eight imperatives to grow your business… during a...

Eight Imperatives to Grow Your Business…

During a Challenging Environment

Peter Schaefer, New Direction Partners

Shift_018

Packaging and Print Innovation Asia

May 2, 2018

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• Today’s Environment

• Growth

• Why is Growing Market Share Important

• Growing Market Share Imperatives

Agenda

© New Direction Partners, LLC 2018

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• Over last 10 years (and likely over the next 20) Packagers and Printers need to

have two focuses…

✓Be Efficient; and

✓Grow.

Don’t Forget, because…

Today’s Environment


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• Over last 10 years (and likely over the next 20) Packagers and Printers need to

have two focuses…

✓Be Efficient; and

✓Grow.

Don’t Forget, because…


“In a maturing to aging market if you don’t grow,

you will run out of business to be more efficient”.


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• Ways to be more efficient:

✓ Technology, workflow, automation, flexible labor, quality, outsource, etc.

• Ways to grow:

✓ Quality, price, manage sales force, innovation/differentiation, new

markets, acquisitions, new products and services.



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• Slower market growth (if any)

• Price competition:

✓ excess capacity;

✓ consolidating customer base; and

✓ aggregators.

• Rising costs:

✓ healthcare;

✓ wages; and

✓ utilities.

Why is Growing Market Share Important?

The Printing World is “Different” Today


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Your

Firm

Cost

IncreaseSubtotal

Market

Growth

(5%)

Pro

Forma

Results

Sales $15.0 $0.0 $15.0 $0.8 $15.8

Materials $5.0 $0.0 $5.0 $0.3 $5.3

Fixed Factory $4.5 $0.1 $4.6 $0.0 $4.6

Variable Factory $1.9 $0.1 $2.0 $0.1 $2.1

Gross Profit $3.6 ($0.2) $3.4 $0.4 $3.8

Fixed S,G&A $1.5 $0.0 $1.5 $0.0 $1.5

Variable S,G&A $1.4 $0.0 $1.4 $0.1 $1.5

Operating Income $0.7 ($0.2) $0.5 $0.3 $0.8

Interest $0.2 $0.0 $0.2 $0.0 $0.2

Pretax Income $0.5 ($0.2) $0.3 $0.3 $0.6

3.3% 2.0% 4.0%

EBITDA $1.5 ($0.2) $1.3 $0.3 $1.6

10.0% 8.7% 10.4%

The Old Days

Growing Market Share


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Growing Market Share

Your

Firm

Cost

Increase

Lower

Prices

(0.5%)

Subtotal

Market

Growth

(2%)

Pro

Forma

Results

Sales $15.0 $0.0 ($0.1) $14.9 $0.3 $15.2

Materials $5.0 $0.0 $0.0 $5.0 $0.1 $5.1

Fixed Factory $4.5 $0.1 $0.0 $4.6 $0.0 $4.6

Variable Factory $1.9 $0.1 $0.0 $2.0 $0.0 $2.0

Gross Profit $3.6 ($0.2) ($0.1) $3.3 $0.2 $3.5

Fixed S,G&A $1.5 $0.0 $0.0 $1.5 $0.0 $1.5

Variable S,G&A $1.4 $0.0 $0.0 $1.4 $0.0 $1.4

Operating Income $0.7 ($0.2) ($0.1) $0.4 $0.1 $0.6

Interest $0.2 $0.0 $0.0 $0.2 $0.0 $0.2

Pretax Income $0.5 ($0.2) ($0.1) $0.2 $0.1 $0.4

3.3% 1.5% 2.4%

EBITDA $1.5 ($0.2) ($0.1) $1.2 $0.1 $1.4

10.0% 8.2% 8.9%© New Direction Partners, LLC 2018

Today

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Printing Economics – Old Days vs. Today

The

Old DaysToday

Revenue Growth $0.8 $0.2

EBITDA Growth +$0.1 ($0.1)


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What is This?


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What is This?

ANSWER:

How a

Packager/Printer

looks to its

customers


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The Role of the Sales Executive is Changing

• Buyers’ motives, practices and behaviors are changing.

• Competition is different:

✓ Social media; and

✓ Email.

Realities of Today


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Customers are Different

• Individual customers have different needs.

• One size does not fit all.

• Specific customer strategies are required.

Realities of Today


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EIGHT IMPERATIVES

How Do You Grow Market Share?


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1 - Measure Sales Activity with the Same Passion

you Measure Production Activity



PRINTING FIRM

ANALYSIS OF SALES GROWTH

As Planned Actual Comment

Total Sales Last Period $850,000 $850,000

Increased Sales:

Target Customers

Strategy $ 20,000 $ 10,000 Cust. #2 delayed decision

System Solution

Strategy $ 45,000 $ 46,000

New sales exec hire $ 7,000

Customer / Market One-time Retail

Growth $ 40,000 $ 55,000 customer promotion

Sub-total $955,000 $963,000

Lost Sales:

Customer #5 lost

Prior year $ 35,000 $ 35,000 Lost on price

Customer #11 lost $ 5,000 Lost on spoiled job

Total Sales This Period $920,000 $923,000

16 © New Direction Partners, LLC 2018

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2 - Set a Target, Plan, Act, Measure and Adjust

Better than Your Competition



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3 - Become a Product Focus Strategy or Customer

Focus Strategy Printing Firm



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3 - Become a Product Focus Strategy or Customer

Focus Strategy Printing Firm



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Customer / Product Focus

- Customer Focus +

-P

rod

uct

Fo

cu

s

+

FAILURE

Attributes –

Views Customer Profitability,

Customer Concentration, Solution

Provider, Sales / Customer

Orientation, High Cost of

Switching, Succeeds via Progress

up the Customer Learning Curve

Attributes –

Views Product

Profitability,

Manufacturing

Orientation,

Succeeds via

Progress up

the Product

Learning Curve

SUCCESS

SUCCESS


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Objective“We will make everything required by a left handed heart

surgeon”.

StrategyProvide whatever customer wants, outsource, transfer

risk from customer.

Structure Strong sales and marketing organization.

Pricing

Measure customer profitability but not every order,

Defend, but if successful, cost of switching provides

room.

SystemsCustomer service teams, customer reporting,

customized web interfaces, fulfillment.

Style (Culture)Customer focus orientation, sales service

empowerment, “Can do”, listens to customers.

RisksCustomer and/or sales exec concentration, customer

only wants discounts, forever rising expectations.

Customer Focus


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Objective“We will provide you a Ford in any color as long as it is

black”.

StrategyMake and deliver a product or service better than any

competitor.

Structure Strong manufacturing and most likely IT departments.

PricingMeasure product and order profitability, may low price

for plant fill for non-core products.

SystemsDrives efficiency and functionality, measure product

activity, standard cost systems.

StyleManufacturing / process orientation, usually low cost

producer.

RisksPotential product obsolescence, low cost of switching

unless system hook.

Product Focus


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4 – Develop a Growth Plan with Those Required to

Execute Them Responsible for Its Implementation



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4 – Develop a Growth Plan with Those Required to

Execute Them Responsible for Its Implementation


THIS IS THE MOST IMPORTANT IMPERATIVE


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Basics of a Plan

• Plan and Measure What ACTIONS You Can Hold Employees Responsible For:

✓ Management – New hires, sales meetings, customer visits, sales executive reviews, training.

✓ Sales Executives – Prospect visits, customer presentations, plant tours.


RESULTS – We are not in the Happiness Business!


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5 – Monitor Plan Results and Adjust Actions Where

Required



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6 – Be Different!



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7 – Target High Growth Industries



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8 – Purchase Competitor Firms



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Successful Acquirers are Implementing Solutions to the Three

Strategic Imperatives Confronting Printers:

• Replace sales from mature markets.

• Drive efficiencies to mitigate/enable lower pricing.

• Reposition into growing (less mature) markets.

Acquisition Strategies


Premium Segments

Printing

• Large Format

• Retail POP

• Program vs. Transactional

• Web-to-Print

• Conventional Direct Mail

• Customized Direct Marketing

• Digital

• Data Analytics/Creative

Packaging

• Flexible Packaging

• Labels

• Pharmaceutical Packaging

• Folding Cartons

• Corrugated


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• Do it with help

✓Helpful to have an independent third party;

✓Increases likelihood of success; and

✓You already have a full time job.

• Do not purchase a troubled firm for product, service or geographical

expansion.

• Do not change manufacturing location and customer service at the same

time.

What to Do - Acquisitions


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1 - Measure Sales Activity with the Same Passion you Measure Production Activity.

2 - Set a Target, Plan, Act, Measure and Adjust Better than Your Competition.

3 - Become a Product Focus Strategy or Customer Focus Strategy Printing Firm.

4 - Develop a Growth Plan with Those Required to Execute Them Responsible for Its

Implementation.

5 - Monitor Plan Results and Adjust Actions Where Required.

6 - Be Different!

7 - Target High Growth Industries.

8 - Purchase Competitor Firms.

How Do You Grow?


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What is This?


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What is This?

ANSWER:

How a Printer

wants to look

because it

represents

Customer

Success!

ANSWER:

A successful

Packager/Printer


Questions?

Peter Schaefer, New Direction Partners

P.O. Box 496

Valley Forge, PA 19481-0496

Tel: (610) 935-1000

Email: [email protected]

Peter Schaefer

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Peter Schaefer is a Partner with New Direction Partners. Peter is an

experienced dealmaker with twenty years of investment banking and valuation

experience. He has closed more than one hundred transactions in virtually

every segment of the printing and packaging industries as well as the sale of

a $75 million helicopter company and a $10 million bread manufacturer.

In addition, Peter has performed hundreds of valuations for ESOPs, estate

and gift tax planning and strategic planning purposes.

Other recent transactions have included the sale of Midnight Oil to Oak Hill Partners, Popular Ink to

Highlander Partners, Classic Graphics to Imagine! Print Solutions, the divestiture of Transcontinental’s

Rastar division to Sun Litho, the sale of Meisel to R.R. Donnelley, the sale of Vectra Corporation to

Taylor Corporation, the sale of Express Label to Cenveo, the purchase of Journal Communications’ IPC

Print Services by Walsworth Publishing, and the purchase of National Graphic Supply by Pitman.

Prior to New Direction Partners, Peter worked for fifteen years at Compass Capital Partners having

served most recently as its President. Prior to that, he worked in the investment banking departments of

KPMG Peat Marwick and Coopers & Lybrand. He received a BS in Economics and Political Science

from Trinity College and an MBA from Villanova University. He is a Candidate Member of the American

Society of Appraisers and is a member of the printing industry’s prestigious NAPL Soderstrom and PIA

Ben Franklin Societies and has served on several Advisory Boards within the printing/packaging

industries. Peter is married to Kathleen and they have six children.

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