Learning how to swim with the big fish
Tuesday, May 8, 2018
Mercian Labels is moving upwards and outwards. Two months ago the business upped sticks at its Derby operation and shifted it 40 miles to its headquarters in Burntwood, Staffordshire. This was a bold statement of expansion; one of many in recent years.
And with all production now under one roof, even more expansion is on the agenda. Staying the pace with such fast evolution can be a tough call, however. Without the capacity, tools or processes in place, trying to keep up with growth can line you up for pain or failure.
Sales and marketing director Hugo Gell says the company was determined to avoid these pitfalls. Gell, along with the 50 or so staff at Mercian, has been tracking all the curves, benchmarks and yardsticks moving in the right direction in recent years, most recently from the modern 2,500m² building from which the company now turns over in excess of £4m from self-adhesive, multi-layer products.
“Our sector is seeing pressure on margins all the time, from changes on exchange rates and prices for materials, to people who want more for less,” he explains.
“Investing in growth was a good way of moving forward – perhaps the only way. So that’s what we did and will continue to do.”
Three years ago, Mercian became the first printer in the world to install the Xeikon Cheetah digital label press. Two months earlier Gell and managing director Adrian Steele announced the merger of subsidiary AC Labels into its main business. This followed the purchase of the assets and goodwill of AC Labels in 2010 after the company went into administration.
In this time and beyond their company has invested big to diversify – in other words expand – from solely producing long-run variable barcode labels to cartons and various forms of non-variable flexo print.
This has seen the business go from being a small local supplier to an export powerhouse supplying its own brands to more than 9,000 clients across the globe.
“What is the best pace to grow a business: fast or slow?” asks Gell. The answer, he reckons, depends not just on finance but other factors including your business’s age and place in its life cycle – start-up, rising star, or mature mainstay. Capacity and resources, and tolerance for risk are other considerations. Somewhere between rapid and slow growth, he says, is “sustainable growth”.
“This,” he explains, “is a pace of growth that’s realistic for your business without coming unstuck. Sustainable growth is different for every business, but at Mercian we have grown four times in size in about 10 years.
“It sometimes feels like we are bursting at the seams, but we have always kept a steady hand on the pace of expansion. Rate of expansion is as important as expansion itself.”
Growth is a mindset, he reckons: “There’s that old saying. ‘think big’, and from a management point of view you have to worry less about the minutiae and daily operations of the business. Instead you look further and wider at a more higher-value development of the company. Adrian and I had always thought strategically, but hadn’t always been able to act strategically.”
Delegating day-to-day tasks can be stressful, but it is also liberating, says Gell, who also had to focus the mindset at all staff levels below management.
“You can either sit still and look at labels and cartons as a commodity product – in which case your team will probably always think small – or you can view what we do as exciting, with huge potential and opportunity that justifies your growth ambitions.
“You only have to walk into a supermarket to see how aesthetically pleasing labels and cartons have become to see the potential.”
Although Mercian Labels remains keen on expanding by acquisition, growth the Mercian way is as much about the “internal cogs”, says Gell. This meant streamlining everything from how staff kept records to processes for movement of data around departments and the business.
“We did the whole thing in one go, which had repercussions and was much more uncomfortable than we envisaged,” he recalls.
The firm spent tens of thousands of pounds on an enterprise resource planning (ERP) system just over a year ago. Almost overnight staff had to learn how to use “enormously sophisticated” IT and even now are still coming to terms with its full potential.
All systems have been integrated seamlessly, so sales, ordering, print and pre-press teams managed to claw back capacity from printing presses. Internal cogs in alignment, the company was ready to target growth in the UK and abroad. Currently exports account for 10% of Mercian Labels’ business. The UK self-adhesive market meanwhile is vast, with Mercian accounting for about 1%. Even if the market remains static, there’s plenty of market share – and therefore growth – to go for.
Going for that growth has involved big expense and a sizeable cultural shift, but Mercian Labels is “reaping huge benefits”, confirms Gell.
The business is now more productive and its products of higher quality. Staff use the IT to measure press performance in terms of time spent on a job and whether the predicted amounts of ink and other materials have been used.
“These measures alone have enables us to gain more than 30% capacity simply by improving efficiency in all areas, and the ERP system means there will be more to come in the next 18 months. It has also kept all of us on our toes and made us work together better because everything is transparent.
“Although we still don’t know the full potential of the IT system, this is no bad thing: it’s exciting because there is more to discover.”
Mercian Labels hopes to focus much of its growth on exports – it already serves clients from Canada to South America and from the Middle East and Africa to Europe. Gell sees potential in China and India and having once exported pottery, “knows how to sell china to China”. However, by focusing on UK growth, the export market may not exceed 10% of business for some time.
That is, of course, if the growth patterns pan out as expected. Gell takes nothing for granted. When you grow as quickly as his business, you have to watch cashflow. “If you want to swim with the big fish, sometimes you have to do what they do”, and trying to keep good credit terms does put a strain on any business. But that is a price to pay for growth of any kind, he adds.
“Fast or slow, whichever approach to growth you choose, each has its own challenges and rewards. Thoughtful planning, careful management, and financial acumen can help you negotiate the ups and downs of the journey. Because handling growth and expansion is a journey, a process of continuous improvement, and I’m not sure you ever totally arrive.”
Location Burntwood, Staffordshire
Inspection host Sales and marketing director Hugo Gell
Size Turnover: £4m; Staff: 48
Sectors Self-adhesive labels and packaging
Products Custom printed self-adhesive labels, high-volume variable barcode labels, tamper-evident labels and labels that indicate exposure to radiation, cartons and security seals for clients ranging from small start-ups to global blue-chip companies and trade buyers.
Kit Eight-colour Edale high-speed flexo-press, Xeikon CX3 and 3300 digital machines
Inspection focus Keeping pace with growth
Get the balance right Somewhere between rapid growth and slow growth is sustainable growth, which may be a realistic goal for your print business to achieve
Get the mindset right Encourage your employees at all levels to “think big” and buy into the need for, and benefits of, business growth
Get systems in place Fast-rate growth often calls for IT upgrades and new-generation software, so invest in suitable systems and processes as well as training
Get the cashflow sorted Growth often involves more materials, equipment and staff and cashflow can become an issue, so plan ahead to avoid a cash crunch
Get thinking long term When going for growth, it’s easy to focus on the short term, but project what your industry will be like in the next few years and develop a plan
Get up-to-date information Keep abreast of new technology, market trends, industry changes and what your customers and competitors are up to