How much is your company worth? In the 1970s and 1980s, valuing a business was relatively straightforward. You estimated the worth of your key tangible assets, totted these figures up and, if the company was being sold as a going concern, added in a little something for goodwill. That traditional yardstick is still reflected in most PSP’s financial statements. It is still the way most accountants like to work. But there are there other considerations.
Deloitte suggests we’re moving to a marketplace where 80% of a company’s value is derived from its intangible assets. So how do you protect your business? Walter Hale provides some pointers.
1. What doesn’t get measured, doesn’t get managed
Like many clichés, this has more than a grain of truth. Most print service providers don’t actively consider how much their company brand, people and reputation are worth. This effectively hard wires managers to allocate capital to the things they do measure and understand - new equipment, new premises, new vehicles - rather than, say, a new website, a new sales director or a new company identity. It’s easy to get a handle on the revenue-generating potential of a new inkjet printer. At a very crude level, you can multiply its capacity over time by the going rate for that kind of wide-format print. Drawing up a business case for a new corporate brand is necessarily more speculative. How do you quantify the return on that investment in terms of new business won? And yet it is entirely possible that your brand needs a refresh to retain or gain customers and to retain or gain staff.
There are steps you can take to get a sense of how your company is perceived. On the employee feedback site Glassdoor, the average company is 3.3 (on a 1 to 5 scale). If your business is reviewed there, check out your rating. If your business isn’t, why not ask your staff to rate you on a scale of 1 to 5? You can do the same with your customers. Ask them to rate your performance and/or your brand on the same scale. The answers may make you uncomfortable but the sooner you learn the sooner you can start improving.
2. Reputation matters
How your business is perceived is, in an increasingly networked world, more critical than ever. It can attract - or repel - customers, partners and talent. At best, a company with a dodgy reputation may find it more expensive to attract and keep staff and have to accept tougher terms from its suppliers. At worst, companies can be treated as pariahs - with investors looking to cut their losses, suppliers fretting about payment terms and customers wondering how quickly and easily they can place their business elsewhere. So projecting a positive image of your business - on the internet, on social media, in the trade - is crucial. Once again, it is not easy to extrapolate, in terms a hard-nosed financial director might understand, how a sizeable following on Instagram can enhance the bottom line. That is one reason why so many companies don’t use these channels properly, consistently and intelligently. Yet the cost of such initiatives is so marginal there seems no real excuse for not doing so.
3. People really are your most important asset
How many times have you heard this cliché, often uttered by executives who look as if, back in the 1920s, they would have tried to sell you snake oil? The ironic thing is that, especially after Brexit, this will finally be true. As the HR director of a fast-growing upmarket British hotel chain told me recently: “Companies who think they are good at HR in general - and staff recruitment and retention in particular - will need to become excellent, or they are going to struggle to compete.”
At industry forums like the Image Reports’ Widthwise roundtable, British wide-format companies in different sectors regularly complain about the time, expensive and difficulty involved in getting the right staff. (For the record, it is estimated that the average cost of hiring an employee is £3,293.) That problem is likely to become more acute in the short term, not less. Now might be a good time to look around your operations and ask which departure(s) would do most damage to your business and what you can do to stop that happening.
4. “People don’t leave bad jobs, they leave bad managers”
Measuring morale across the business is essential, but it is also important to drill down a bit and explore why some parts of the business are better at retaining employees than others. You may have a manager who has a problematic relationship with staff. They may be newly promoted, undertrained, badly mentored, incompetent, dishonest or vicious. Either way, you need to find out why this is happening and do something about it. Wide-format, like most industries, is like a village where everyone knows everyone’s business and it’s surprising how much damage a disaffected former employee can do.
5. Don’t ignore the brand
Are your sales slowing? Are the best people choosing to work for your rivals? Do you find yourself apologising for your brand? Does it feel ‘flat’ to you? If you answer yes to one or more of these questions, it might be time to rethink your brand. This can mean anything from a complete makeover, with an entirely new logo, to a refresh which takes the existing ingredients and develops them to address the kind of issues outlined above. A successful rebrand – no matter on what scale – will always start with such questions as who you are and what makes your business stand out.
6. Creativity counts
Be honest, how innovative is your company? Do your clients regard you as a creative powerhouse - or a safe pair of hands? Does your culture encourage creativity - or is it all about getting the job done? In a business world increasingly defined by networks of collaborating companies, such perceptions matter. You don’t have to be Steve Jobs or Apple to position your company as a creative, innovative business. If you can do that, the rewards, though hard to compute, will be significant. Technologically liberated from dependence on one supplier, companies are able – and likely - to gravitate towards innovators.
7. Turn R&D into a competitive advantage
Many print service providers already do R&D - if only by customer request. In doing so, they create an intangible asset, intellectual property, that is of value to their own business and their client’s. In a fiercely competitive market, R&D can help businesses distinguish themselves from the madding crowd of wide-format printers selling print as a commodity. Traditionally, some printers have relied on quality as their USP but, in a digitally driven market, being better is a subjective, comparative matter. Being able to prove that you are different - because you can do X and y and your competitors can’t - is a much more compelling proposition to customers.
8. Only connect
One of the intangible assets which is going to become increasingly influential in determining the value of your business is your relationships with other companies. In short, who are you working with? How good, successful or innovative are they? And how do you ensure you make the most of out of those relationships? For example: are you selling on Amazon Marketplace? If not, why not? It may be utterly irrelevant but have you checked it out?
Equally, are you one of the print service providers suppliers use to develop and test new technologies? Or do you belong to a consortium that is devoted to reducing the sector’s carbon emissions? These are not the kind of issues that are easily reduced to figures that can be entered into a standard profit and loss account, but you can’t ignore them. And nor, for that matter, can your finance director