Going up in your clients estimation

Barney Cox
Tuesday, November 6, 2007

Darren Briers has a problem with estimating. Hes fixed the problems that his own business, Northampton-based B2 printer Avalon, had in that area. But he believes the situation it faced before implementing a Brightblue estimating system are the rule in the industry rather than the exception.

“People estimate inaccurately because they don’t have a true idea of the value added in the business,” Briers says. “If you don’t know what your costs are, how can you price for a job? I believe people are going out of business because they’re offering prices that don’t reflect the true cost of doing the work.”

Briers left print and the UK in 1990, upping sticks to France for a simpler life. Returning to the UK in 2001, he vowed not to get back into the industry, but found himself slowly getting involved again through old friends and colleagues. Eventually he reached the point where he was looking to set up his own business when the opportunity to buy Avalon out of liquidation arose in December 2003. He moved quickly to secure the business and kept 11 out of the 18 staff.

In and among the problems that were unearthed as Briers got to know the business was estimating.

Avalon’s previous system was template-based, which made too many assumptions and introduced errors between the estimated price and the true cost, with no way of separating the two. “We had a handle on our production costs,” Briers says. “We wanted our estimates to reflect that and to price accordingly.”

Best guessing
This approach also relied on the estimator using his or her expertise to determine the most cost-efficient method of manufacturing. “And if the estimator hasn’t got the skills, they’re probably not telling the system the best way to do it,” says Briers.

There was another complicating factor too: an increased pressure to turn quotes around quicker.

“B2 is now print-on-demand, we never have more than three to four days,” Briers says. “The ability of digital to offer one- or two-day turnarounds leads to the expectation that all print can be done that quickly.”

He adds: “Estimates are now wanted very quickly, typically within one to five hours. That gives us the problem of either having a dedicated estimator, or cutting corners, which leads to inaccuracy.”

For a small business – and one whose previous downfall, Briers believes, was partly down to inaccurate estimating – it was a tricky situation that required a radical solution.

Briers wanted a tool that could automatically calculate the most efficient way his factory could produce a job from only the most basic information a client would provide. Before putting in Brightblue, he had looked for a full MIS, but found every system “clunky or clumsy”.

Brightblue runs as a service. Customers pay a flat monthly fee based on the amount of equipment they have, and the number of invoices they generate each month. All the software is hosted by Brightblue, which maintains and upgrades the system as required.

Briers says Avalon’s monthly fee is about £1,000. “It’s a fixed cost, there are no nasty surprises like having to shell out £2,500 for a server going down or £5,000 for a software upgrade,” he says.

“I love it, it’s my estimator, and if I employed someone it would be a monthly salary – an estimator would cost £22,000 a year.”

That saving in staff costs is important: Avalon runs a tight ship. Since the end of 2003 the business has gone from £1.1m to £1.7m in sales without adding any front-end staff. In fact, headcount has reduced by two.

Automation is inevitable
Briers believes that automation in the sales and administration sides of the business is inevitable. The firm has minimal staffing in pre-press, on the press and in post-press, and runs 24/7. Since he got involved the firm has installed a B2 MAN Roland 500 five-colour plus coater, which is more productive than the two machines it replaced, uses 30% less energy and needs just one operator.

“I can’t take any more cost out of production, there’s nowhere else to go. If you’re not looking at systems for the front-end that add services or take out costs, you’re insane,” Briers says. “Brightblue has taken cost out because estimators have left and we haven’t needed to replace them.”

The software is loaded up with a model of Avalon’s kit with all its capabilities and cost rates, and also the specification and prices for any outwork. The system guides anyone doing an estimate to build an accurate product specification and then uses that along with the equipment model to run all the possible production permutations and come up with the most cost-effective way of producing the job.

Briers believes a major strength is the ability to calculate the actual cost as well as the price. Price is based on a mark-up and once an estimate is completed it’s easy to see what the result is of changing the price – say to match a better price the customer has got from elsewhere. This separation of cost from price gives Avalon a powerful tool to determine when to break its price rules to win work and when to walk away.

Sweet spot
“It’s given us the chance to pursue work more vigorously as it’s shown us where our sweet spot is,” Briers says. “It’s also made us more prepared to turn away work that’s not suitable. Seeing the effect of changing the margin on screen is a real eye-opener.”

Another change has been in understanding the cost and price of some jobs. Despite having a good idea of Avalon’s costs, Briers has been surprised by some of the costs and prices thrown up.

“I’ve seen some prices I thought I’d never offer so low, but once I’ve seen the underlying details, I decided to go for. Conversely there are other jobs I’d have done before that I can now choose not to take on because the cost is unsustainable.”

One of the original objectives of the installation was to let customers log on and create their own estimates; some customers have taken up the option, which takes the firm about five minutes to set up. “Some of the marketing and design agencies use it when pitching to get a price for the print element so they don’t have to bother us,” Briers says.

There have been significant benefits to the business since installing the system. Briers says that Brightblue has put “2-3% on our gross margin.” Other benefits have accrued too. “It has helped us look at other areas where we could save costs, such as overs. We’ve saved 100 sheets on every job and that’s helped massively.”

Avalon’s adoption of automated estimating won the firm the E-commerce category in the Printing World/ BPIF Excellence Awards this year, but the bigger reward comes from what the system delivers day in, day out: more management information, the ability to focus on work that suits the firm best, and more profit.

Briers is looking at the next steps for Avalon and is focusing on management automation and e-commerce. A Prism MIS is the next step in management: the system scored highly with Avalon for its data collection and production management, but Briers felt estimating let it down. Now Prism and Brightblue have formed an alliance it’s a natural step for the firm to take in its administration automation.


FACTFILE
Printer Avalon
Size 7 staff
Sales £1.7m
Sector 2 rapid turnaround marketing collateral
Problem Needed fast, simple and accurate estimating system
Solution Brightblue online automated estimating tool

INSPECTION LESSONS

Avoid the ‘best guess’ estimate

1
Without accurate costing and estimating, a print company is lost

2 Template-based systems offer the worst of all worlds, being slow and inaccurate and requiring skilled staff to operate

3 Remember the difference between cost and
price and use it for strategic advantage when chasing work

4 Automation has neared its limits in production, but offers the potential to cut costs and reduce complexity in administration, while providing valuable management information

5 Using a service rather than buying a system or developing it in-house offers an affordable and predictable payment model

6 An accurate automated estimating system can disprove long-held price prejudices and help focus a firm on more profitable work

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