Initial Operational Expenditures for a Printing Company
By: Brad Kartel
Submitted: 2011-08-06 09:43:30 | Word Count: 631
You now have your digital or offset commercial printer installed. You have rented a commercial space in the downtown area and you have hired your staff. Everything is ready and you can already serve clients' commercial printing needs-from black and white receipts and invoices to more complicated printing jobs like brochures, posters, and catalogs. You excitedly take on each new job that comes in every day, whether from walk-in customers or from the clients brought in by your sales people.
Then after about a month when you have consumed most of your initial inventory of printing supplies, you realize that you do not have the money to replenish them. Even if you ask for terms from your suppliers, it seems that you could not pay them.
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What just happened there? You seem to have a lot of customers already. It seems that the commercial printing presses are running all day every day. And you seem to have a lot of sales. Then how come you do not have enough money to cover expenses?
It could be one or two reasons out of many factors that contributed to this situation. But most likely it is because in your excitement, you forgot to set aside liquid funds for your company's operations for first six months of business. You see, in the first month, you will probably have some sales, but you could not really expect it to be that much because after all, you are still marketing and promoting your new commercial printer, what you are offering and what you could do for your customers that others could not. You also spend some money on promotional expenses. So you can expect, so that you will not be disappointed, that you could hardly break even on your first month. Your income will hardly be able to cover salaries, rental, and supplies.
So what about the second month? Your marketing and promotions efforts may have already paid off by this time. Your sales are already increasing and your presses are hot most of the time. But still there is not much liquid funds in the bank and whatever money comes in is not enough to cover operational costs. Does this mean that you are losing? The answer is a big "No."
You have to realize that in the printing business, your big clients are mostly companies who would ask for terms from you. While most printing presses demand a 50% down payment for their jobs, this gets over-ridden if it is a known client and you are still trying to woo them for regular big jobs that they can give you. So you offer them terms. Or even if they pay the 50%, the balance will still be paid in terms of 30, 60, or 90 days, depending on your agreement. Additionally, as your relationship grows, there are some clients that no longer pay a down payment because of the delay in the processing. Instead, they process full payments upon delivery and issuance of the sales invoice. So at the very least, you can get paid within 15 days because of course, you also have to respect their payment schedules.
That is why if you are new in the business of being a commercial printer, you should have at least six months-worth of operational costs as liquid funds. That should be part of your capital. While you may be able to earn it after a while, you will just have to be ready in case the cash doesn't start rolling. These are the downsides of having a commercial printing company.
Author Resource:-
Brad Kartel is a marketing executive whose passion is helping business owners build their campaign through acquiring commercial printing services. Learn more about this commercial printer.
