Recently a business owner closed his doors, but shared his lessons learned with “What They Think”, an organization focused on sharing lessons with the printing industry.  Below is an interview and details.  Any business owner dealing with this economy can take some valuable lessons from this.

The Rise and Fall of Mallard Press

By Cary Sherburne
Published: October 12, 2009

The recent closure of Mallard Press caught our eye. While I don’t know Bob Gay or the company personally, a review of its web site revealed a company that appeared to be on the right track and making the right investments for the future.  Bob Gay was kind enough to speak frankly with us about the factors that led to the demise of the company.  Perhaps there are lessons here for others in the industry who may be teetering on the edge or worried about the future. Mallard Press was an independently owned and operated commercial printing business that had been in operation in the Chicago area for 30 years.  At its peak, it brought in revenues of over $5 million.  Here’s what Bob had to say. In Part One of the article, he discusses what happened; in Part Two, we move to what perhaps should have happened.

WTT: Bob, what would you say was the major contributing factor that led to closing the business?

BG: My biggest problem was that I had taken on too much debt.  I had made investments that were required to take my business where I wanted it to go, and I had about three and a half years to the finish line.  We were doing fine until about December of 2007, which was our first bad month, with sales off 18%. I remember seeing those numbers as if it were yesterday.

WTT: What were some of those investments?

BG: We had invested in Canon color and black & white digital to the tune of $10,000 to $15,000 per month.  We were into Komori for about $14,000 per month.  And the KBA press, which is a marvelous press and probably the most versatile printing press in the world, bar none, was an $11,000-per-month investment.  That is a lot of debt service for a company with $5 million in revenues.  We were building to grow, but any downtick in revenues was painful because of that debt service.

WTT: When you saw the December 2007 results, what actions did you take?

BG: We did make some adjustments to the business, and as a result were able to go through the spring of 2008 fairly strong, although the June through September period was below average, down 15-20%.  It gets tough to recover from four months of consecutive losses.

WTT: To what did you attribute the revenue decline?

BG: To a change in customer buying habits.  We did an analysis of our client base.  We were not losing clients; they were just spending less, due to the economy and possibly to more use of electronic media.

WTT: So what did you do next?

BG: We then looked at increasing our client base through acquisitions.  AGS, a die cutting operation, was basically closing its doors and we made a deal with them that would keep their company together, because the services they offered were services we were outsourcing anyway. There was also another company that was closing its doors and we purchased some of their assets as well. This was about $2 million in business and we took 10 of their 18 employees on board. As a result of all of that, we had a terrific December.

WTT: Then what happened as the new year began?

BG: From January through now, everything tailed off.  Sales were down 27%.  We again looked at our customer base, and it was the same Top Ten customers, but their sales volumes were down.  We even had some loyal print brokers that were getting less work for the same reason—their customers were also dialing down.

WTT: I am sure all of this must have led to some painful decisions.

BG: Absolutely.  We made some first quarter adjustments to get things in line, but I knew that it wasn’t going to be enough.  After the second quarter, I really needed to make some deep cuts.  This was extremely painful, because people who had done nothing wrong were losing their jobs.  The remaining staff took pay cuts to keep their jobs.

WTT: In hindsight, would you have made staff cuts earlier?

BG: Yes, but I was slow to do so because it is just not in my nature.  These people worked hard, and I was optimistic that the services we provided would help bring the business back.  This is how we had always survived before—because of our diversification.  If one area was not performing, the other two areas could pick up the slack.  But with the decrease in sales and additional 10 employees, I increased payroll by $400,000 but only increased sales by 1.5%. I was operating as a man in business, not a businessman.  A businessman would have made the cuts sooner, but the man in business had hoped it would come back.

WTT: What else did you do to try to salvage the situation?

BG: We went to the equipment finance companies, Wells Fargo, GE and IKON Financial, and working with them was tremendous; they were all on board to help us. We were able to negotiate six months interest only payments to help us weather the storm and work to get our sales up.  We also went to our landlord to see what they would be willing to do.  We let them know that others were participating and we weren’t just coming to them for help.  They were a bit reluctant to help and I basically had to sell my soul a little to get their cooperation.  They gave us six months at half rent, but the negotiations gave them the full right to kick us out if they didn’t think I was going to perform after these six months.

WTT: I take it that resulted in the crowning blow, then.

BG: About three-quarters of the way through the process, we provided the landlord with a financial statement per the agreement.  It was a bad June and we were not making any headway.  They performed their fiduciary responsibility to their shareholders by exercising their right to evict.  We looked around for other spaces and looked to our lender for some additional support.  Even though we eliminated 12 employees and took some other steps that brought us back to break-even, our lender decided not to extend our line of credit or to provide us with the funding to move the business to a different location.

WTT: Why was that? Presumably you had been doing business with them for a long time.

BG: Yes, but their position was that we were maxed out on our line of credit with no good outlook for being able to pay it all back, and they were simply not in a position to lend us the $100,000 or more it would have cost us to move.  This was on a Friday afternoon, and rather abruptly, the next Monday, per the request of the bank, the company went into receivership in order to pay down the line of credit and the other creditors as well as take control of all receivables.  That obviously brought the business to a screeching halt.

WTT: Why do you think the banks took that position after working with you for so long?

BG: I have probably always been the exception when they have discussions in their board room.  I can just hear the discussions:  “They are out of factor, but Bob has a passion for the business and we believe in what he is doing. He has built a unique company that has advantages over standard printing companies, and he will be a survivor.  He has done it before.” To be honest with you, in 2008, I was swinging back and forth between being three to five months behind in rent.  I never thought 2009 sales would still just not materialize. Clients are simply buying differently, and I don’t know if those levels are going to continue to decline or whether they are even going to continue to use print in many cases.

WTT: What about all of the government talk about bailing out small businesses, stimulus, TARP and all of that?  Did you try for any of that money?

BG: Sure did.  I asked about an SBA loan that could spread the short-term debt over a longer term with a lower interest rate and I couldn’t even get that. Now 38 people are without jobs. So much for economic stimulus.

Read the second half of this interview

Depends on the relationship one has with the specific supplier, how important that supplier is to their business, how long the survey it, and most importantly if the company responses quickly the first time the customer shares their thoughts. If I have a good ongoing relationship with the supplier as a partner, they are important to my well being, the survey is short and covers points most interesting to me and not you, and the company responds quickly maybe even call me, then I feel it is a way to get things changed and get a reaction. I will fill out surveys for them.

Example, if I have a partnership type relationship with my printer, rely on them to perform to drive marketing efforts, the survey takes a minute, and they call to discuss, then I DO NOT get survey burn-out.

If you are just another printer, who puts out average work with no skin in my game, the survey doesn’t respect my time, and you do nothing when I gave feedback of any kind in the past, then I hate to get your survey, wouldn’t take it, and WOULD get survey burnt out quickly. I would be burnt out the first time I got a survey and maybe even use it as an excuse to stop using you because I was thinking of moving on anyway and needed a reason.

We get so many surveys, but the ones I take are the ones where I respect their business, enjoy working with them, they know me, or I know they will do something with my information.

I would argue that burnout is an indication that the supplier is missing something in their relationship with the customer or they lack an understanding of how frequently to go to the well for feedback or how to approach customers for feedback.

If your membership is large I suggest not surveying everyone, but break membership into subsets and manage last survey dates. Then you can get information and support your members, but not badger your membership and cause dissatisfaction.

Some organizations can get away with surveying their members more often, but I don’t know how your response rates have been in the past to comment here.

There is a definite threshold and you don’t want to go over the line.

The key is to understand their appetite for research, look at the size of your membership to determine if you can segment out and only survey a portion of membership and still get the statistical significance necessary for a quality study, and look at the incentives you give to members who participate.

Having a study on a website many times doesn’t work as well and typically an email with the link is the way to go if you want higher response rates, reminder management, tracing. E-newsletters with a link may work, but it may compromise the data or cause box stuffing.

If you can share the results of the research it would help as well. We have found that if a member filling out a research study sees value in the results and will get a copy of the report free, they are more apt to participate in more studies. In one association they go to members just about every 90 days with a study, get high response rates, but always share the report with anyone participating. Others pay for the published study.

They pick the right studies and put out a quality report so members look forward to them. Members see value in participating and the research has become a membership benefit! In this case the research studies got the #1 rating on satisfaction of all the services offered to membership. That is what may want to strive for.

Hope this helps. Good luck.

Recently an association executive was trying to learn how to approach a membership award program for their conference.  Below are a few things to consider.  Granted this is a professional organization so take what you would like from it.   Here is the response.

Hopefully the ideas below helps as you decide how to approach.

1) You may want to start off with maybe a few awards that focus on the key, most important awards. I have seen members dread going to their big dinner / award dinner because they state “I see more firewood being handed out and I never go to them”. Firewood meaning plagues. Be careful and pick your battle. Members will appreciate it and you can test the waters and expand from there.

2) Depending on your membership a plague is a nice gesture and something visible. Certificates may work if in a nice frame and something they would hang in their office or out in front. I noticed you are a teacher association so maybe the certificates would be nice right next to their degree. Also, academia may be more open to recognition versus trade associations so you may be onto something.

3) I don’t think the money is the thing. A nice plague or certificate should be fine. It is the recognition more than the money in most cases with professional organizations.

4) Definitely would give them a little token or money to come out and stay.Again, nothing crazy, but maybe the flight and motel room.

You know your membership and what gets them jazzed more than anyone so I suggest going with your first instinct or go out to members and ask, but start small if you can and then grow from there if possible. First year maybe 5 awards, and then increase as feedback comes back and you see the response from members and winners.

Also, promoting the awards is important and giving PR to those winning members. Maybe a short case study posted on your website explaining what they did to win and why they are a star peer.

A more subtle way to capture referrals is to tie the request for referrals into a customer feedback survey.  The way it works is that you send a customer a very short five question survey after your complete a job, complete a service, or ship a product.  One of the questions asks the ultimate question “How likely are you to recommend us to a colleague, friend, or family member?”  For all customers who click “Very Likely”,  you now know they are loyal, love you, are passionate about what you do for them, and are the customers most likely to recommend you.  They have self qualified themselves!  At that point when they click submit on the survey you direct them to a landing page to highlight your referral program along with any gift you want to offer.  It is that simple.  I have seen up to 5% of those filling out the survey offering referrals to help their supplier or vendor.  What an opportunity!   Just don’t forget to call them or thank them for the referral.  It is only common courtesy and it will feed the referral process.  

Just last week a small printer closed a $1,000 initial order with a referral by using this process and the newly acquired customer appears to be ready to give them future orders for other printing needs.  This process isn’t just for printers, but can work with insurance agencies, any service organization or business that relies on referrals to grow and prosper. 

So, don’t leave your loyal customers just buying from you.  Engage them in the selling process and expand your selling force.

1)Keep surveys as short as possible and know your audience. 

2)Know both their appetite for the kind of survey you are doing and also how strong your relationship is with them.

3)Look at your e-mail invitation to the survey.  Messaging is so important to grab attention.

4)Look at the words used. You may be getting caught in spam and it isn’t being delivered.

5)Look at the subject line to make sure it is enticing and connects with the responder.

Most of the time you should only need to remind once and then you become an annoyance.  If you need to go with multiple reminders then something is going on.