Given the brutal business conditions in the first quarter of 2009, I thought it might be helpful to share insights as to what I've been seeing going on among NAPL's client base.
1. Business activity is more affected by fear than at any time in past 20 years including aftermath of 9-11;
2. Very few, if any, of my clients had a good first quarter, rather, it was only a matter of degree to which results were poor, bad, horrific, or life-threatening......some had year over year sales decreases of 20%!;
3. Break-even is the new profit leader as even "leading companies" are hurting right now;
4. The recession has accelerated business consolidation in the print and graphic communications industry, as the shrinking demand pie hurts revenues and cut throat price competition kills bottom line profits;
5. Cost cutting is not optional. If you are an owner who is not good at managing to the break-even point, your best bet is to seek Interim Management assistance because the time saved by having a pro implement cost saving measures easily justifies the cost and emotional toil;
6. Some clients are courageously looking beyond survival-mode and positioning themselves for growth on the other side of recession. "Recessions redistribute market share", says NAPL Chief Economist Andy Paparozzi. Growth-minded clients engage in proactive M&A outreach campaigns, hire sales persons from failing companies, measure customer satisfaction, carefully add capabilities, and zero in on customer opportunities like never before;
7. Some owners of struggling print and graphic communications companies have plunged into do-it-yourself attempts at mergers and acquisitions, doting the landscape with botched consolidations and failed courtships;
8. Ownership restructuring has become the new M&A, as many family businesses and private partnerships just can't afford all those mouths to feed and the result is a bump in partner buyouts since 2007;
9. Identifying and eliminating the hidden costs of doing business with the wrong customers can be the difference between losing money or making a profit. Bad economic times are not forgiving to owners who lack the guts to weed out unprofitable customers;
10. Owners and managers can control costs, they can not control revenues. That is why every client right now is implementing some form of Cost Realignment Initiative, whether formally via a plan with NAPL assistance or "just doing it" on their own;
11. Business valuations for M&A and ownership restructuring in the print and graphic communications industry may end up overvaluing companies if they treat 2008 as just another year. Be sure to place more weight on 2008 and year to date 2009 to reflect "the new economy" whether you are valuing EBITDA or underlying general intangible assets;
12. The credit crunch has been mild SO FAR as few banks have played 1990-style hardball by kicking borrowers out of the loan portfolio or squeezing them into brutal forbearance agreements. But this can change in the second quarter when borrowers present their banks with not-so-great 2008 year end financial statements from their CPA firm. If you are an owner anticpating concerns when your bank sees the numbers, call me BEFORE sending the financials to the bank, we can anticipate issues and formulate a plan that is designed to minimize risk of the bank's negative reaction.
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