Whether your catalog company is at $10 million or $150 million in revenue, there are questions about the key metrics of cataloging and Web marketing you should ask yourself — and know where and how to find answers — if you expect to regularly generate above-average profits. Here are the key areas; some are in the form of questions that I use when helping direct marketers prepare their strategic plans, raise growth financing or sell part or all of their business. Merchandising Q1. Describe your merchandising and buying function. Is it a “one-man show?” Q2. Who attends trade shows, makes overseas sourcing trips, selects final products? Is
West Companies Inc.
To help maximize profitability: You can do so through the use of optimizing prospect circ, and 12-, 24-, and 36-month lifetime value calculations. This includes decisions about sales vs. profit growth and improved “managing” of reported profits. For company valuation calculations: 1) to tell the “catalog opportunity story” when raising growth financing — whether from a local bank or equity/debt source; 2) when buying another company —to help define purchase price and secure financing; 3) when selling part or all of a catalog business; 4) for customer list valuations in deal-making — or for your local banker, who won’t increase your line of credit without strong, analytical explanations; and 5)
In my last Catalog Success column, “What Acquisition Due Diligence Reviews Can Teach You” (February 2007, pg. 37), I explained why catalogers can benefit from embracing and using the analytical models employed by acquirers and financing sources in this industry as they decide which catalog/Web marketing businesses to pursue. Now, onto the use of due diligence methodologies in catalog deal-making. These are some of the key analyses you should use in most of your seasonal circ plans and your annual strategic plan. Furthermore, and of no small importance, these are the same metrics and analyses your local banker should be using when deciding on
As a heads-up for catalogers, let’s note some challenges you need to watch for: 1) The 2007 postage increase is much more nasty than one can imagine. Not only will it decrease your reported profits, but it will also increase your prospect breakeven. And it will, of course, shrink the size of your economically available, mailable prospect universe. Investors already have determined that higher postage will retard catalog business profitability in 2007 and beyond. So catalog company valuations already have begun to shrink for sellers, buyers and growth financing sources. 2) By having to report shipping and handling revenue you receive (from customers) in your top
As competition among acquirers of catalog companies has increased and multiples have grown, these buyers have become more sophisticated in their acquisition due diligence reviews (DDRs). “Multiple” refers to the multiplying amount applied to the latest 12 months of EBITDA (earnings before interest, taxes, depreciation and amortization), to equal the final valuation. And this especially is true for equity house investors, all of whom have extensive fiduciary responsibilities to their sources of capital, which often are insurance companies, pension plans, banks and other institutions. In fact, even most large direct marketers don’t acquire catalogers without similar intensive DDRs. DDRs help as you do your circ
What better way for a tips-oriented business magazine to wind down 2006 than with the top 50 tips of the year? My staff and I spent the past several weeks going through every article that’s run so far in Catalog Success and the Catalog Success Idea Factory e-newsletter this year to bring you the ultimate how-to “cheat sheet.” Throughout these pages, we’ve synthesized the year’s best tips, summarizing, and in some cases quoting directly, from stories and/or the sources themselves, where noted. Below each, you’ll see the industry expert who offered the tip. We reference the issue from which the tips originate so
If you work in any segment of the catalog and/or online marketing business, you’ll continuously be affected by mergers, acquisitions, growth financing, consolidations and valuations. And that’s regardless of whether you’re an equity owner or even like the subject! The reason is simple: Deals are changing the metrics, success hurtles and economies of scale in direct marketing. With the possible exceptions of increased postage rates and merchandise importing, it’s hard to think of other variables that have changed our competitive landscape so drastically in recent decades. In deal making over the past few years, acquisitions by equity house investors alone greatly have changed the competitive