How to measure success? Topline or bottomline?

Faheem Agboatwala and Mehul Desai of the BMPA are planning a session on the importance of profits for BMPA’s annual get-together, Print Summit, on 24 January at the Tata Theatre, NCPA, Mumbai. Ramu Ramanathan examines the vexed issue.

12 Dec 2013 | By Ramu Ramanathan

Print Summit is acknowledged to be the premier print knowledge conference in India. The BMPA, who organises it, know that 2013 has been a grim year. Which is why the duo of Faheem Agboatwala and Mehul Desai have planned a session on toplines v/s bottomlines.

Agboatwala says, “When you set an annual target, is it based on turnover or profit? I would like to set an NP target and work on that, base upwards instead of the traditional top-down method.”

Chat with a printer, and questions about the money squeeze come hard and fast

• How should the Indian print industry measure success? Topline or bottomline.

• Why have margins diminished? Should the industry change, and how does a printer evolve with it?

• What is tougher? To pay heed to dad’s old school chopdi method? Or to pay attention to a son’s MIS system?

• Are people much more open about using banking services, or is it still about hedging your bets?

• Why is profit such a dirty word for a printer’s customer?

These questions are becoming relevant as we operate in a tough marketplace; and as Arvind Sekhar of Sai Packaging, says, “It is a bloodbath out there.”

What should a printing firm look out for

In an industry as volatile as printing, it is important to have a stable financial system. Print Summit on 24 January hopes to examine cost of sales, the mix of products sold, sales against target, sales conversion rates, delivery on time, employee turnover, number of new ideas generated, how many ideas become profitable, rate of conversion of hot leads, customer acquisition cost or inventory turnover, bank finance and interest rates, error rate, and the number of customer complaints.

So how does a printing company’s profitability get measured? Through its bottomline or through toplines? As Mehul Desai, who is co- chairing the session says, “It is important not to confuse business success with goals. Unfortunately, print companies make that mistake.”

He states, “For example, a printer might have the objective of generating Rs 25- crore worth of sales for a particular year. That’s a goal. The method would be around the sale process, not the Rs 25-crore figure. They might include new customers, how many visits from prospective customers ended up in presentations, and how many presentations ended up in sales.”

Desai adds, “Some companies have big targets. That’s good, but they have to be realistic. If the company needs thirty extra people plus another Rs 10-crore worth of machinery to reach those targets, it might well become economically unviable. If the targets feel unattainable or ridiculous, should a print firm try and achieve it? And more importantly, at what cost?”

“Number of print orders per day” is straightforward. “Number of print orders that meet minimum quality specifications” might be more difficult to measure. When that happens, companies have two choices. They can either focus on something that can be measured, or they can settle for an alternative or proxy.

Mehul Desai feels it is important that the print industry needs to review how it does real business. Business practice changes, and so printers need to change in order to succeed. As a result, some business modules can get out-dated and stale and need renewal.

Bottomlines or toplines are critical in determining business success, but what should a growing print firm look out for?

Turnover is vanity, profit is sanity

Every printer would love to have the purchasing power of an ITC or a Navneet or a Manipal or a Repro. Bigger companies can afford the most advanced machinery and will often be able to negotiate special deals on paper and consumables.

But bigger doesn’t necessarily mean better. There’s nothing easy about managing hundreds of staff and dozens of product lines across multiple sites. The logical solution is to install layers of red-tapism and bureaucracy, but that can have the effect of making companies leaner.

Chennai is a perfect example. Three print firms have been crippled after a Scandinavian giant offered print business and snapped the deal; the three firms were not able to recover their glory days. In Mumbai, we have seen more than 10-12 top firms who have found themselves in trouble. I met the owner of a pre-press house in Lower Parel who admitted that its management structures had not kept pace with its growth.

Jungles are dangerous and competitive environments. Only the smartest animals survive. The same applies to printing – and there are few better ways of judging a printer’s shrewdness than by examining its machinery investments.

A high-spec machine isn’t always the answer. Bells and whistles may be indulgences. Plus, is a new kit even needed? It might make more sense to find efficiencies in the production process, outsource work or both.

The last two years has seen print firms been affected due to bad timing in making investments, i.e. investments which haven’t been able to ride the cusp of currency fluctuation; be it the Euro or the Yen.

Poor investments can take two forms. First, there’s picking the wrong investment, which is essentially a question about product. The second is just poor investment strategy. This is a more complicated pitfall and involves the printer’s choice of vendors, its financier and its accountant, to name just some of the players involved in the process of separating a print company from its hard-earned capital.

Before you start, take note of the traps for the unwary. Prof Dr Rajendrakumar Anayath of The Technological Institute of Textile & Sciences, has seen his fair share of mis-investments. He says, “The problems often start from trusting the sales pitch on a PowerPoint over the product’s technical realities.

“The ones that come to mind most commonly are those that have been based on best-case productivity and efficiency data and that haven’t factored in the realities of day-to-day print production. I have seen presses that could in no way deliver on the promised reduction in waste, makeready and production time.This includes digital.

“In some cases, we have even seen devices unable to produce the product they were intended for. It can all sound good in a sales presentation or on a positive weighted ROI spreadsheet, but you need to dig further than that,” says Anayath.

Small is beautiful

That begs another important question: should smaller printers (thousands dot the Indian printscape) always aim to become big printers? Nick Bendel who is deputy editor of ProPrint says, “Big printers base their business models on their size. That’s what gives them their purchasing power and economies of scale, so they have no choice but to remain big.”

He adds, “Smaller printers do have a choice. You can’t fault firms that grow through referrals and demand for new products. But you can’t say the same for companies that see expansion as a key to success rather than a product of success.”

Smaller printers like an Avantika in Delhi or a Vishwakala in Bengaluru, have a knack for being flexible and offer customers a more personal service. That’s why there will always be a place for them in the printing jungle.

May we make money in a thousand and one ways.

Faheem Agboatwala Hi-Tech Printing Services

When you set an annual target is it based on turnover or profit? I would like to set a NP target and work on that base upwards instead of the traditional top-down method. Print Summit hopes to examine cost of sales, the mix of products sold, sales against target, sales conversion rates, delivery on time, employee turnover, new ideas generated, how many ideas become profitable, rate of conversion of hot leads, customer acquisition cost or inventory turnover, bank finance and interest rates, error rate and the of customer complaints.

Mehul A Desai - Mail Order Solutions

The panel discussion in the afternoon of 24 at BMPA’s Print Summit will feature six speakers. These are: two print owners cum CEOs (A Balachandra of Rajhans Enterprises and P Narendra of Pragati Offset); two firms headed by professional print CEOs (Pramod Khera of Repro India and CJ Jasawala of Thomson Press); and two disruptors (Nilesh Parwani of Vistaprint and Dharti Desai of MOS). The six leaders will be quizzed by Ramu Ramnathan and I and will examine different methodologies for different types of print operations.