the significant FM (ooops, Managed Print Services) business your company has developed over the years.

7) Consider taking your company public! Don’t laugh at this one, even though it would be hard not to laugh. I did (took my first company public). (I shouldn’t have, but I did.)

Don’t wait until the last minute to work on your exit strategy. It is best to do your homework well in advance of exit strategy implementation.

Well, I’ve certainly not compiled an extensive, exhaustive list, so, those of you who have suggestions for additional exit strategies to consider, feel free to add those by “comments” … or send me an e-mail with your thoughts.