As we assembled this year’s contributions to our 2016 industry predictions, we found fewer submissions. Perhaps the end of the year is too busy of a time, perhaps people are a bit uncertain of what the future will hold. However, the submissions we did receive are in-depth, interesting and insightful. It’s definitely quality over quantity - enjoy!
President and CEO
In 2016, the Baby Boomers have begun their exodus. More business owners will be looking at leaving the business due to age, health, risk aversion, sheer exhaustion or, for the fortunate and smart planners, retirement.
Frankly, the time to move is now. We’re seeing multiples on value decreasing due to risk and uncertainty in the overall markets. The seller's window is slowly closing and, in fact, shut in some print industries.
And owners smell it. We’re seeing a big uptick in orders for business valuations. Print owners are developing exit plans, and for those not in denial about the eventual reality of the situation, they are willing to extend exit timelines from 1 year to 2-3 years to achieve their objectives.
In 2016, the buyer rules. We will shift from a strong seller’s market to a buyer-take-all market. This shouldn’t scare you if you have a profitable business. There’s still plenty of overhang in the buyer’s market to make you attractive to investors.
You need to focus on revenues, pricing, and ultimately, profitable sales. It’s more important to understand and execute your growth strategies in 2016. Potential sellers will need to position for a decisive 2017, with a ready-to-sell position, accompanied by the last 3 years of financial performance.
With buyers calling the shots, strategic deals will be very quiet and will meet the investor's strategic objectives. Expect more CEO-to-CEO deals.
Yes, the great deals of last year are gone. Now that’s a general statement - keep in mind that if you have a nice top line, gross margins and net cash flow, then you’ll still be of interest to investors. It’s just that they’ll be much more selective, and your journey will be an uphill one.
Marketing and Communications Director
The print industry has gone through so many changes in the past 10 years, primarily due to the effects of the internet. The consumer demands real-time, relevant communications. They need to receive information that speaks to their current needs and interests.
Commercial print experienced this when one-to-one marketing was enabled through digital print technology. Now Labels, Packaging, POS/POP and even folding cartons are seeing digital becoming a viable solution. This gives the printer the ability to provide their customer ways to speak directly to the consumer. Shorter runs have become the norm in display graphics and label/packaging. Their challenge is selling it without following the traditional processes. This was a big hurdle for commercial printers.
I also believe direct marketing printing such as "Dear Bob or Dear Susan" no longer has the same value. If you are applying the intelligence at the press, you are too late to have an effect on the performance of the marketing piece. You have to understand the objectives of the campaign to provide any input that will impact the performance of the marketing program.
The recent developments in LCD technology is impressive. The cost of providing real-time content continues to go down while the quality continues to go up. Content is king. If you can provide the vehicle to communicate dynamic information, you will have a customer for life. One caveat: It has to integrate into a complete marketing/sales strategy.
We (R and D Computers, Inc.) play primarily in the enterprise or corporate space. What we are seeing is a decrease in central reproduction facilities and an increase in smaller, distributed printing solutions. The need for efficiency has increased. When an individual needs to print something, they need lower quantities, but they need it quickly and more often. They don't have time to walk to a centralized, large scale room. The need for customized output has decreased. Two-sided copies is about the extent of the options they need for their output. They would rather hand-staple then try to figure out how to do so in a print driver.
Ultimately, to provide "End-to-End" solutions, the printer has to look at the data, the sales process, the products and services, the method of selling, the communication methods and most importantly, your customer's customer. Convergence of technologies, such as a digital workflows, helps to create links between CRM, Sales strategies and Advertising and connects it to Social Media, Analytics and Real Time target marketing. It’s improving results that can be measured and duplicated.
Research Director – Hardcopy Solutions
We see the market for wide format printing and digital displays coming together more and more – this is something we expect to see a lot more of in 2016 and beyond as many of the larger wide format buyers are developing a growing sensitivity to where they allot their advertising budgets.
These are the days of “big data,” advertisers get stats about effectiveness of many other types of advertising, direct mail, Internet, etc, so they expect the same kind of info about display graphics advertising. The absence of some of that kind of business intelligence, except in pilot programs or specific research studies, is part of what we see driving investments in digital displays for promotional advertising that incorporates tools like dynamic content management and analytics.
We see wide format display graphics growing, but we see display graphics and digital displays often playing together, and we think there are many signage and graphics providers that recognize they should be developing their capabilities to play a role in a market where digital displays are part of the communications mix.
Orazio “Omike” Fichera
With 38 years of understanding of how The Channel works, there should be no question in minds of anyone in the Print / Imaging / Finishing Industries that the important role dealers / distributors play in the distribution of products is not going away.
Without mentioning the names of the giants-of-our-industry, there have been times when manufacturers opted for dropping channel sales for direct sales only to realize costs were staggering and equally as important. Printers and sign shops like doing business with their local dealers who take a personal interest in them for numerous reasons, one of which is the survival of their dealerships.
Dealer Communicator has, and always will, honored manufacturers who know "how to manage their channel." Top Five Tips:
- Know that a dealer is an independent and can go anywhere for products. Manufacturers may not like this - but that's life.
- Know that you need to treat dealers as selling partners.
- The more visible you are to your channel of dealers / distributors, the more you teach them (owners, managers, salespeople & CSRs), the tighter will be their relationship with you their vendor-partner. Request examples of techniques you can use to personalize your connection with existing dealers; techniques you can use to entice qualified dealers to join your network. (Examples are FREE. Email mailto:email@example.com).
- One of the more prominent names in the channel is HP. Follow Meg Whitman on YouTube. See and hear her presentations to their dealers. A statement by Ms. Whitman that all manufacturers can follow with pride is this: "Our number one competitive advantage in the industry is our channel.”
- FINALLY....Do Not.... hear me. DO NOT send your salespeople or your CSRs into the field with an attitude that will help you to fail; an attitude that dealers clearly hate. And that is We Are The Manufacturer, All Knowing, And We'll Tell You What You Need To Do To Receive Our Attention and Our Pat On The Head. And If You Don't Sell More, We'll Take The Line Away From You. What? You don't believe this is factual? Wrong!
James M. Hill
2015 turned the tables as to financial buyers versus strategic buyers. We all know the PE overhang is about $1.6 billion dollars and the PE firms need to spend the money. But excess cash in public and private companies that are not sponsored is $2.5 billion dollars and so, while PE prevailed in 2014 (buying sixty two percent of companies over $10 million in EBITDA), in 2015 strategics bought 76% of the companies that were over $10 million in EBITDA.
Many large companies are not growing. The economy has industrial growth about 1-2% so they must be acquisitive and not organic growth or their stock value will erode.
Now flexible packaging and industrial packaging remains strong as it is dictated by food, beverage and pharma; and those categories remain healthy. And the strategics will continue to dominate in 2016, despite the increase in interest rates which is very small, but the high yield debt market has caused some of the larger acquisitions to get stalled because of the failure to launch a high yield debt offering.
The PE business has shown returns better with the largest funds and not with the lower middle market funds -- despite that fact endowments and pension plans do love new funds where managing directors of successful PE funds have formed a new fund.
2016 may not see the meteoric valuations of 2014 – unless a strategic prizes the target and can justify it – and we are seeing many sellers (privately held) worrying about selling the business because in one or two years, a recession may hit; but not like the 2008 recession. Inventory won’t be as “sexy” in 2016 and we may see lower valuations but with so much financial and strategic overhang, we will see activity as the economy continues to grow very slowly.
As I speak with current and prospective clients about 2016, I sense "tempered" optimism, but the market, pending fed rates and upcoming elections are still major concerns! Most owners were "hunkered-down" in 2012-2014 with flat or eroded sales. Several liked my Lean, 6-sigma cost-reduction proposals, but said "they were just trying to meet payroll." 2015 seemed to be a 'mixed-bag' with some starting to have increased sales.
Several owners indicate planned sales growth for 2016, so we've started to have discussions about facility/equipment additions and process improvements. Any 'accelerated' Sales growth (say >25%) can overload existing business systems, processes, employee procedures/training and controls.
Management needs to carefully manage the Operational ramp-up to make sure quality, delivery and OP-EX costs don't suffer due to this incremental burden. A high-class problem, but if the customer isn't satisfied due to quality issues or late shipments, was it really worth it to damage your image/brand or potentially lose the customer?
Champion of Print
2016 will be the year of divorce in the print industry!
It’s been trending for a while, but next year will be the year of “them and us.”
The print industry will split into two. We will end up with two types of vendors. The first type of vendor will be the efficient low-cost vendor. The other vendors will be value-added, solution sellers.
The efficient low-cost vendors will be focussed on selling on price. They’ll try to shift as much print as possible in order to make their business model work. They will have an incredibly lean workflow and manufacturing process.
The value-added, solution seller will focus more on profits. They will be making a shift from selling “commodity” print. Their focus will be more on selling a service, of which print forms a part.
There may be a few other printers as well. They will be the ones chasing one of these business models. But they’ll be struggling to sell solutions successfully. Or they’ll be complaining about the prices that other people sell print – because they won’t be working as efficiently as they should. These printers will be the ones getting squeezed. They’ll be the ones going out of business.
So will you be a low cost vendor? Focusing on value-add and solutions? Or struggling because you are not implementing either of these models correctly?
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Thanks to all who contributed to this year’s predictions! Happy New Year from the LaManna Alliance!