I would have preferred my first column for Catalog Success to focus on good news. But I just can’t describe a rash of businesses that are about to close or sell in 2008 as good news.
The 2008 valuations and acquisitions forecast for multichannel marketers looks cloudy, especially for those in the $20 million to $50 million range whose businesses remain print-centric. Paper and postal price hikes imposed last year will likely lead entrepreneurs to sell this year.
The Storm’s Here
A perfect storm of increased paper and postal costs has conspired to put a chokehold on mailers everywhere, particularly small and midsize businesses. Rates for Standard mail flats — the category affecting most catalogers — increased 40 percent for some. And smaller companies are bearing the brunt. It’s been nearly 15 years since we’ve seen this kind of double whammy.
The end result sent most mailers into the all-important fourth quarter on unstable footing. There was little testing time to figure out prudent courses of action. Granted, few businesses rely solely on print catalogs these days. But the printed page remains the fuel for the multichannel machine.
Most mailers weren’t very jolly this holiday season, with sales flat or down. Then there’s the economic mess from the mortgage crisis and consumers who’ve overextended credit card debt. And has anybody seen gas prices lately? Couple that with declining home values and things could get ugly.
How ugly? Sagging sales are putting downward pressure on multiples and valuations, which means sellers won’t get as much for their businesses. Suddenly, all the entrepreneurial sweat equity built by business owners has been reduced to just sweat.
It’s like buying and selling stocks. You wouldn’t sell your stock after buying it high. Rather, you’d ride out the storm, protect your paper losses as best you could and wait it out until the market improves. That sentiment is exactly what's being forced on entrepreneurs..