Business Brokerage 
.
Steve Skrlac, MBA, CFA
Sales Representative
.
Ontario / GTA / Toronto Businesses for Sale
Your Subtitle Text
Selling a Printing Business
A printing business is a popular type of business that buyers often ask about with business brokers. If you are thinking of selling a printing business you should know some important tips to help you plan the process, to make it as easy and painless as possible.
This article touches on a few pointers but you should certainly talk to a business broker and your professional advisors regarding your specific situation.
A printing business for sale is attractive for a number of reasons:
Hours of operation are usually good for a print shop
A print shop is typically open during the week during ‘business hours’ and sometime Saturdays. This is a nice option for people looking for a business where they will not be obligated to be there for evenings and weekends. Selling a business where the owner does not necessarily need to be on premises for evening hours is a marketable attribute.
Business clientele
A print or copy shop usually deals with business customers to provide printing service such as: letters, envelopes, flyers, banners, posters, graphic design services and so on.
Established book of business
In most printing shops, the customers are typically recurring. Once a business sets up their logos and overall relationship with their printer, it takes some effort to switch. If customers are services properly and pricing is appropriate then customer churn can usually be managed effectively. This displays some of the economic characteristics similar to the subscription based business model.
Some issues which may affect the selling price of a printing business:
Not all print businesses can be valued by a simple mathematical formula. The process to determine the correct valuation truly is an art & a science. That being said, there following are a few factors which can affect the business valuation:
Financial history
Like all other small businesses for sale, the historic revenue, expenses and profitability of the business is a key component to the pricing. As a general rule of thumb, many print shops sell in the a range of 2-2.5x seller’s discretionary income though.
The age and condition of the printing equipment & copiers
If the shop has a very old printing press or relies on 2-colour offset presses when the industry is moving to digital copiers, wide-format output and print on-demand work then a new owner may reasonably conclude that an investment in new equipment may be required, which would affect the valuation of the business.
Another key attribute are the terms of the service contract. For instance, many copiers are charges on a 'per click' basis where they owe anywhere from a fraction of a cent for black & white jobs to over 10 cents on colour copies. They may have to pay this variable service fee on a monthly basis and in return receive full service work and toner for the machines.
Also, if the equipment is not under service agreements then that may give a prospective purchaser pause as well.
Is the equipment owned of leased?
If the equipment used by the shop is all under lease and a buyer of the business is being asked to have the equipment leases assigned to them, then this would produce a different valuation for the business than if the equipment were all owned. Many print shops lease equipment since technology advances so quickly in the industry. Better digital copiers come out almost every year with higher resolution output so in order to stay competitive with the latest machinery, some business owners lease equipment on short term contracts.
How many years has the print shop been in business?
A printing business for sale that is less than a year old would be valued less than one with several years of history in a community, all other things being equal. A large part of the business value is the goodwill which consists partly of reputation and word of mouth.
How diverse is the customer base
If the seller of the print business relies on one or two big accounts for a large proportion of the revenue then this would be a red flag. Buyers of printing businesses prefer a diversified customer base so that if one client leaves that the overall success of the business would not be jeopardized.
Employees trained in printing and production
Many buyers come to the industry with very little printing experience. The reality is that the learning curve is there. A seller should be prepared to train the new owner but the staff in place should have a depth of experience in things like print production, bindery, graphics and customer knowledge to assist in the months that follow, until the new owner gets acclimatized to the business operation. Using the 2 and 4 colour offset presses is a true trade so a buyer may need to rely on a skilled pressman with experience here.
Franchisor approval
If the print business is part of a franchise group then you must be ready to have a potential buyer approved by the master franchisor. This approval is usually a condition in the purchase agreement but realize that it is not a foregone conclusion. Print industry franchisors are looking for candidates that will be able to learn, operate and grow the business. Aptitude is a major factor in their approval process as is marketing savvy in order to thrive in this competitive business.
Selling a printing business can be a challenge if not conducted properly. There are buyers in the market looking for this type of business but as an owner, you must realize that there are many pitfalls to selling that must be avoided to prevent costly mistakes. Talk to your business brokers, lawyer and accountant early in the process to get the best information from the very beginning.
Contact Steve Skrlac, MBA at 1-877-935-1110 to discuss selling your printing business in Toronto, GTA or southern Ontario, Canada.
More Resources:
How to sell a business
Tax issues when selling your business
Article on selling a printing business
This article touches on a few pointers but you should certainly talk to a business broker and your professional advisors regarding your specific situation.
A printing business for sale is attractive for a number of reasons:
Hours of operation are usually good for a print shop
A print shop is typically open during the week during ‘business hours’ and sometime Saturdays. This is a nice option for people looking for a business where they will not be obligated to be there for evenings and weekends. Selling a business where the owner does not necessarily need to be on premises for evening hours is a marketable attribute.
Business clientele
A print or copy shop usually deals with business customers to provide printing service such as: letters, envelopes, flyers, banners, posters, graphic design services and so on.
Established book of business
In most printing shops, the customers are typically recurring. Once a business sets up their logos and overall relationship with their printer, it takes some effort to switch. If customers are services properly and pricing is appropriate then customer churn can usually be managed effectively. This displays some of the economic characteristics similar to the subscription based business model.
Some issues which may affect the selling price of a printing business:
Not all print businesses can be valued by a simple mathematical formula. The process to determine the correct valuation truly is an art & a science. That being said, there following are a few factors which can affect the business valuation:
Financial history
Like all other small businesses for sale, the historic revenue, expenses and profitability of the business is a key component to the pricing. As a general rule of thumb, many print shops sell in the a range of 2-2.5x seller’s discretionary income though.
The age and condition of the printing equipment & copiers
If the shop has a very old printing press or relies on 2-colour offset presses when the industry is moving to digital copiers, wide-format output and print on-demand work then a new owner may reasonably conclude that an investment in new equipment may be required, which would affect the valuation of the business.
Another key attribute are the terms of the service contract. For instance, many copiers are charges on a 'per click' basis where they owe anywhere from a fraction of a cent for black & white jobs to over 10 cents on colour copies. They may have to pay this variable service fee on a monthly basis and in return receive full service work and toner for the machines.
Also, if the equipment is not under service agreements then that may give a prospective purchaser pause as well.
Is the equipment owned of leased?
If the equipment used by the shop is all under lease and a buyer of the business is being asked to have the equipment leases assigned to them, then this would produce a different valuation for the business than if the equipment were all owned. Many print shops lease equipment since technology advances so quickly in the industry. Better digital copiers come out almost every year with higher resolution output so in order to stay competitive with the latest machinery, some business owners lease equipment on short term contracts.
How many years has the print shop been in business?
A printing business for sale that is less than a year old would be valued less than one with several years of history in a community, all other things being equal. A large part of the business value is the goodwill which consists partly of reputation and word of mouth.
How diverse is the customer base
If the seller of the print business relies on one or two big accounts for a large proportion of the revenue then this would be a red flag. Buyers of printing businesses prefer a diversified customer base so that if one client leaves that the overall success of the business would not be jeopardized.
Employees trained in printing and production
Many buyers come to the industry with very little printing experience. The reality is that the learning curve is there. A seller should be prepared to train the new owner but the staff in place should have a depth of experience in things like print production, bindery, graphics and customer knowledge to assist in the months that follow, until the new owner gets acclimatized to the business operation. Using the 2 and 4 colour offset presses is a true trade so a buyer may need to rely on a skilled pressman with experience here.
Franchisor approval
If the print business is part of a franchise group then you must be ready to have a potential buyer approved by the master franchisor. This approval is usually a condition in the purchase agreement but realize that it is not a foregone conclusion. Print industry franchisors are looking for candidates that will be able to learn, operate and grow the business. Aptitude is a major factor in their approval process as is marketing savvy in order to thrive in this competitive business.
Selling a printing business can be a challenge if not conducted properly. There are buyers in the market looking for this type of business but as an owner, you must realize that there are many pitfalls to selling that must be avoided to prevent costly mistakes. Talk to your business brokers, lawyer and accountant early in the process to get the best information from the very beginning.
Contact Steve Skrlac, MBA at 1-877-935-1110 to discuss selling your printing business in Toronto, GTA or southern Ontario, Canada.
More Resources:
How to sell a business
Tax issues when selling your business
Article on selling a printing business
