Friday, July 20, 2012

No Computerized Estimating - Shocking!

I'm working on one of three valuations this week, and one of them has really shocked me.

This company is thinking of selling and during my discussions with the owner we started talking about pricing. Just in passing, I asked him what estimating system he was using. I expected him to tell me Printer's Plan, PrintPoint Leader (formerly PrintLeader), PrintSmith or one of the other less known programs.

Instead, much to my shock and amazement, he told me he does all the estimating by hand based upon rates and charges that are in his head. "Surely, you have your basic estimating rates written down," I asked, and he said, "Nope!"

"How the heck do you expect to sell this business, especially to a newcomer when you don't have your pricing, estimating and invoicing already automated. Do you realize how much more it is costing you and how much more money you could be putting in your pocket just by computerizing those function in your company?"

Gee, I was starting to sound like a salesman for one of these companies. This will be one of the few valuations where I will actually break precedent and use some negative numbers in the valuation sheet that I use to arrive at an "excess earnings" multiplier.

Every once in a while I will find someone using an outdated Franklin Pricing Catalog, but for the most part it seems like 95% of the companies I deal with have at least installed a computerized estimating system.

It has been a long time since I have encountered someone who is so out of touch with the industry that he has chosen to use pencil, paper and calculator to figure his prices. At one point, he even mentioned that he hasn't raised his prices on some items in 3-4 years because it was too much of a hassle.

Instead, he refers to little post-it notes, charts and tables he prepared years ago, as well as a lot of data that is indeed just stored in his head. His markup rates for outside services and paper are all over the place, and it often depends upon whether it is Wednesday or Friday as to what type of markup he is going to apply to a $1,500 job that he just brokered out!

Just amazing. His failure to computerize will impact the value of his business by no less than $60-80,000, an amount that would buy ten of any of the estimating systems mentioned above.

One side benefit that everyone forgets about is the vast improvement in filing methods when you use a computerized estimating system. You can convert from a problem plagued alphabetical filing system to a very efficient numerical system in a matter of a few short weeks, and when you do you will look back on the decision noting, like so many others do, that your only mistake was in not converting over years ago.

That's my rant for the day.

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Monday, July 9, 2012

Terminal Cancer and Valuation

I already have my story theme for next month. It is based upon a recent call I received from a fellow printer. The scene: Mother and Father own the business. Many years ago, they gave their son 40% interest in the business. Each parent retain 30% ownership.
The son has been diagnosed with terminal cancer... slow growing, but nonetheless terminal, with no cures and no possibility for living much longer than another year or so. The father calls me and wants to discuss methods of valuations, because he is planning ahead and wants to be fair to all sides. When his son dies, and it will be sooner rather than later, his intentions are to buy-out his daughter-in-law's interest in the business. He neither wants a high value or a low value, just a fair valuation (and method) that all members of the family can agree upon. Of special concern is an agreed upon valuation method that would not only satisfy his son but also his daughter-in-law and possibly even her family.
Why the latter? Well, as is often the case, especially when large amounts of money are at stake, those individuals closely involved with the business will often think it is worth far more than is being offered, to the point where one party or the other feels or thinks that they are being taken advantage of. Trust me, this will prove to be an interesting story.

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Friday, July 6, 2012

July 2012 Column Now Available!

Just a quick notice that my July 2012 column titled, "Making and Breaking Promises to God - Part II," is now available free on my web site at www.quickconsultant.com.
The column also tells about the author's own harrowing experiences sailing a 22' sailboat to the Bahamas, and the destruction of coral reefs that ensued as he tried to find land! DO NOT READ if you are an avid environmentalist!

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Monday, July 2, 2012

Visit Margie Dana Web Site

I normally don't get carried away with recommending other sites, but today I will make an exception.

Margie Dana, who hosts a web site at: http://www.printbuyersinternational.com/ wrote a column on June 16, 2012 titled, "What Print Buyers Won't Tolerate."

The list includes more than a dozen problems or excuses encountered by print buyers that cause them to throw up their hands in disgust and seek out another printer. The list is made of some pretty common sense stuff that happens far too often in our industry.

The list is unusual in that "increasing prices" or "prices that are too high" don't even make the list. I've often said that I think printers are their own worst enemies when it comes to the need to raise prices but fail to do so out of what most often is an unwarranted fear that customers will suddenly leave in droves. Visit her web site and check the right side of her Index page to find the column, "What Print Buyers Won't Tolerate."

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