Transition Plans & Consultancy Services
“The bottom quartile of all print related businesses appear to be unsustainable. The owners of these businesses must change their business model and thinking to survive”
– Richard Rasmussen, principal, Ascent Partners, Aug 2016.
A Benchmarking survey conducted by Future Print and the Printing Industries Association of Australia (141 participants), showed the huge gulf between the performance of the top quartile and bottom quartile as far as Net Profit Before Owner’s Salary is concerned:
|Revenue Band||High 25% (Top Quartile) |
Net Profit Before
Owner’s Salary – FY 15
|Low 25% (Bottom Quartile)
Net Profit Before
Owner’s Salary – FY 15
|$0 to $700,000||$ 133,109||$ 12,096|
|$700,000 to $1.5 million||$ 331,732||$ 43,204|
|$1.5 to $3.0 million||$ 433,611||$ 69,765|
|$3.0 to $9.0 million||$ 674,140||$ 122,205|
|$9 million Plus||$1,456,647||$246,951|
In all revenue bands, the bottom quartile shows profitability levels that are unsustainable. These profits are the profits the owners have from which they can draw a salary.
These profit levels are consistent with the previous year’s (FY14’s) results.
Very few business can survive in the bottom quartile for a long period of time. Put simply they will run out of cash or a small loss of profits, due perhaps to a loss of a client, loss of a key employee or illness will force their hand.
The results show that for the past five years, the number of businesses in the industry has contracted by around 10-12% per annum. A large proportion of these businesses were in the bottom quartile of their revenue band.
The question is, “if you’re in this bottom quartile, what’s the plan to turn the business around”? Clearly doing nothing is not an option.
Simplistically these businesses must make relatively quick structural changes to the way they operate.
As the business landscape for print is changing dramatically, the other quartiles are not secure either, although from the results above, the top quartile is doing well from a purely profitability perspective. But the middle two quartiles may also need to “transition” their business to one that is more sustainable and aim to move up to the top quartile.
The speed of change it accelerating – look back just 10 years and web 2 print (W2P) was just starting, there were no smart phones, Facebook was two years old (2004) and Linked in only four years old (2002). Newspapers were not under threat and we were still producing the Yellow Pages. Offset ruled and digital was only in A3 (click rates were about over twice what they are today, on far more expensive / slower machines that produced far poorer quality). We had 6,000 Australian offset / digital printers, now we have close to half that.
A transition plan recognises the realities of the current position of the business and makes some fundamental plans to change the way the business operates. It recognises that all businesses have a lifecycle, and to stay “as is” in an ever-changing world is not an option.
So, a transition plan is not for people who don’t have the capacity or desire to change.
- A Plan to exit the business over time (period 3 months to 3+ years).
- A Plan to grow the business via acquisition.
- A Plan to merge businesses or create affiliations with others.
- A Plan to downsize manufacturing.
- A Plan to diversify.
Obviously there are many others, but these are the common types of plans that are delivered.
Each option aims to increase business profitability and business value. It also aims to mitigate risks that the business may face. These risks can include loss of a key client, minimising exposure of negative equity, key man insurance, setting up an “Information bank” of how the business operates (operations, staff, property, suppliers, data bases, financials etc.).
We also look at staffing and machinery levels, premise requirements and timing.
Proven 5 Step Business Transition Plan process:
- Establish present situation / goals and objectives.
We always start with seeking to understand the basics about the present business, where the business owner is at in their business life cycle and what they want to achieve and when. More often than not, proprietors need to accept the market realities and adjust their thinking – we need to make sure they are capable of making the necessary changes to transition into the next phase. We also seek to understand their personal objectives – their life outside the business environment.
- Collect data to provide a Business Appraisal.
Knowledge of the business value and what drives the value is a very important ingredient in the planning process. If you want to transition to the next phase, you want to make sure that changes made will positively affect business value and profitability.
- Analysis of the business “as is”
Here we focus on the present business – we review its vital components– the business model, the market for its services, financial, staffing, plant and equipment, premises, operational, systems, market position, operational, sustainability and growth potential.
- Analyse options.
Having completed steps 1-3 we now know the business and owner’s profile / needs and can then develop appropriate transition options. We do this based on the sound information we have gathered, on the market realities at the time, and what is achievable.
- Provide an Action Plan
We are now well placed to provide an implementation / action plan – This provides what needs to be done, by whom and when. This action plan may take some time to implement, so we take it in bite size chunks over time that the business can manage. For example a management buyout, or easing of the time the proprietor spends in the business is not going to happen overnight.
The plan is delivered by our principal, Richard Rasmussen, who is an industry veteran of 35 years – 21 Years with Heidelberg and the remainder in private practice as an industry delivering consultancy, acting as a sales agent to buy and sell business, and providing business valuations and appraisals. Normally the plans are delivered remotely, but arrangements can be made to deliver some face to face.
We complete the plan in three months. The proprietor must be prepared to work with us to provide the information we need, and be available to consult with during that period.
We change in three equal instalments – one third upon engagement, one third after week six, and the balance after three months. As a guide a the cost of a smaller plan for a business of say five employees starts at $2,400 plus GST (3 x $800 plus GST) with remote delivery.
If you’ve hit the wall and are uncertain of which way to go to transition to the next phase, then please call us today to discuss. We don’t have a magic wand, but do promise to get the best possible outcome for all businesses.
Phone Richard Rasmussen – 00402 021 101 or email firstname.lastname@example.org
We have acted for a wide range on people within the industry as consultants and advisors.
Some of our projects have included:
Review of internal print operations, report & recommendations
clients include University Of Melbourne & Swinburne University
Marketing Audits & Marketing Plans
Facilitation of Monthly Management Meetings
Business Planning & Strategy
Supplier Marketing planning & implementation