I am a keen reader of business sites focusing on tech start-ups. These small companies often come from nothing and hit big dollars quickly. I keep track of my favourite companies to learn what I can from their (usually young) CEOs and whether they are successes like BigCommerce or noble failures like 99Dresses, you can always learn something about building a business.
These companies put a lot of thought into their business model. Often their success or failure seems to come down to the way it is set up, and the potential acquisition of competitors and challengers is usually built into the structure from an early stage. Every time I read about this, I think about how little thought seems to go into business models in print, especially when it comes to acquisitions.
Largely, I think that’s because our industry is old and we have found what works. Mostly, we are family businesses built on the back of a male tradesman as managing director and his wife doing admin, or a couple of mates who thought they could do it at least as well as their boss setting up shop as partners.
If the owners were keen and they grew their businesses, these basic models would often morph into the single-site single-city mid-range printer that still populate most of our markets.
These basic models have worked well for us for a long time. But in the last 15 years we have seen several major attempts to impose a consolidation model over the top of these old structures. The first one that I really paid attention to was Teldon Media, an attempt to roll five established Sydney printers into one group. It didn’t work.
And so many more haven’t worked: Geon, Blue Star 1.0, Focus, Standard Publishing are just the Sydney based ones I am familiar with. Each of these groups had some pretty clever people and what they were trying to do makes business sense – combine organisations to reduce waste, increase buying power and reap economies of scale.
What went wrong? It can’t all have been due to dud management or stupid pricing. The high capital costs of gear could have been a factor but other industries with heavy metal consolidate successfully.
Maybe it is just attention. Even with the best MIS and press operator in the world, someone still needs to check the job on the press and act as its guardian angel through the shop. I have had to reprint three small jobs in the last 12 months, a pretty good result and while I put it down partly to the fact my staff know their jobs backwards, I am also in the factory shepherding the sale I brought in from prepress to delivery.
For small places like mine, that level of attention is possible. When the sales guy from Geon won the job, who was making sure it was imposed correctly and not cracking on the spine as it was printed and folded at 2am on a Sunday night two states over?
When ABC Learning collapsed, part of the received wisdom was that childcare was not suited to a corporate structure. There were few economies of scale to be had by owning one hundred centres as opposed to one – you can’t move all the centres under one roof to save rent, some admin still has to be done onsite and the service received by the parents still largely came down to the (poorly paid) individual staff. All consolidation did was add an unwieldy corporate superstructure to a bunch of small businesses that would have been better off left alone. The business model just didn’t suit consolidation.
Is this us too? Logic says no but reality says yes, at least on current results.
Of course there are some examples of consolidated groups still around. Opus springs to mind, the new Focus Group is still on the hunt with a seemingly bottomless bucket of acquisition money and IPMG has certainly picked up a few companies along the way. So it obviously can be done, but given the success rate, you would have to be courageous to try it.
Baden Kirgan is the MD of Jeffries Printing
Comment below to have your say on this story.
If you have a news story or tip-off, get in touch at editorial@sprinter.com.au.
Sign up to the Sprinter newsletter