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Be ready for those inevitable tough days
For 2024, a flat economy with modest inflation or ‘soft recession’ is projected. According to BDC economists, real GDP growth for 2024 is forecasted to be at one to two per cent and inflation is expected to be two to three per cent. A recent study by Printing United found growth was a modest 2.7 per cent in 2023. Also, only 50.5 per cent of printers reported sales growth.
With these projections, industry leaders may feel that if they continue as usual, businesses will have modest growth with low risk. However, multiple companies have approached us to help them sell due to projected rent increases of three to four times. Their entire business is now at risk because they can’t absorb cost increases and do not expect customers to accept price hikes. They are now desperate to offload their businesses and expect to close deals soon. However, three to six months is not enough time to go through the M+A process effectively.
When you’re forced to sell
Loss of a major customer can put the entire company at risk. Some companies may face significant increases in labour expenses. Further, the health of a business partner, spouse or self can create the need to focus on personal priorities.
Environmental concerns leading to a preference for sustainable practices have a major impact on the industry. Provincial and municipal governments have implemented legislation that influence the economics of printed material and their life cycle. TC Transcontinental recently closed the Saint-Hyacinthe, Que., plant after the City of Montreal banned the delivery of advertising flyers to homes whose owners had not requested delivery.
In Ontario and British Columbia, extended producer responsibility for paper products and packaging laws mean producers (companies that design, create and market products and packaging) will be responsible for managing and paying for the full life cycle of their products. These laws not only affect printers, but also make print buyers cautious.
Risk mitigation plans
To prepare for major increases in expenses like rent and labour:
- be vigilant, prepare budgets, monitor financials and create ‘what if’ scenarios;
- have sound financials with capital reserves, or suitable line of credit;
- identify trigger events that impact business;
- engage professional support early;
- embrace technology that enables staff to do more with less effort for cost efficiencies;
- if you’re unable to attract high value clients, diversify to other markets or provide new product offerings;
- have a succession plan with rotating one-, three-, five-year plans because effective exit plans take years to execute.
- as owners age, they are less likely to make major investments that are important for the continued success of a company, so, it’s important to identify key roles and customer relationships and develop back-up strategies;
- participate in organizations and peer groups for greater insights as well as educate customers about current or potential legislation;
- invest in staff training and professional development as well as encourage staff to attend industry events, as it will prepare them for future challenges; and
- monitor market trends, technological advancements, and economic indicators closely to anticipate changes and adapt quickly.
Think of these proactive steps not as work, but as insurance. We would not operate companies without adequate insurance, so add these steps to your policy.
There are several examples of companies in Canada that suffered major fires, were able to rebuild and emerge stronger.
By Bob Dale
As seen in the March/April 2024 issue of PrintAction.