It might be called quick printing, but that doesn’t mean the prospective buyer of a business in this industry shouldn’t take his or her time examining a company’s suitability as a purchase. And there are a few concepts that should be understood by a prospective buyer of a printing business for sale. They include:
Related Businesses
There's a benefit to owning a printing operation that also produces large format prints --posters and architectural drawings are examples--and offers design capabilities, mail box rentals and other services. It means the company is prepared with a variety of ways to serve most every customer who walks through the door, even just to get copies made. With other business services available, the print business can increase revenues and profits with its present base of customers.
But there's no advantage to spreading investments over a number of sub-enterprises if each doesn’t show a profit. Make sure the extra equipment and employees are making contributions that add to the company's bottom line.
Changing Competitive Environment
An economy in flux, the very situation we currently are experiencing, might mean there are problems with a printing business for sale. Some customers, looking to reduce expenses and take advantage of special sales on office equipment, will set up their own in-house printing capability. It’s useful to ask the seller of a business with declining revenues whether the cause is current customers bringing less work, or a loss of accounts.
It's an important distinction. It’s preferable if much of the slowdown is a consequence of the first problem--less business from current customers. As an improving economy restores the revenues collected by customer businesses, they will increase their need for services from the printing business for sale.
But a healthier business climate won"t be as beneficial for the print company with a shrunken account list. It means former customers have gone out of business or made other arrangements to get their print work completed. That business won’t come back.
Knowing the Numbers
It’s useful for the prospective buyer of a quick print business to be aware of this industry average: earnings before interest, taxes, depreciation and amortization (EBITDA)usually range between 10% and 20% of gross revenues.
A company showing earnings above that range needs to be examined closely. The seller might be right to ask a premium for the business because of its profitability. But the reason should be obvious, such as a lease with below-market rent.
It's also possible that a seller is not revealing all of the costs associated with doing business, a good reason for a buyer to pass on the offering. For example, are family members working in he business but not shown on the payroll?
Another key figure to know is the pricing rule of thumb which values a printing business for sale at 50% of it annual revenues. Like most valuation rules, of course, the formula is a starting place to determine an appropriate selling price.
Profitability at the lower end of the suggested range might translate to a price below the rule-of-thumb number. Also depressing the value would be the need to replace expensive equipment or to move the plant because the current lease will soon expire.
However, the business with annual revenues of $500,000 might merit a price higher than the $250,000 indicated by the rule of thumb, if much of the equipment was acquired in the last few years. Or if the seller is planning to carry back 30% or 40% of the purchase price.
Following these insights will help the prospective buyer of a quick printing business for sale to make an intelligent and profitable decision.
About the Author: Peter Siegel, MBA, has provided consulting for buyers and sellers involved in deals on a printing business for sale - as well as other sectors of the small and mid-sized business market--for 25 years. The site he launched in 1994, BizBen.com, has become a leading online marketplace for business opportunities and for the services provided to buyers and sellers. Peter Siegel can be reached at 866-270-6278.
Posted on April 21, 2010 | 
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