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How to deal with the printer’s ‘fiscal cliff’ – Richard Rasmussen’s Market Watch

Tuesday, 22 January 2013
By Print 21 Online Article
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Ascent Partners’ Richard Rasmussen investigates what local print businesses should do if they find themselves subject to the so-called printer’s ‘fiscal cliff’ of financial difficulty.

25 per cent of Australian Printers are on – or will be on – the Financial Cliff in 2013. 

We’ve all read about the US economy and the financial cliff they temporarily averted at the start of this year. The next step is the likelihood they will raise the debt ceiling, which hit US$16.4 trillion at the end of 2012.

I wonder how many Australian printers have hit their debt ceiling (albeit hopefully a few zeros less that the US economy), and are contemplating raising their debt ceiling to pay the bills?

My estimate is that 25 per cent of Australian printer’s businesses are on their own financial cliff – i.e. they are either in deep financial difficulty now or will be sometime in 2013.

Whilst many may find this statement alarmist, I live in the real world; I see printer’s P & L statements on a week-to-week basis and work close to the core of these issues. Here are my supporting arguments:

1.     Market Watch

As many of you know I have been publishing Market Watch on a monthly basis since July 2011. This email bulletin details the market movements in our industry. It includes liquidations, auctions, closures, plant consolidations.  I counted 30 closures (forced or otherwise) in 2012 and 36 acquisitions. So there are 66 fewer printers in the market. Now, not all sales are caused because printers are on the financial cliff, but let’s say about half are. So you have around 50 that have fallen over due to financial difficulties during 2012.

Try as I might to record all the data in Market Watch I think realistically I only capture about 25 per cent of the closures and purchases. This is mainly because I rely predominantly on the industry’s trade journals to report them. They do a good job, but miss out on many of the smaller, less public closures and sales. So that brings that number of closures and business sales due to financial difficulties, by my reckoning, to around 200. Depending on who you ask, there were about 2,000 printers in the Australian market, so that’s about 10 per cent who are no longer there due to financial stress.

Add to that the number that who are trading under severe financial pressure, which let’s define as not being able to make a year-end profit, and/or have consistent major cash flow issues, and/or they have negative equity in their business, of another 15 per cent and you arrive at about my 25 per cent figure of those that have either closed, been bought out (due to financial pressure) or experienced severe financial pressure over 2012:

Starting number of printers 1.1.12


New entrants (an educated guesstimate)


Business Closures (due to financial distress)


(6% of starting number)
Business Sales (due to financial distress)


(4% of starting number)
Business Sales (not financial stress related)


Sum remaining


Of sum remaining those that experienced financial stress in 2012


(15% of starting number)
Not under financial stress during 2013




Total experiencing financial stress during 2012


(25% of starting number)

Will the trend continue in 2103?

Has the worst passed? I fear not, for a variety of reasons:

  1. The ATO is coming down hard on business – The amount of winding up notices in January for all businesses is substantial. Clearly there are many who are outside ATO payment terms.
  2. Banks are not lending the way they used to and are more prone to take a harder line of financially stressed businesses
  3. Different business models (web to print, print management, overseas, and digital for example) are continually eroding commercial printer’s market share.
  4. Ditto for different media – i.e. the web, email, social media, outdoor.
  5. The general economy
  6. Lack of competitiveness for many of those with obsolete machinery and systems
  7. The fact that many under financial stress and have been for a long period of time – sooner or later something has to give.
  8. Debtor days are being stretched

So a conservative view is that another 25 per cent or 443 of the remaining printers will either go or be under severe financial pressure during 2013:

Starting number of printers – 1.1.13


New entrants


Business Closures (due to financial distress)


(6% of starting number)
Business Sales (due to financial distress)


(4% of starting number)
Business Sales (not financial stress related)


Sum remaining


Of sum remaining those that will experience financial stress during 2013


(15% of starting number)
Not under financial stress during 2013


Total under financial stress during 2013


(25% of starting number)

Now, I’m well aware that many will have different views. I readily concede there are a lot of assumptions in my data but think, based on what I record in Market Watch (to my knowledge the only record of closures in the industry), what I see as a business sales agent and consultant and the trends in the industry, and in the networks I have access to and work within, my estimates seem reasonable – 25 per cent are on the financial cliff.

Consolidation, closure or turnaround for the 25 per cent on the Financial Cliff?

I’d like to see fewer closures and more consolidation (business sales, mergers, affiliations). Closures are generally ugly for all concerned – creditors, families, employees, customers and the whole industry.

Consolidations are far less so. Sales and acquisitions, mergers, and affiliations are far more appealing – they generally provide for greater value for the client base and possibly some machinery, a better outcome for the business owner, who often needs to be gainfully employed post closure, and a better outcome for employees, some of which will likely picked up by the consolidator.

Once a firm enters administration, the goodwill (client base) value plummets. I don’t mean by 5 per cent or 10 per cent, I’m talking 75 per cent or 100 per cent of the value pre-administration.

The reason for this loss of value is twofold – firstly, as every day goes by, clients walk, and the staff managing those clients walk. The perception of a purchaser’s ability to retain clients is severely diminished. Secondly in my experience the administrator’s focus is not on protecting client value.  It’s about analysis of the financials and quickly ascertaining if the business can be made viable.  The hard work required to quickly analyse the value of the client base, prepare a sales document, market it and sell it, is more than often neglected by administrators.

So if you want to see value for your client base and perhaps some machinery, perhaps a better outcome for your employees is to consolidate your business with others or sell. Sell the client base/business before administration, and set yourself up to have a job with the purchasing/consolidating firm. This does not mean having to reduce the creditor’s return or running afoul of the law.

The reason I think more don’t go down the consolidation path is they simply don’t know what their options are, don’t know how to go about it don’t know who to ask. They also probably don’t know what people should pay, the legal ramifications, what terms the deal should be done under or who is the best party to go to.

Of course there are other major options to closure, and consolidation for those on the financial cliff is “turnaround”. As the name implies, “turnaround” involves changing the business into a business that is sustainable and profitable.   There are plenty of lessons to be learnt from those profitable businesses in the market, and many things to change to turn things around. Unfortunately, in my experience most do not chose this path, nor do they implement realistic strategies to make a turnaround come to fruition, or engage outsiders to help. Part of this I think is due to the age of the proprietor and their preparedness to make the investment in time and perhaps money to make it happen.

If you’re in the ‘financial cliff’ 25 per cent category, here’s what you should do: 

1.     Be objective and realistic and seek advice.  

First thing to ask is could this be you in the 25 per cent category – are or expect to make a loss, and/or have consistent major cash flow issues, and/or have negative equity in the business? If you think we’re all doing it tough, you’re dead wrong. Some are doing it very well, and most will survive 2013 without these issues.

What makes you think you are in the 75 per cent and not the 25 per cent? And if you don’t which one, then chances are, you’re in the ‘25 per cent financial cliff’ category.

If you know you are in this 25 per cent category, or may enter this category in 2013, ask yourself, what am I doing to change and turn the business around?

And if you decide to change – ask yourself what is the realistic chance of this happening? Has it ever happened before? Here’s where most will need objective eyes to review the business and its plans for 2013 – These independent eyes will provide a reality check.

It is often very hard for business owners to be totally objective and realistic in the analysis of their business. So, in all likelihood you will need to seek advice and assistance. There are people that can help with specific industry knowledge, including Ascent Partners, in all states.

2.     Be aware that all is not lost – know your options.

There are alternatives to most financial cliff situations. But as stated before, you will likely need to engage someone to help you analyse your situation and provide options, and in some instances help you with implementing those options. Look and ask around for the best person/people to help you and your business.

In all likelihood those people will include your accountant, but please understand they deal largely with historical data, and are not experts in turnaround work, nor are they best placed to know or advise all the consolidation and closure options that are available in our industry such as ours.

After the analysis you may not like where you are at, but at least you’ll know, and be able to start to work on a turnaround or consolidation or closure plan.

All is certainly not lost – there are opportunities to make the best of whatever situation you find yourself in.

The problem I find is that generally most generate limited options. This is largely because they don’t know what they don’t know. It doesn’t have to be a business closure, or an amalgamation or sale. There could be a whole range of options available to turn the business around.

3.     Understand the real value lies in your client base.

What are in demand right now are your clients. The vast majority of printers want more turnover.  What’s not of as much value within your business is your machinery. Of course there are some businesses that will sell ‘as is,’ as a going concern, but most purchasers want the sales and perhaps one or two pieces of equipment. That’s because most buyers are in the trade, and have their own underutilised equipment.

So, purchasers and consolidators generally want clients, and they want the means to hold onto those clients.

Anything you can do to provide that surety of client retention is highly valued, and more often than not that includes you as the vendor and client facing staff.

4.     What’s the value of your clients?

Don’t be concerned that your clients are worth nothing. They are, even if the business is in financial difficulties. Client values value widely. Appraisers need to consider many facets of the business including:

  • Type of business
  • Size of business
  • Client spread
  • Type of clients
  • Growth prospects of client
  • Profitability of clients – note a no profit business does not mean those clients will not produce a profit for the purchaser!!
  • Location of clients
  • Factors around client retention – i.e. Owner / employees coming across
  • If the business is in administration

Putting your business into administration dramatically reduces the value of your clients – If you get to the stage of putting your firm into administration, you’ve lost your ability to get a fair value for you clients, much of your ability to be employed, and the opportunity to find homes for selected staff and machinery.

5.     Do something!

As a famous Australian Rule football coach Allan Jeans once said to his players – “Don’t think, do – do something.” What he’s really saying is that it’s fine to think something, but at the end of the day, you have to do something.

For those on or near the brink of the Financial Cliff, thinking and doing nothing should not be an option.


Being in the 25 per cent of printers that I estimate are on the financial cliff is not a certain route to closure.  There are plenty of alternatives to consider. But consider and know of them, you must.

If you haven’t been able to change the business around in the past, ask yourself, what’s going to change this year? Please get a reality check on your plans.

Seek independent advice. Don’t try and do it all yourself. Knowing the breadth of options available to you is the key to being able to choose the best path to enable you to get the best return and provide the best opportunity for you and perhaps your employees in the future.

Richard Rasmussen is the principal of Ascent Partners, a business focused on providing business sales and consultancy services to the Australian Printing Industry. Market Watch is a free monthly email bulletin – subscribe at 

One Response to “How to deal with the printer’s ‘fiscal cliff’ – Richard Rasmussen’s Market Watch”

  1. January 23, 2013 at 11:21 am,

    James T

    Good one Richard. Like it.

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