Could now be the right time to invest in cutting-edge equipment that will set you ahead of your competitors and win business? Learn from some successful trade printers who did it, and made it work.
Recently at the Graphics Canada show, I had the opportunity to attend a special panel discussion about why now could be a good time to buy an offset press. There weren’t many people sitting with me in the audience, and I’m sure we all know why: right now, the last thing on many people’s minds is making a huge investment like an offset press. First, the current economic climate means that everyone is keeping a close watch on their chequebooks. Second, the print industry isn’t exactly booming.
Putting negativity aside for the moment and looking forward, no matter what the state of the economy, the industry is still alive and there will always be work available for printers. We’re always going to need packaging, labels, books, displays, brochures, etc. Yes, things are a bit shaky right now, but there are many printers out there who will not only survive, but thrive once things turn around.
In his keynote speech to open the Graphics Canada show, Dr. Joe Webb mentioned that in times like this, it is the real innovators and entrepreneurs who come forward out of a recession. So, could now be the right time to invest in cutting edge equipment that will set you ahead of your competitors and win business?
The expert panel at the seminar was made up of four successful printers who have all bought a large offset press within the last two years: Warren Werbitt from Pazazz Printing who bought a KBA Rapida 142 56” UV press; Brian Armstrong from Printer Gateway who has a Komori Lithrone SX 29” press; Kieron Pope of Toronto Trade Printers who purchased a Mitsubishi Diamond 3000 40” press; and Jack Walmsley of Interprovincial Printing who owns a Heidelberg XL 41” press. Also on the panel was Jim Hughes of EquiBank Financial Services, who specializes in equipment financing for the printing and graphics industry.
The deciding factor
The seminar’s moderator, Doug Picklyk addressed the panel with a good question: what prompted you to make the decision to buy a new press? The responses came down to two main reasons: a new press would expand what they could offer and put them ahead of the competition, and also because it was customer-driven as they outgrew older equipment.
Kieron Pope had some key points: “We keep hearing numbers about the print industry being flat, but there is still a couple of billion dollars of business and still a lot of work out there. We had aging equipment at our shop and we noticed a trend: more of our clients wanted more capabilities – the client demands were outreaching what our equipment could produce. After the purchase, we solidified new accounts and brought in some new people. We didn’t want to lose out on some of the higher margin work because of aging equipment.”
I believe the point that he was making is that there is still work out there for those who know how to find it. Clients are demanding a lot these days and as Jack Walmsley put it: “You’ve either got to stay in business, or get out of the business.”
The cost of maintaining older equipment was another one of Walmsley’s key points: “We were looking at many thousands of dollars in maintenance costs to keep up the old equipment we had. There were days we couldn’t even get the manufacturer to answer the phone. Having a new press was the way to go. Who knows if it was the right time in this economy, but we’re hoping it’s going to get better. When a new press is there, it creates work for the cutter, the folder, etc. That is the bottom line.”
The key benefits
The discussion then turned to what was the most significant benefit of the new press. Warren Werbitt said that efficiency and speed were the biggest benefits he saw, because his company is now able to maximize its abilities on a bigger sheet size. They get jobs now that they wouldn’t have gotten on the old press. Werbitt also noted: “When you bring a new press or equipment in, the attitudes change and people are more motivated. It also gives the salespeople something more to talk about. It goes down the whole ladder – the pride of having something new. It adds more value to the process.”
Pope noted that benefits for him included the guys in his shop appreciating new technologies like automatic plate washers and blanket loaders. In turn, he sees much faster make-readies, which mean a lot when you’re in the short-run business. If you’re a printer out there with some of the older equipment, you could be wasting a lot of time and money on make-readies. With the newer technology that is available you can cycle through jobs much faster to the point where it can not only change your entire production process, but increase profits because you’ll get more jobs done in less time.
Brian Armstrong added that he saw a new press as a value proposition that would increase profits. A key factor for him was that a new press held significant benefits: efficiency, quicker make-ready, better colour control and speed. Because of the new press, his company can now offer same-day service. “What we can do now in a day would have taken us a week to do before,” he said. Walmsley added: “I make my money in make-readies; I don’t make money when my press is running. It’s how many jobs I can get through, not the size of the job – that’s where the new presses make all the difference.”
Financing the press
Especially with the current state of the economy, financing is a big and tricky issue. The challenge is to make sure you have the business to be able to sustain a press. It’s a case of the chicken vs. the egg: do you need the press to get the business, or do you need the business before you can get the press?
The answer to that question is not as straightforward as it may seem. The general consensus was that it really depends on your market and that it is very industry-specific. Werbitt said that when you buy a press that exceeds anything your competition has, you have a great advantage. Armstrong’s tip is that you really have to do your homework. As he put it: “You aren’t buying a slice of pizza, you’re making a multimillion dollar investment.” An investment like this really dictates where your business is going and forces you to redefine your business model. Armstrong suggests that you have to look at things like supporting equipment, ROI, as well as key operating and production indicators. His tip is to look at the ratio of 2/3: if a new press can shorten your make-ready time by 2/3, the numbers will probably work out in the end and it will be a good investment for your company. He went into the decision looking at a two-year payoff and suggests that you have to go into it with open eyes and have a solidified plan together instead of scrambling afterwards to make it happen.
Access to capital
Jim Hughes of EquiBank Financial Services stepped in next to discuss what he looks for when printers come to him for financing. “Track record and history are critical.” He also noted that times are changing, things are turning around and: “The largest single impact as far as access to capital is the fact that the players have changed and they are less anxious to lend against printing equipment.”
A tip from Brian Armstrong about access to capital is keeping your business transparent when it comes to lenders. “We look at our financial partners as just that – partners. We inform them about board acquisitions, new members, advancements, relationships, press articles…we keep the relationship open. The more you keep things transparent with your financial partners, the easier it is for them to find ways to help you. A lot of people see them as the enemy, but the key is nurturing the relationship. You have to help them understand your business.”
On the other hand, Jack Walmsley said he is not a big fan of bankers (to put it delicately), so he financed the press himself. While this is not a feasible option for many people, he said he was able to accomplish this by sitting down and doing the arithmetic. He made sure he knew how much he would need to pay for it, and also looked at how much he could get for the press when he sells it. Another reason he decided to finance it himself was because of interest rates. “What I worry about is what’s going to happen when the economy starts turning around. Interest rates aren’t going to stay at zero per cent forever. I don’t know how people will survive if rates climb back up to 12 per cent or 14 per cent.”
Service and maintenance contracts
For many of the printers on the panel, service and maintenance contracts were the deciding factor in choosing one press over another. You’ve really got to shop around. The final decision-making process for the purchase took between six months to two years for the panellists. Armstrong spent hundreds of hours in consideration and said that it was important for him to fly out to various locations and see the presses running and see other business models. His advice is that you’ve really got to negotiate a good service contract. You have to pay attention to not only the contract terms, but find out how many guys are available nearby who are trained and qualified. When you run 24/7, you can’t wait a day to get back up and running after a break-down. You have to ask these questions and pay attention to the responses – this will really help you narrow down some of the suppliers.
In addition, Warren Werbitt’s advice is that you’ve also got to stay on top of maintenance yourself, internally. “It’s like owning a car – check the oil and tires regularly and you’ll have less problems. But if your car breaks down, call the mechanic. Likewise, if your press breaks down, you’ve got to be able to count on the manufacturer.”
Looking back over the years, Jack Walmsley had a few sentiments: “I think some of those old presses were built like a battleship. They used to be built better those days. They weighed more and ran better. Those were the good old days when you simply had gears and toggles. But those presses didn’t have the technological capabilities of today’s equipment. Nowadays if a press breaks down, it’s because of the electronics.”
That’s why he says service is so important now. His advice is to negotiate the best possible maintenance contract, but to keep in mind that the guarantee is only as good as the person in the company who gives it to you. The bottom line is: do they show up when you need them if something goes wrong?
“Good service means that you can even call them a few months after the installation for a check-up. You shouldn’t have to pay for things like that – that’s the kind of service we need these days,” Walmsley noted.
I think we can learn a lot from what these four printers had to say about their experiences in buying a new offset press. Their advice has a lot of value no matter what type of equipment you may be thinking of purchasing – it is a big investment and there’s a lot at stake. One last piece of advice I learned from the discussion is if you’re thinking of buying a new press and the numbers just aren’t there, don’t “sell your soul,” as Armstrong put it. See if a book of business comes with the press and you might save on the bottom line by merging with another company. There’s enough business out there for everyone; you just have to be smart and make some good decisions. Now might be the best time for you to buy a new press and be able to offer more to your customers. As they say, “if you build it, they will come.”