Traditional Business: Phil’s Story

I’d always dreamed of owning my own business. I was sick of working for bosses and not getting anywhere. I was in a job where I worked long hours and gave my best, yet received no respect at work or at home. I’d always respected business people and I wanted to be one of them. An offer landed in my lap to buy a printing business. The previous owner had gone into liquidation and the purchase price seemed like a bargain at $250 000 for equipment and goodwill. I knew nothing about printing, but figured the existing staff would know what to do. However I was concerned about the reason for the liquidation. Maybe the ex-owner had made some bad decisions? I did some homework to find out what it would cost me to start and maintain a new printing business.

I found other similar sized printing businesses for sale, but at more than double the price I was being offered. If I went and started my own printing business, equipment costs for reasonable machinery would be in the vicinity of $600,000. Whether I started one or bought the one in liquidation, premises would cost around $4000 or more per month and insurance about $5,000 per year. Then I would need to employ some staff. A receptionist, graphic designer, printer, printer’s apprentice, finishing and cutting workers would put my wages at around $15, 000 per month plus 9% superannuation, work cover etc.

Just to meet my costs and stay in business I would have to be turning over $100,000 per month, obtaining at least a 20% profit margin. And that’s not taking into account the lag period just after Christmas where the work volume won’t be there to cover costs, so I would have to put money into the business to sustain it through the down periods. The figures I was shown indicated that the turnover was there, but not the profit margins. They had way too many employees so I figured I could cut back there and save a bit.

I had enough money to buy the business and it was an excellent price, so I jumped in. I should have worn a life vest, because it only took a few months to begin to drown in bills and problems.

I found that the competition in the printing industry is tremendous. There were so many other businesses quoting against me, forcing my costs down and sometimes I wasn’t able to reach my 20% margin. After I determined which ones were not needed, I trimmed back on the staff as planned. I should have sacked them on the day that I took over, because it turned out that they were entitled to holiday pay, long service leave and superannuation. I now owned that liability instead of the previous owner, because the staff had been my employees for at least one day. That put an unexpected fifteen thousand dollar dent in my cash tin.

Another major hurdle was the vast amount of time involved in trying to bring in new work. No matter what size the job was, people wanted me to visit them three times or more. For a cheap job, that totally reduced my overall margins. I was putting in long hours in an effort to become profitable. I employed extra sales staff to try and get more jobs in, but it exacerbated the problems. My bills just compounded and it was only a few months before I simply ran out of money to keep the business afloat. The next thing I knew I was out of business and I was dealing with the liquidators again, but from the other side of the fence.

It was a costly exercise. In just six months I lost over two hundred thousands dollars. Fortunately I was introduced to MLM when I was, because the hundred dollars I needed to start up was about all I could scratch together. I made a profit in MLM in next to no time.

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