As the print equipment and services industry continues declining it's time to evaluate all aspects of the deliverable. In the days of its growth it made sense for dealers to sell all the industry's equipment. However, today dealers should question that approach. Here are my thoughts on Production Print.
There seems to be a lot of talk regarding Production Print. However, if that talk turned into a discussion based on realities, most would listen with caution. The Imaging Channel is chasing this fantasy to the glories of production print, and too many get sucked into the vortex of what I describe as “production print’s pit of debt.” A debt rarely paid back to those who acquire it. Production Print is not a growth business model; it’s a displacement model. Many are buying into the noise without studying the data. Just because manufacturers are dumping R&D money into production print doesn’t mean your dealership should sacrifice its profits to join in.
If the channel were realistic in the market realities, there would be fewer players, and for some, the game would be rewarding. However, the game is being played by too many who don't play based on a knowledge of the game. Some of the players on the field are not aligned to win; they simply showed up to play a game they have no business playing.
“Never let the noise in the excitement of chasing revenues silence the cries to controlling cost.”
If the dealers really looked at the numbers and paid attention to all the cost associated with running a production print program, most would concede and abounded this money pit. Think about all the production machines spread around the demo rooms of those dealers who once had a grand vision of production print's success. Not to mention the obsolete parts, the extensive supply inventories, or production print technicians without enough placements, so they are fixing desktop printers. Now top that off with lowering print volumes. Many of these production placements are not the ideal account and extremely underutilized. Sales reps are placing production print equipment to capitalize on the lower service cost per page in order to increase hardware revenue.
Today there are too many manufacturers trying to chase after the king of production Xerox. Soon this king will buckle down and fight harder for their customers. When Carl Icahn decided to inject himself into the Xerox management, he made a few comments that should be noteworthy. The comments regarding the Global Imaging Group selling non-Xerox brand equipment is something the other manufacturers should take heed of. One day soon all the non-Xerox brand equipment placed in the past by, Global Imaging will revert back to, Xerox this will obviously include production print.
My prediction of HP buying Xerox also plays heavily into the production print arena. HP and Xerox share many customers, along with indisputable brand recognition. The indigo technology from HP would be a great asset to the Xerox production line up. Xerox has had an advantage for decades on production. Yes, they can be challenged by our friends at Konica, Canon, or Ricoh. However, dealers without the understanding of the market will find themselves selling production print as they sell walk-up A3's. These less sophisticated dealers will turn production print into a vendor auction. Sadly, in much of the market, this has already happened.
Dealers should re-think the production strategy. Those dealers less than 10 million in revenue should run from production. Focus instead on beating your competitors who are bogged down with 1990-2000 sales mythologies. Figure out how to align with the market realities, stop chasing revenue with no regards to cost. I see dealers more excited about the trophies of production print then the profits from its placements. Let your competitor's lose money selling production while you deliver 85-90% of their customers a better experience with A4.
In March 2018, I wrote an article for ENX Magazine regarding Production Print. It was based on an analysis of nearly 5,400 Black and White units. Here’s a link to that article. https://www.enxmag.com/twii/minding-your-business/2018/03/production-print-taking-a-deeper-look-at-the-true-data-not-marketing-hype/
Create Something Different Be an Entrepreneur and Change the Game
Start developing a strategy to change the way your customers’ lease equipment; change the way you allow customers to engage you aligning with a digital world. It's time to shed outdated parts of the deliverable which kill margin and are no longer relevant to the market's realities. My friends, it's time to change the whole game. It's time to win.
A Possible Solution to Exit Production Print’s Pit of Debt
It’s simple call up a competitor and sell them your base of production print. To motivate you into doing this. Take your production print and evaluate its actual cost to the organization. When you discover the negative numbers and truly understand how it’s weighing down your profits, you will then be ready to exit “Production Print’s Pit of Debt.”
Now that you’re ready to spin it off. Sell your production print business for the revenue it generated over the last twelve months. I am sure you can find a dealer in your market who would be happy to acquire your production base. Selling at revenue would give you a five times EBITDA at a 20% EBITDA, and in reality, If Dealers with a handful of units in the field put their production print business on a separate PnL, their EBITDA on that business would more than likely be around -5 to 5%. Provided you are accounting for all the cost appropriately and don’t forget to add in the depreciation cost of all the equipment in your demo rooms. Call my friends at NEXERA and have them help you evaluate your actual cost.
Getting out of production print for many dealers would result in an instant increase in overall profit. A handful of units in the market is simply not enough to offset the high cost of the deliverable. As a bonus you will finally get rid of those production units you walk by every day and see $$$$ littering your demo room floors.
Things to think about as the industry continues declining and mega dealers keep buying distribution. Those independent dealers left should fight the game to win as they grow. Let the private equity fight each other to grow their top lines. The future of the industry will prove painful to those who insist on chasing revenue and using outdated sales mythologies which are out of alignment with the realities of the market. As we are witnessing today with some of the industry’s actors who are watching their revenues evaporate, buried in debt fighting for survival, being the biggest doesn’t translate to being stable or profitable.
"Status Quo is the Killer of all that will be invented."
For more thoughts on the subject In March 2018, I wrote an article for ENX Magazine regarding Production Print. It was based on an analysis of nearly 5,400 Black and White units. Here’s a link to that article. https://www.enxmag.com/twii/minding-your-business/2018/03/production-print-taking-a-deeper-look-at-the-true-data-not-marketing-hype/
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