The Unspoken Reason why Printing Owners Don’t Pursue Divestitures
When people ask, “What is divestiture?” it’s always with a fair amount of trepidation. For many mid-size businesses, it seems like a strategy generally reserved for huge companies with a team of financial gurus. But it’s actually a tactic any printing owner should pursue.
Why? Because a divestiture is about refining, not giving up.
It’s about making yourself lean before your company gets fat.
It’s about identifying potential problems before they happen, and being proactive enough to nip ‘em in the bud.
But first, what is Divestiture?
Investopedia dubs it “the partial or full disposal of an investment or asset through sale, exchange, closure or bankruptcy.”
Investorwords.com’s definition is similar, and they add “A company will often divest an asset which is not performing well, which is not vital to the company’s core business, or which is worth more to a potential buyer or as a separate entity than as part of the company.”
I like both of them. In either case, you see what happens: A company sells part of its operation. An analogy would be letting go of an employee who isn’t producing or simply doesn’t fit with your strategic direction. A divestiture is at a slightly larger scale.
Why doesn’t it happen more often? Before I give you the unspoken reason why printing owners don’t pursue a divestiture, let’s look at why they should:
- A divestiture can help you part with an under-performing part of the company. When I was with Vomela Specialty, I’d watch time and time again as 3M would divest portions of the company that were unprofitable or under-performing. It reduced the drag on their financial resources and their personnel, and let them truly achieve their potential.
- A divestiture will help hone your strategic focus. You’re always trying to find new markets and new business segments for expansion. And you take risks and make experiments. As you move forward, your true strategic target emerges and evolves.
This is a moving target, however, and after a while, portions of your business no longer apply to your vision. Shedding those segments of your business that aren’t aligned with your overall vision will help you to keep your resources pointed at what’s critical to your business.
- A divestiture could be far more valuable to another company than your own. Divesting a segment of your company may ultimately be the best way to yield maximum profit. Other companies who are heading in a strategic, long-term direction that’s aligned with your potential divestiture may place a premium on what you’ve got. Talk about a win-win situation.
So why aren’t companies taking a serious look at divestitures?
What is the unspoken reason why they don’t pursue divestiture?
It’s simple. They fear their own financials.
Before you even consider the factor of risk, and whether or not the owner is willing to reach for something new, most owners don’t have the simple data to make the decision.
Many printing owners aren’t confident enough in the analysis of their own financials, and they don’t understand how to qualify a business segment as worthy of a divestiture, or to break it apart from their own business.
Entrepreneurs are also in such a frantic scramble to generate revenue, they’ll grasp at anything they can. Even an underperforming part of the business is better than nothing. But is it really over the long run?
Don’t get me wrong. A divestiture takes time, focus and resources. But that’s like anything in business, and considering the potential strategic reward, it’s something that definitely warrants consideration – especially when you can assemble a team of outside experts to do the lifting.
Not understanding those financials is a common fear. Heck, I’d call it an epidemic among printing owners. But without it, you can’t make the truly powerful strategic moves, like divesting underperforming assets.
(Photo by morgaine)
Click on the button below to receive Rock LaManna's 5 Key Strategies for Printing Executives. In a series of 5 direct, hard-hitting emails, you'll discover essential strategies for today's printing executives.
Rock LaManna is the President and CEO of the LaManna Alliance. The LaManna Alliance helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic transition – including mergers, acquisitions, organic growth, and exit / succession plans.