Value Added: Reinvention In A Downturn

By Thomas Heath


Great American companies are under stress and cutting dividends. General Motors is openly discussing bankruptcy. Another General, this one Electric, slashed its dividend. Venerable Goldman Sachs has morphed into a commercial bank and took government bailout money. Remember the legendary Lehman Brothers? Bear Stearns? Wachovia? They were once so reliable, their stocks were the reliable investment choice of widows and orphans.

More of the names I grew up with might not survive the year. It's stunning. But this column is about one successful reinvention.

Global Printing, tucked in a quiet corner of Alexandria, was facing the abyss seven years ago when the millions of catalogs and manuals it prints began migrating to the Web.

Historically, printing was a safe, local business that made a good living for its owner. Printing companies tend to be local because paper is relatively costly to distribute. Presses, too, are expensive, so would-be competitors are usually few. The key is to run the presses nonstop.
Global's owner Jonathan Budington sums it up this way: "We're like an airline in that we own huge fixed assets. Planes and printers both sell time on their machines."

"A lot of guys got rich on printing back in the early 90s," Budington said.

With big clients like MCI, Booz Allen and the American Red Cross, Global was profitable but didn't grow. Founded in 1978, Global reliably made about 15 percent profit before tax.

When the Internet disrupted the traditional business model, Budington transformed Global from an old-line manufacturer into a state-of-the-art consulting service. Instead of just printing, Global helps clients assemble data, target customers and deliver it to them efficiently. It still makes money the old-fashioned way, by running its presses around the clock. But the company has a new life in consulting.

Global is worth around $5 million, and Budington owns all of it except for the factory. And he is in the process of buying that from the former owner.

Budington showed initiative from the get go. He started in customer service at Global Printing in 1991. Back then, the business brought in about $3 million in revenue. After three months on the job, he asked founder Jerry Dreo if he could run the satellite office in Tysons Corner, where Budington had heard through the company grapevine that a long-time manager was leaving. (I cannot imagine walking into the executive editor's office after three months at The Washington Post and asking for a transfer to, gee, how about London?)

"I told him I would really like a shot at that. I was relentless."

Budington knew that his contract was filled with incentives based on growth and profit. Global's Tysons office had been billing its clients $15,000 a month. Budington grew the business to $100,000 a month within two years.

Eventually, Dreo brought him back to Alexandria and named him director of operations (Budington invented the job description himself). The year was 1995, and companywide revenue was at $4.5 million. Budington immediately opened a new office on K Street in the District to grab more clients.

By 2000, revenue was up to $6.5 million a year and the company borrowed $3 million for new machinery so it could expand into higher quality color printing. The money was borrowed under an Industrial Revenue Bond that was guaranteed by the city of Alexandria. The IRB interest rate was about 6.5 percent, which was good for that time period.

Then something happened.

Budington noticed customers were taking longer to pay their bills. Bills paid in 45 days now took 60. By the first quarter of 2001, it stretched to 70. Then it dawned on Budington: his customers, many of whom were technology startups, were failing. The tech bubble had burst and the 2001-2002 recession had begun.

Revenue at Global crashed. By the third quarter of 2001, revenues had dropped from $6.5 million to $3.9 million. Global lost $1.4 million over a 16-month period. Wachovia Bank started making noises about the debt on the new color presses.

"Things were getting ugly," said Budington, who was one of the top five executives at the company. "Technology was starting to make things obsolete. Let's say you were printing a lot of instructions manuals internally. Suddenly, those instructions manuals were available online."
Sensing that the print business was changing, he suggested to Dreo that the old days were gone and that they needed to invent new revenue streams from their clients.

Budington became chief executive, bought 20 percent of the company and the reinvention began.

"I said we need a plan, and it can't wait for the recession to end. We have to restructure the company and build a new business model."

Dreo and Budington borrowed money and cashed out their 401(k)s to cover payroll. They slashed expenses. A seven-person accounting department dropped to two.

"We looked at clients and instead of focusing on printing, let's look at what services go along with everything we were producing. In the old days, we would print and the client would distribute. We changed the model. Instead of a manufacturing bent, we started a service model."
Rather than leave its printed material on a client's loading docks, Global offered to deliver it to the client's employees or whatever the final destination. That could mean anything from packaging welcome kits for a client's employees to mailing the material to a company's targeted customers. Instead of just printing a catalogue, Global now packages it with forms, wallet cards, identification badges and anything else an employee or a conference attendee needs. That is known as the "fulfullment business."

Global bought a mailing company in 2003 for $1 million. It started collecting client data. It hired data programmers and started a business making Web pages. All in, the consulting side of sales is responsible for the vast majority of Global's growth.

"When we tie all this together, I can make money on the printing, I can make money on the data, I can make money on the fulfillment, and I can make money on the mailing and on Web developments," Budington said.

Global started growing again, from $3.9 million in revenues in 2002 to $12 million last year. As the profits rolled in, Budington used his share to buy up stock in the company.

The company is hustling to maintain revenue during the current downturn. Business is flat, and Budington is using the recession to buy some competitors at a cheap price. Global employs about 70 people, who make anywhere from $30,000 to $250,000 a year, and all of whom have health insurance.

His labor costs are a quarter of revenues or more than $3 million a year. Materials like paper and ink are 20 percent of revenue. Sales expenses are 13 percent. Dreo still owns the building, so Global pays him rent. The company's insurance, leases on digital equipment and other costs leave an operating margin of around 10 percent of revenue, before taxes.

That's over $1 million this year. In past years, Budington used his share of the cash flow to buy up company stock. Now that he owns it all, the profit goes into new equipment and business expansion.

He is sniffing around at real estate opportunities and the outdoor sign business. One investor offered him $8 million in stock for the company, but he would have to stay around and manage it for awhile -- and cut costs. No deal.

As I left his office a couple of weeks ago, he handed me a business card. The card has the name, Global Thinking. That, said Budington, is where the future lies.

By Dan Beyers  |  March 22, 2009; 8:00 PM ET  | Category:  Value Added
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Comments

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This is a great example of a truism that having a CEO that can SELL is critical to the success of a small business. I'm also impressed with Jonathan's ability to anticipate what the customer is going to want in the future and deliver it today.

Posted by: kellyh99 | March 23, 2009 7:43 AM

Budington’s “global thinking” and survival techniques in today’s economy is quite impressive. Who knew with the advent of the Internet that some businesses would have to cope by expanding services and create new ways to increase their bottom line. His “fulfillment business” is a rather savvy way to stay in the game and assist area businesses with everything under the sun. Way to go!

Posted by: matthagan | March 23, 2009 10:06 AM

If people are impressed with the innovations that have kept Global in business, as a customer I can close the loop for anyone who is thinking about hiring them to do consulting work. Not only have they got the printing side of the business totally down, they've got so many ideas, so much experience and so much brain-power together in one place that they can't help but come up with brilliant ideas for their clients.

Posted by: furnituregirl | March 23, 2009 10:45 AM

nice story. $13 million in revenues not bad in this economy.

Posted by: baseballindc | March 23, 2009 12:18 PM

Very cool business. The key to success lies in innovation and marketing.

Posted by: nrfball | March 23, 2009 3:31 PM

It just shows that a little fresh thinking, a lot of hard work and a bit of luck can work wonders.

Posted by: Harney2 | March 23, 2009 4:08 PM

I appreciate all of the positive feedback. I’ve been very lucky over the past few years. I’ve also had a fantastic group of people here to depend on. Many of our employees have been here for 20+ years. We also hire many each year right out of college. Our success has come from this combination of wisdom and new thinking.

Posted by: jonGlobal | March 23, 2009 5:15 PM

The classic story about the railroads. Instead of seeing themselves in the in the railroad business, they should have seen themselves more broadly in the transportation business. Global recast itself from a printer to an information distributor. Hard to do; very nicely done.

Posted by: abmcc | March 23, 2009 5:26 PM

What an inspiring story! Reinventing oneself is the hallmark of a great thinking businessman. No shortcuts, just pure ingenuity and self confidence It's the American Success Story.

Posted by: toofred | March 23, 2009 5:29 PM

to abmcc. you nailed it with the railroads analogy. RR should have thought of themselves as transporation companies, just as budington knew he was an information company. RR gave it away to the truckers. classic. thanks for the feedback. thoughtful analysis.

Posted by: heatht | March 23, 2009 5:36 PM

Jonathan sounds like a true entrepreneur. Will be very interesting to see how he survives the current economic crisis.

Posted by: polynikes | March 23, 2009 5:37 PM

To polynikes – it will be interesting to see how this works in 2009. So far, revenue has been flat, but that doesn’t show a complete picture. We have seen a slight decrease in the traditional printing business, but a spike in the data development and targeted print / web business. Our clients have so many ways to communicate in this environment, and this economy is forcing them to think differently. In 2001, we were a leading indicator. Our revenues and cash disappeared before we had a handle on what was happening. That isn’t the case this time. We’re very busy.

Posted by: jonGlobal | March 23, 2009 5:53 PM

jon. does that make you a lagging indicator? why?

Posted by: heatht | March 23, 2009 5:55 PM

Good question. Since 2001, I've been focused on growth. Most printing companies that don't grow end up shrinking. It's hard to tread water in this business. I think our flat revenue is actually growth in this economy. The investments I've made are paying off (bigger sales staff / more training / more products). I regularly remind myself what my fund statements say: "past performance doesn't indicate future growth". Nervous energy helps too - I have much on the line here.

Posted by: jonGlobal | March 23, 2009 6:02 PM

"global thinking" is certainly where the future lies. very interesting article!

Posted by: scottbeale50 | March 23, 2009 6:03 PM

Jon is a true entepreneur! What he has done since the previous recession is what many printers haven't done, reinvent themselves.
As in many industries in this information age our final tangible product is only a commodity. Global's value-added services help their customers better market their products and services while information, data and fullfillment close the loop for the customer's needs. Global is a marketing company, not a printer, it just so happens they have printing presses. If Global was traded on the NASDAQ I would buy it now.

Posted by: proheidelberg | March 23, 2009 7:37 PM

It is wonderful to see Global getting such positive recognition. I have been a client of Global's for over 5 years. Jon and the entire team are a true partner ... saying they are a "vendor" would diminish everything they have done.

I could give a hundred stories about Global -- they are leader in print innovation and customer service. What started as a pure print partnership has grown into several major areas of our business. For example, they built our fulfillment manager for printing / inventory / shipping our book series.

Business Cards seem to be a headache for all businesses -- now ours are easy as pie with the online system they built us.

Currently, they are also in the middle of a huge data migration project.

Clearly, I could go on.... Congrats Jon!!

Posted by: K8-1114 | March 23, 2009 7:53 PM

I’m in complete agreement with K8-114: “Vendor” does not begin to describe the value they bring to the table.

As a customer for the past ten years, I can attest not only to the quality of their product and their focused customer service, but to their visionary approach. Jon never stops thinking of better ways to do things and he’s assembled a great team to help him move the company forward, from customer service reps who anticipate problems and makes sure printed products are produced and mailed accurately to savvy programmers who help me see “under the hood” of my website and databases.

I can’t say enough about his project managers who, with Jon, listened to our marketing goals and then helped us think “outside the box” about what we could do in the short- and long-term (via a new website and fulfillment system) to achieve them . . . and within budget.

Posted by: segdc | March 24, 2009 9:52 AM

Another interesting entrepreneur! I am impressed with Jonathan’s ability to continue to evolve his company to meet the continually changing market demands. I will be calling Jonathan the next time I need a printer.

Posted by: MDC2 | March 24, 2009 11:14 AM

Printing has traditionally been priced as a commodity, much like over night delivery once was. Sound like Budington read Thomas Friedman's book The World is Flat. Now that were in the idea and knowledge economy, capital will begin to naturally flow towards those businesses who add value based on intellect, talent, and ideas. Companies like Gloabl Printing are the new intellectual venture capitalists who'll be creating more value above and beyond the staus quo, and therein you will find new foundations of wealth being poured.

Congratulations to Mr. Budington who 'get it' ... who isn't afraid of exploring adopting new ideas that stretch the imagination of commerce.

My guess is, unlike others who sit there with the bat on their shoulders looking for the perfect slow ball pitch, he's willing to lean in towards the fast balls and take a swing at them. Eventually, it's his spirit of entrepreneurism that leads to accidentilly stumbling upon ad idea that'll make his $12 million a year business a $12 billion business because he was always looking beyond what's around the next corner ... which is something all great CEOs do ... while his teammates keep their eye on the ball, run the bases with singles and doubles ... in hopes he'll one day serve up a grand slam ... which is what makes business fun.

Imagine if all business people thought the way Mr Budington does. What would we have? We'd have an economy that would be on the path to creating more profits, more jobs, more properity across the board ... for everyone.

Posted by: zigziegfried | March 24, 2009 3:07 PM

The printer who adds a professional copywriter to their staff, one who really knows how to write compelling copy that sells, will automatically separate themselves from 98% of all other commercial printers.

For instance, the printer who can take a standard business card and knows how to turn it into a prospecting tool so powerful even if it were dropped on the ground and someone were to pick it up, they're compelled to take action ... they'd corner the printing market .. or minimumally speaking ... create for themselves an entry level service that would get their foot in the door with a lot of businesses who otherwise would be indifferent to hearing a pitch from another commercial printer.

Global Printing is not in the printing business ... they're in the business of making other businesses more innovative, more competitive, and more profitable.

Again .. an inspiring story where a printer is rewriting the rules of innovation.


Posted by: zigziegfried | March 24, 2009 3:23 PM

good analysis zig.

Posted by: heatht | March 24, 2009 4:01 PM

Speaking as a long-standing client of Global Printing the thing I most appreciate is their willingness to problem solve. They have consistently demonstrated their ability to think beyond their current "product offerings" and develop innovative solutions to solve our marketing and communication challenges. Believe me whan I say that, on the surface, some of these solutions may not make sense from a strict focus on revenue. But their commitment to looking at the big picture has earned our trust, and, more importantly, our business. I look forward to my conversations with our partners at Global and my continued friendship with their staff. In tough times its nice to know there are people who care about one's success as much as the people at Global Printing.

Posted by: LarryGamache | March 24, 2009 10:44 PM

Congrats, Jon! He has a great team - Katie Gosnell is our favorite!! They are always willing to go the extra mile no matter the day of the week or the hour of the night! They are willing to make the impossible possible with a smile, terrific sense of humor, great service, and a great product. Wishing you much continued success.

Posted by: emls | March 25, 2009 4:42 PM

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