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Don't depend on the economy

Oct 1, 1996 12:00 AM

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How dependent are you on the economy? When the business cycle turns down, do your sales go with it? Or do you keep growing, grabbing market share from recession-weakened competitors?

Recently the National Assn. of Printers & Lithographers (NAPL) Printing Economic Research Center tracked the sales of 221 commercial printers against GDP from 1989 to 1994. Our sample included companies from across the United States with annual sales ranging from less than $300,000 to more than $400 million, and serving all major printed product and process markets. The time frame included economic expansion (1989-90), recession (1991) and recovery (1992-94).

We surveyed the same firms each time and intentionally excluded 1995 from the analysis because print sales were distorted by paper price inflation. Our results are summarized in the accompanying table. Notice, in particular:

* Most of our sample moved in lock step with the economy. Their sales were up an average of 9.2 percent during the last years of the boom that begin in the early 1980s, down 5.8 percent during the recession that followed, and up 8.5 percent during the recovery of mid-1992.

* Approximately one-fifth of our sample grew without interruption from 1989 to 1994. In fact, these printers not only continued to grow during the recession, but grew faster--by 13.4 percent on average--than they did during either expansion or recovery.

(*) Percent of companies surveyed does not equal 100 percent because not all fit in one of the categories listed.

Neither of these results should cause surprise. It's very hard to insulate yourself from the ups and downs of the economy and very easy to use a down economy as an excuse for poor performance.

Being dependent on the economy is one thing; being ignorant of the dependence is something else. Specifically, it's inexcusable: data to measure how the economy affects a printing company is readily available, very inexpensive and easy to use. Uncovering the reliance is the first step in reducing it, which, as the 22.8 percent of our sample that grew through the last recession shows, is entirely possible.

How do you measure dependence on the economy? Start by comparing your sales to GDP. Use inflation-adjusted GDP since it is the best measure of how the economy actually is doing. Look at several years, not just a few quarters, to capture the long-term relationship across the business cycle. Try to concentrate on the trend, not on growth relative to the economy. Have your sales been moving up and down with the economy? After all, your goal is to outperform competitors, not the economy at large. And if your sales are not comparably adjusted for inflation, the comparison with GDP will be meaningless.

GDP figures are released quarterly by the U.S. Dept. of Commerce and are published in the department's monthly Survey of Current Business. Annual subscriptions are $41 and issues are at many libraries. NAPL members are encouraged to call the association (201-342-0700) for help getting started.

How do you reduce dependence on the economy? Basic market research is essential. Resources such as "Predicast F&S Index United States" and "Business Periodicals Index," both available at any library, along with others described in the NAPL Print Demand Yearbook, help users build a detailed profile of practically any industry.

A little more digging would uncover the industry's key trends, opportunities and problems, providing invaluable information to the printer serious about developing unique communication solutions based on thorough knowledge of a client's business.

Of course, the research is time-consuming, but far more productive than hoping the economy stays healthy a little longer. Moreover, it is just as important for companies that have historically grown through economic downturns as it is for everyone else: the economy changes constantly, souring markets that had been sweet for years and creating immense new opportunities in other areas. So, just because the last recession didn't bite, doesn't mean the next one won't.

In short, no printer has to be a slave to the business cycle. Tracking sales against GDP and using resources similar to those cited above to continuously develop markets can minimize dependence on the economy. This action can make the economy's ups and downs your opportunity and the other guy's problem.

ANDREW D. PAPAROZZI Chief economist, National Assn. of Printers & Lithographers Printing Economic Research Center