Time was when a handshake sealed the deal and a man (it was always a man) was as good as his word. Times have changed. Doing business now demands a more rigorous and professional set of nego-tiations, and the paperwork to go with it.
Yet it’s surprising how many printers still use a handshake as a form of guarantee for the arrangement of goods for cash. Printing has, for better or worse, numerous aspects about it that set it apart from other business transactions. Few industries commit to undertake such high-value work so often with little or no advance payment or guarantees. The headlines clearly spell out what a few bad debts can do to even a well-run company.
Printing is a necessarily ‘jobbing’ business, with plenty of ad hoc work. The possibility of regular, contracted work is not one to ignore, but speaking to leading printers, contracts are clearly the exception not the rule.
Guy Marco, managing director of Impress Printers in Sydney, laments the passing of honourable handshake agree-ments. He points to a general malaise in business dealings, characterised by a lack of loyalty and evidenced by a loss of simple manners, such as promptly returning phone and email messages. “Real com-mun-ication would solve a lot of business problems, but nobody wants to talk about it any more. They all think they’re too busy.
“Unfortunately, a gentlemen’s agree-ment is not part of today’s marketplace or business world. There’s very little loyalty from anyone, whether they’re contract clients or otherwise.”
Formal contracts seem thin on the ground in print, coming into play only when the sums involved are very sub-stantial. And when the sums are that substantial, more often than not there’s a print manager involved.
Paul Towsey has a background in managing some of the country’s largest printing contracts. He spent five years at Stream Solutions, running the Telstra account, then worked as a consultant with Fulton Francis. For several months, he has run the Victorian government print management unit under its contract with Finsbury Green. He tells ProPrint that many print projects are covered by agreements but legal contracts are seldom used until prices reach close to seven figures. And there’s a simple reason for that: complexity and time constraints.
“As soon as you go to contract, it tends to go legal, and it can get silly in how long it takes to negotiate and get legal people to look at it. If you’re dealing with a large-ish organisation, as soon as you say the word ‘contract’ it gets tedious and convoluted. So if you’re talking about deals of less than, say, a million dollars, you’ll probably find that there are agreements in place in print, but when dollars get serious and people have to spend money to put systems and people in for it, they usually want a contract to make sure things are properly in place.”
Lane Print managing director Peter Lane, a past president of the Printing Industries Association of Australia, is a firm believer in contracts.
“We’ve got two sides to the business – our ‘traditional’ side and the transactional side. Obviously the transactional side is all contracted, and on the other side, we do a lot of publications and magazines. We tend to target the medium to large customer spectrum so we have a tendency to encourage contracting as much as possible, especially if they have more than one project with us, so you can try to build a relationship with them,” he said.
There are some caveats to contracts though. “You need to take advantage of volume purchasing through indent from the paper mills, and so on, to stabilise costs over the period of the contract, so you’re not exposed to price rises that may surprise you and have an impact on when you get a return from the job itself.”
Marco also likes the idea of contracts, but has few established clients. “The biggest advantage with contract work is that you’ve secured all or part of a client’s work for a specific period. You still have to perform, and more so than for other accounts because you’re being scrutinised because of the contract conditions, but there is a sense of continuity with that sort of work. There’s no guarantee of how much they’ll spend, but at least you know you’re going to get the available work.”
Bright Print Group managing director John Bright is less concerned with contracts, due in part to the make-up of his client base. Much of the 100-staff company’s work is smaller in volume, which he says makes a difference.
“We only have a couple of contracted customers,” he tells ProPrint. “We don’t operate at the big end of town, and we don’t have customers that spend a huge amount of money with us so they’re not really warranted. Only our largest customers are under contract.
“We’re very lucky. Our largest customer is only 5-6% of our turnover, so we don’t have a need for it. We have good relationships with our major customers, and we’ve had many of them for a long time. For most of those a handshake is considered as good as a contract.”
Casual relationships
What is there between the legal guarantee of a contract and the casual honour system of a handshake? Towsey’s experience has told him that a contract is worthwhile if it’s available, but a letter of agreement can do almost as well in many situations.
“If you can get a contract, then it’s worth it. Then you have to assess the effort it would take to get one. Any printer would jump at the chance to have a contracted customer, but is it worth the effort? Usually it’s not because of the legal aspects. An agreement is usually good enough though, because as long as both parties agree to do what they say they’ll do, the agreement will be healthy.
“It’s important to consider that no printer wants to be treated like an ad hoc supplier. They don’t want to feel that customers are going to the market all the time, because it’s too price-driven. Some kind of agreement is important because it helps to build some relationship collateral, which protects you from a competitor coming in and beating you on price.”
John Bright feels a tight market makes clients more flighty and contracts harder to nail down. “A lot of customers say it’s a buyer’s market out there at the moment, so perhaps people are shopping around and are reluctant to sign contracts because they think they can buy their print cheaper somewhere else. There’s a lot of desperate printers out there throwing silly prices around.”
Different perspectives of a common situation point to a common view: clients can be won and kept not just through contracts but through delivery of the big three – price, service, quality. If you give them what they want, they’ll keep coming back for more.
“It used to be price, service and quality, take any two, but now it’s all three,” says Lane. “In essence you’ve got to be very proactive. If you can see any potential in the customer it’s all about service and differentiation, and that now implies that you’ve got to move across to the other mediums like applications for iPhones, augmented reality type services, and things that you can value add.”
For small to medium-sized businesses though, the option of a contract with their clients is unlikely. Any margin made on a typical job would be eaten away by the costs of negotiating the contract.
The answer, according to Russell Kavnat, client service manager at Sydney’s Dashing Print, is turning an occasional or ad hoc client into a regular client through top-shelf service.
“About 70% of our work is regular. Customer service and quality are the reasons customers come back. I don’t think you need to have contracts if you offer good service. As soon as a client comes in we try to turn them around into a regular customer through that service.”
Marco agrees that service makes a difference, but not the only difference.
“You try as much as you possibly can to not let them test you against another supplier. You live or die by the level of your service and with the delivery of quality goods. But service alone won’t help you retain that client.
“But then, we’ve seen clients contracted to other print shops who come to us complaining about the service and quality they’re getting, but they’re stuck with the terms and conditions of the contract, and there’s nothing we can do to help them until the contract runs out,” adds Marco.
Paul Towsey recommends ‘the big three’ as well for attracting and keeping clients onside. “It’s allegiance, it’s customer service, it’s not just the product. It’s where people are proactive, recording and tracking, being accountable, getting all the little things right. If you get things wrong you don’t just hide from it. It’s the old adage: issues are opportunities in disguise. In a lot of cases, the substance of a relationship you have with a client is developed through an issue or problem you have. That’s how you find out what people are made of.
“Service and relationships built over time also protect you against the marauders who want to come in and take your business. There’s a lot of price gouging occurring, and that will be a test of your relationship.”
Tenders offer a means to contract print projects, but they have a number of drawbacks for those not well equipped to prepare proposals.
“It’s a Dutch auction and the lowest price wins,” says Marco. “Usually, for tenders and contracts, you’re looking at very substantial print buyers which, generally speaking, can only be serviced by large print shops.”
Love me tender
Lane is “absolutely interested in tender work”, he says. “On one side of our business, we do a lot of tendering because we target the utilities and governments at all levels, so having the resources internally to prepare tender responses gets easier as you get more experienced at it. It is a sort of business development role, but once you go through it you find there is a lot of consistency in other tenders so you don’t have to start with a blank sheet all the time, but you need to have the resources, in-house or otherwise, to be able to respond to specific requests.”
That requirement precludes most tender work for Bright Print Group. John Bright says: “Our business model doesn’t really support going for tenders. We have a lot of salespeople on the road providing sales for the company, whereas tendering seems to be won by printers who rely on that avenue for sales and don’t invest as heavily in a sales team, and deal with print brokers and managers.
“Tenders are a lot of work in prepara-tion, and you need to specialise in that kind of thing to do it well. No matter how well you respond to the tender document it generally comes down to price anyway.”
The PIAA recommends that every print project contain a contract, or signed letter of agreement, to spell out the parameters binding both parties. The association points out that printers are as vulnerable as any other business in their operations, and many is the printer that has been ripped off by unscrupulous clients.
Several years ago, the PIAA’s legal and HR department prepared a generic Terms of Trade document for the use of members. That document has been rigorously updated and released to members recently (free; non-members can purchase it) to be used as a template contract with clients. It can be adjusted to suit individual companies and projects.
It covers potential issues such as unders and overs, copyright, quotations, invoicing and charges, delivery, collection and rejection, payment methods, interest and terms, and many more aspects of typical print jobs. The recently introduced Personal Properties Securities Act is also included in the revised version.
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