Since they are difficult to purchase from far away, vehicle wraps are among the projects that will continue to stay local.
SMC: How have rising raw material prices impacted the digital printing and sign industries, and what can businesses do to manage these costs while remaining competitive in the market?
CF: In our last fiscal year, our top-line sales were up, and our net was down. We’ve been too soft with price increases and have been taking it on the chin. We’ve raised prices where we can, but now we’re looking more specifically at where those prices can be increased. Of course, similar to everyone, we’re always looking at automation to produce more work with the same staff. This battle will continue long-term and is one everyone needs to look at if they want to stay in business.
GL: The easiest way is always having inventory ahead of your competitor. If you have cash flow, take advantage of deals to buy bulk that you can store and use as long as the shelf life, and be competitive with that bulk. If you’re only buying as you need product, you’re always going to be paying a premium, and then you’re not going to be competitive. However, your competitor will. There will always be someone who’s more agile than the next person. That’s just business.
SMC: How are rising interest rates affecting shops, and what steps can they take to mitigate the impact on their operations and growth?
CF: We have significant investment in real estate for the size of our company. The interest rates increasing this quickly has directly impacted our financial statements. However, I’m more comfortable paying interest on real estate than on equipment because equipment is depreciating rapidly, while also costing more in interest. Real estate is hopefully stable in the long-term.
GL: If you don’t want interest rates to impact your business, don’t buy anything. Hunker down and just maintain the equipment you have. Interest rates are going to keep on climbing. The days of cheap money have come and gone. Even if your credit score is triple-A and you have a very lean operation, you’re still going to pay a hefty price on capitalizing your equipment. Interest rates come right off the bottom line. Companies who are looking to expand will always look to buy. Whoever’s looking to buy will always pay a premium. There’s no real magic, unless they have cash flow, where they don’t have to rely on financing their equipment, but who wants to tie up their cash flow on capital costs? You want to use your money efficiently and keep your cash flow for operations. The companies that will survive and actually take advantage of it are always the companies growing, but they will always pay a premium, especially in the current market.
SMC: Where do you see the digital printing and sign industries heading in the next five to 10 years?
CF: Digital printing and signage will become more competitive as entry into the industry gets easier on the small scale. It’s a bright future in this industry for those who look for the unique opportunities and service their clients well.
GL: We’re seeing a lot of consolidation. Larger printing companies are buying a lot of medium-sized printing companies, consolidating, and looking to add to their offerings for their clients. They can be more agile in the different products they offer, and then that’s just their business model. They’re going to keep on buying digital print companies. We’re also seeing that right across the board in the sign business. Larger sign companies are buying and having strategies to buy small- or medium-sized sign companies to augment their offerings for the customer base they’re looking for, or looking to buy companies that have the customer base they’re looking for, to add it to their own internal roster. Thirdly, over the last five years, we’ve seen some unique situations where medium-sized sign companies are understanding the need to offer a good digital print footprint and consolidating or adding capital equipment to their businesses. They’re becoming more hybrid sign companies, offering digital print in a large capacity, as well as custom signage. I’ve seen that model a lot throughout southern Ontario, Montreal, and Vancouver. Essentially, three different business models are happening, and the ultimate solution is to offer customers a one-stop solution for signs and print.
