Printing Equipment Costs Vary

January 20, 2003
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GRAND RAPIDS — Different types of printing outfits have different needs that require different equipment capabilities.

“There are so many different types of presses and types of bindery equipment that you could walk into any shop in town and not see any similarities,” said Deb Scott, owner of Copy Options and president of the Graphic Communications Alliance of West Michigan.

The range in printing equipment — and price — is extraordinary, she said.

Cost depends on the size, type and style of the machine, said Mike Medore, a Mid-State Litho Inc. sales and service representative whose region includes West Michigan.

For example, a brand new, small, sheet-fed offset press that prints on 11 x 17 paper costs just under $20,000, he said. Of the brands Mid-State sells, a large-format, sheet-fed offset press can go as high as $1.2 million.

“Work in itself is how they finance the equipment,” Medore explained. “They have to have work to be able to keep the machines running, so the machines are making money to make these payments.”

The greater the work load, the greater the demand for new machines with higher speeds and improved efficiency.

A million-dollar machine comes with a high monthly payment, but if a shop is doing a few hundred thousand dollars a month in printing, it takes care of itself, Medore said.

“You don’t go buy a million dollar machine to do $10,000 to $20,000 worth of work a month.

     “In our company we try to sell correctly, based on how much work you’re trying to do and what type of work it is. Are you trying to do 5 million sheets a month or are you trying to do 50,000 sheets a month? That determines what kind of machine and what dollar range you should put yourself into.”

Medore estimates there are 150 or more printers operating in West Michigan, which doesn’t include the in-house printing plants owned and operated by large corporations and packaging companies.

Whether the shop wants to use coated stocks, whether it wants to print books, whether it wants to do four- or five-color high quality photo-type resolutions or art style reproductions — all those factors go in to determining the best brand and type of equipment for the particular shop.

Flint-based Mid-State Litho distributes and installs Sakurai and Hamada brand lines of graphic and offset press equipment and sells Standard Horizon finishing and binding systems. The company serves all of Lower Michigan.

The company also takes trade-ins and sells used and refurbished equipment, though used equipment sales is a small percentage of its overall business.

Cost of used equipment is based on its age, current condition and whether it has been maintained properly over time, Medore noted. He said a properly maintained press will usually last about 100 million sheets.

Some machines have been so well taken care of that they’re worth almost 90 percent of their new value, and some are only worth 10 percent of their original value, he said.

Printing companies have several different financing options.

Mid-State Litho President Douglas Barrett said some people pay cash, some use traditional bank financing and some lease.

“We give people some general recommendations and encourage them to discuss it with their accountants and own financial people. We just head them in the right direction and to the right people. It really is up to the individual and his own situation what is the best way to go.”

Going the traditional bank loan route is actually a little cheaper, he said. Although leasing is a little more expensive, it’s easier to get and it has some tax advantages.

Because leasing is considered renting, the business gets to write the rental off every month.

“With a purchase — say cash it out — it’s a seven-year depreciation cycle, so you only get to write off the depreciation and the interest over the seven-year period,” Barrett explained. “If you lease it for three years, you’ll have a large rent payment, but in three years you will basically receive all your tax breaks on that piece.”

Mid-State has a few finance companies it works with, but it doesn’t fork out dollars itself. It works with its finance companies to get pre-approval for the customer and also connects customers to lease companies in the industry.

If it’s a relatively small transaction, say a few thousand dollars, Mid-State might take payment in three installments, such as one-third of payment on delivery, one-third in 30 days and the remaining third in 60 days.

That doesn’t happen very often, Medore said, because most customers can finance smaller amounts by other means.

If something needs to be done to make the deal happen, brand manufacturers will occasionally sweeten the deal with an incentive, but that tends to be on a case-to-case basis, Barrett said.

Barrett said he’s seeing an increase in the number of printers using traditional business loans to finance equipment purchases as opposed to leasing equipment.

The cream in the printing industry is rising to the top, he said. The people that have invested in their companies continually are surviving. The ones that haven’t are just going away.

“We’re selling to people that are much more intelligent buyers. They know how to get the money and they know what the value of investing in equipment is because they’ve done it continually.

“The knowledge level of the customer we’re dealing with is progressively weeding itself out to the better and better business people. As a result of that, we’re seeing more bank transactions. These are people who have had relationships with bankers for 10, 15, 20 years.”

There’s kind of a dual cycle in technology in the printing equipment business, Barrett pointed out.

“The computer side has gone crazy; it’s completely turned our business on its ear in regard to how jobs are being done. The whole complexion of what people expect from printers and how printing is done has changed.”

People are designing things on their own computers and bringing them to printers, he explained.

What happened is the technology created in the pre-press department sort of got ahead of the presses, in regard to such things as using new types of plates.

“Now what’s starting to happen is the presses are really being designed to work with these new plates, so the press technology  — ‘the mechanical iron side’ — is catching up to the computer side.”

Computers have also sped up the obsolescence of the actual ‘iron’ itself.

It used to be people would buy a machine and want it to last 20 to 30 years, Barrett noted. The question is, how will the business be different 10 years from now?

“Now people don’t really want to spend the extra 30 percent for a name brand because they may only want 10 years out of the machine, not 30,” he said.

“People really do look at the ‘iron’ and the cost justification now. It’s serious business; there’s no room for error.”

Though capital equipment spending has been down in nearly every business sector during the economic slump, Barrett said Mid-State’s sales haven’t decreased over the last two years.

“There’s a new generation of machinery coming out and we are riding that wave a little bit. People are kind of in a mode where they need to upgrade or they’ll go away. In our particular situation, our edge is our service. That’s one of the reasons we’ve maintained our growth despite the economy.”

If a printer has 1 million pieces of paper that have to go through his shop but his press can only do 500,000, he has to upgrade or risk not being able to get the job out on time — and losing a customer, Medore added.

“If your business is growing, or your customer’s needs are changing and growing, you have to grow with them. So you have to get that better, faster, fancier machine just to survive.”           

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