If there was a single area I find most entrepreneurs spend too little time on, it's planning. Because they don’t spend the time on planning they spend even less time on research, a necessity of planning. The fact that prints are declining across the business segments of the industry is no surprise to anybody at this point. I’ve been speaking about it for four years now. Some providers have entered the MPS space, albeit with limited success. I attribute that lack of success to a lack of a plan, and therefore lack of the fortitude to endure the time and monetary investment to truly get a successful MPS program launched.
As I’ve been telling our clients now for almost a year the good times have to end relative to equipment margins. Over the last three years the copier manufactures have been emulating the car manufacturers of 2005 – 2008, providing great incentives to the dealer community; many of those same manufacturers were not making the types of profits required to invest for the future. Meanwhile, dealers have been experiencing exceptionally strong margins. Over the last few months the manufacturers have raised their prices and are reducing incentives. The market share wars had to end. The guidance we provided our clients’ was not to get accustomed to the high margins: Use the extra profit to invest in the business but don’t set your long-term expenses to those margins.
There’s another phenomenon occurring today and it has to do with the transition of color prints; that transition is masking a declining industry. If your overall prints decrease by 10% but 10% of the remaining prints increase in per print revenue by 5X your revenue grows by 30%. Of course you aren’t going to convert 10% of your prints per year to color but you get the point. Here’s the problem: At some point you’ll have reached optimum color to black ratio and overall prints will continue to decline. That decline will be accelerated by the fact that revenue per click in color will continue to decline. What can you do with this information? Use the “temporary,” in that you know aftermarket will soon go into a complete decline, profits to invest in transforming your business. Printer aftermarket provides you will more opportunity to offset the decline.
Now add to that what is occurring with technology, particularly at an industry level. Have you heard of electronic medical records? Do you know that medical practices and hospitals can get government funding for basically making meaningful strides away from paper? Did you know Federal Courts require documents to be filed electronically? If your children/grandchildren are under 10 years old today I cannot imagine they will be burdened with heavy text books in college, rather toting around their single, light weight tablet with their text books, “course packs,” which today are printed, and class notes all loaded. That same tablet will also have any magazines or newspapers they read their graphing or financial calculator for their classes and maybe even their e-wallet. They’ll walk into the cafeteria and read their menu off of a digital sign, if they didn’t preorder using and app on that same tablet. Paper is going the way of carbon paper.
When color devices were introduced and many pundits said the independent dealer would not be able to make the transition I knew they were wrong. When production devices were introduced and those same pundits made the same claim, that they were too expensive and too complicated devices for the independent dealer to sell, I knew they were wrong. For the last 40+ years the independent dealer has clearly demonstrated that if it involved “putting marks on paper” the independent dealer rose to the occasion and adapted. But the backstop was that the core business, be it “black and white” when color was introduced or office when production was introduces, was a healthy growing business. The growing attribute is quickly coming to an end so I strongly encourage you to explore what you will do for your next act and use your current profits to fund those growth areas. You don’t have to look any further than Xerox and HP, two industry leaders, for examples of industry players that are using the profits from their imaging business to invest in future growth opportunities.