‘I’m really excited about where the market is going’
Monday, August 13, 2018
Danny Clarke, managing director of Howard Hunt Group’s eponymous manufacturing business and Graft print management, is a passionate man.
He’s passionate about the need to attract more bright young things into print, and positively evangelical about the sector’s need to sell itself on value rather than price.
However, he’s a little less forthcoming about his age, despite being the ‘right’ side of 40.
Darryl Danielli How did you get into print?
Danny Clarke My first Saturday job was working in a local gym. My mum actually got me the job, and part of the role was also selling gym memberships. And while I was there I sold a gym membership to the then sales director of MBA Group, owned by Bachar Aintaoui, over in Tottenham. He mentioned that he was looking for a trainee salesperson and what did I think? To be honest, I was still at college and didn’t really have a clear idea of what I wanted to do, but he offered me what was then really good money, so I got a suit and gave it a go.
What where you studying?
Business studies and marketing. I was only a year into the course when I joined MBA. But it was a great experience – absolutely loved it and I’m still very good friends with Bachar, he’s one of the industry’s great characters. And Mark [Halford], who gave me the job was great too; he really invested his time in me. That was one of the things that makes me conscious of when apprentices come into our business now, we have to really invest the time in them – it’s really important. In my three years at MBA I probably learned as much as at any time in my life.
When did you join MBA then?
1998. It was a really exciting time.
And did you learn all parts of the business?
I did. I very much gravitated towards sales, because that’s what Mark bought me in for. But they had the corporate side of things, direct mail, and then the transactional side – so it was a great grounding. I was there for just over three years and by my second year I had started to land some quite good contracts and I started to make a bit of a name for myself.
So how come you left?
I was approached by K2 [in Manchester], which was setting up a London office. I was young and I knew best; I wanted to work in London, and it was more money. I had some really great experiences there because they were really at the cutting edge of direct mail then. People talk about one-to-one marketing now, but firms like K2 were doing that a long time ago. Yes, it’s progressed, but it’s not as new as some people think. I wasn’t at K2 for very long though, because I was offered a management role at Vertis, which was owned by the Big Flower Group.
You must have still been quite young though?
I was, but I had always hit my numbers. I also used to be quite creative about my age [laughs]. Because I was conscious that I was too young to be doing what I was doing then. Vertis was a wonderful business though, in terms of working for a corporate, the people within the business, the culture they created, they were all life-long print people and were a fount of knowledge. I still think now that a lot of the best people, the people in senior management roles around the country, have a Vertis background.
It definitely seems to be one of those companies where you can almost trace the family tree of a sector?
I think so. I learned a huge amount there and it was really sad that the Americans decided to pull out. There were some really good parts – but it was very clear that we were a very small fish in their very big pond. One of the US executives described us as a ‘rounding error’, but bearing in mind we were a £120m business that’s quite a big rounding error.
How was it you joined Howard Hunt?
Luke [Pigott, now chief executive of Howard Hunt Group] had been making approaches for a while for me to run the sales team. I think I had been recommended by a customer. But I was really happy at Vertis, but then Big Flower decided to put it up for sale and I become involved in a restructuring for the first time. I was quite young and I found being involved in decisions about who should stay and who should go quite difficult. I stayed right until the end though, but joined Howard Hunt as sales director in 2006.
So that was around the time Mark Scanlon bought the Vertis business?
As Mark got in, I got out. He’s a great businessman and has done a fantastic job at Wyndeham/Walstead, but it was obvious that Vertis was going to be packaged up into parts and sold.
I guess after that experience though, joining a family-run business must have been a welcome change.
It was a built of a culture shock, I’d worked at family businesses before, but it probably had less structure in it than I was used to.
Was it much more of a manufacturing organisation in those days too?
100%. When I joined, I think we had just started Celerity, which is our data and software business. Which is doing fantastically now, but was still in its infancy then. The core of the revenue was still manufacturing and it had been on a really aggressive growth spurt, and invested heavily in equipment. It was very entrepreneurial, but the business was run, like a lot of businesses back then, day-to-day. I liked it because it had a very flat management structure to the chairman [Nod Pigott], who sat in an open-plan office, and Luke, who was managing director then...
Is Nod still involved?
He still comes in on a regular basis. Obviously he doesn’t have an active role, he’s 74 now. You talk about characters in the industry, he’s a massive one and he still shapes the culture and is a massive asset to the business. When I joined, though, it was really exciting, but it was little bit of a case of ‘where’s the structure? Where are we going?’ Our strategy was simply to keep growing, which I loved, but I wanted us to look at new markets and start thinking about the future.
Was the business essentially growing because the market was growing? Was it riding the wave?
I suppose that’s fair. But the business was still very bold. Nod spent a lot of money – but it’s probably fair to say that the strategy was ‘the market’s growing, let’s grow with it and keep buying equipment’.
Not a bad strategy to be fair, if the timing’s right?
Spot on. But I think one of the best things we said as a business was that while we wanted to keep growing the manufacturing side, the business should be 50% manufacturing and 50% services. We set that strategy about 10 years ago and if you look, we’re not a million miles away from that now. Group revenues are £75m heading towards £80m and £40m of that is from manufacturing, with the rest from our digital agency, our data agency and print management. That’s a really nice balance and if you look at where the industry is going, the businesses that are evolving and doing well – the Paragons, the GIs – they all have those multiple service offerings. At the core has to be manufacturing, we’re passionate about that, but around that has to be complemented by creative, data, digital and outsourcing.
And also I guess that’s where the margin is – but does having the manufacturing also benefit the services side of the business?
Absolutely. I always describe it as a Trojan Horse. You build a relationship, the trust, and the understanding of the client through the print business and you then add the value services, which is where the margins are. But you wouldn’t necessarily get those relationships with a CMO as just a small digital agency or data and software business, but you can being a large print manufacturer.
And you achieved that in the end?
Absolutely. One of the things we probably regret though, and it’s something we’re trying to do more of now, is look at acquisitions.
I was going to ask about that, if you look at Paragon and Go Inspire (GI), there’s been a lot of M&A in the market, is that not something you looked at?
We’re really interested, but because we’re a very sales and marketing oriented organisation we’ve always backed ourselves to grow organically before. But as the market has got smaller through consolidation, we’ve probably not been aggressive enough in the past couple of years. ORM, our digital agency, is the only business we haven’t started ourselves – it was small company that we bought just over six years ago. But we’ve grown it from less than £2m revenue to more than £10m. We’re looking at a couple of acquisitions right now though.
Can you say what markets you might be looking at?
One’s in manufacturing and the other in creative services. Our next target is to get beyond £100m turnover. We’re a very young board, with the exception of Nod, and we want to be in the market for a very long time – so, we’re not looking to cash our chips in. For us the excitement is where we can take the business.
And I suppose just a few years ago you were one of the biggest players in the market, but now you’ve got Paragon growing at rate of knots, Go Inspire leapfrogging £80m?
It’s interesting, isn’t it. There have definitely been some acquisitions that have passed our door that we maybe should have looked at. But I do think there are still some very exciting opportunities. I’ve been to a lot of events recently and I know the market has been a bit downbeat for the past six or seven months, paper price rises, GDPR – but I’m really excited about where the market is going. I think through the consolidation in the market and what’s going to happen when the new PECR [Privacy and Electronic Communications Regulations] rules come into force next year, I think there’s a real opportunity for print, direct mail, unaddressed mail and all those things. But once a market takes a dip it takes a while to get through that, so I don’t think the industry will see the benefit until 2019.
I guess the current challenges make now a good time to buy a business.
100% and I would be disappointed if we didn’t pull off an acquisition in the next six months. We got quite far with a few, but when we got deep into the due diligence it was clear that they didn’t do quite what it said on the tin. Equally, we’re not as experienced as the likes of Paragon, so we’re learning on the tools a little bit and we’re not going to rush into anything.
In terms of structure the of the business as at stands though, there are four divisions...
We’ve got Howard Hunt, which is the manufacturing business and recently invested heavily in digital, because we really believe in that side of the market. We were actually the first people to go into that with [Kodak] Prosper, but at the time it didn’t work for us. We were probably not ready for it, our clients weren’t ready for it and Kodak was in Chapter 11 at the time – so they probably weren’t really ready for it either then.
I was going to ask you about that. There’s a perception that in the direct mail market you’re quite late to high-speed digital, but actually you were one of the first in the UK?
We were the first and the last I suppose. It was a big internal debate for a long time. When we installed Prosper seven years ago, we were like a beta test for it. Back then I didn’t really think our clients were ready for it. The counter was that we would be the first, and we were getting a fantastic deal from Kodak – so I thought, you know what, let’s go for it. But it was a beta machine, so Kodak and us were learning on the tools. In the end, we just couldn’t get that critical mass to justify the further investment. So, we took the decision to pull out and I suppose it was a little bit of once bitten, twice shy.
And I suppose the it was not a great message to clients either then?
You mean the PR around ‘why didn’t they make it work’? It was a bit of a stain on our copybook, I suppose. So, we took a step back from digital, just as everyone else in the market started looking at it – but even then it took a lot of people a long time to build the critical mass needed to make it work.
So, what changed for you?
In the past 18-months we’ve researched the market probably deeper than anyone, and decided to take the plunge with HP. And now we know we’ve got the work, so it’s not a case of having to go out and find the work. In fact, we’re already looking at a second stage investment.
And in terms of the other businesses?
I’ve already mentioned our digital agency, ORM, which has 90 people.
A pretty big digital agency now...
We’re really proud of what we’ve done with that. And then there’s Celerity, our data and software business which resells a lot of software for the likes of Adobe and Salesforce, and the consultancy around those – but it was really founded on building databases. As well as here it has offices in Boston [US] and Madrid. Celerity founded the Nectar [loyalty scheme] database, that was our first big customer. We were producing all the Nectar work at Howard Hunt and they approached us and said that they needed to build a database, and for the first three or four years that was our founding customer and it really put Celerity on the map.
That must have been quite a scary project.
Huge, from a manufacturing perspective too – it was 60 or 70 million packs, a lot of volume and no fail. But they were good times and the people in the business really pulled together. We had that account for well over 10 years. If you look across Celerity and ORM we have more than 160 people and revenues of more than £22m – great for profits, great for cash generation and also progression.
How do you mean?
Sometimes when you try and attract the best young people into the print trade, they might ask ‘but is it going to last me a 30-40-year career’. We know it will, but we can also talk to them about other parts of the business they can progress into. It’s a really attractive sell. I believe as an industry we need to work at bringing young people in. And our customers are getting younger, but the print industry isn’t and that’s a big concern. Yes, we need the skillset and knowledge that comes with experience, but we also need to attract the brightest and best from the next generation.
That was set up as a little print management business, really a lead supplier model, because we were being asked to by customers. We were producing part of their print requirements, but they started to ask if we could do the rest. So, we decided to do it properly, do it how the best print managers do it: make sure we have the right software, embed people onsite and have a high-quality supply chain. We started that business six years ago and revenues will probably be just over £13m this year.
Not so little now. And a fair chunk of that work is produced in-house?
Not as much as you would think. Maybe 20%. Because a lot just doesn’t suit our production profile.
Is that challenging though, offering print management when some of your clients are print managers?
Not really, because we make sure we don’t compete directly. We all know that 50%-55% of DM and print work is controlled by print management, but the third- and fourth-generation print management contracts are very difficult to generate savings on. We’re still a big supplier to print managers, and we’re very happy about that, but if you look at where their focus is now it’s on global deals, America, Europe, Asia. So, if you look at the UK, where print management is very mature, the deal sizes are getting smaller and that plays in to the hands of the likes of us, the Paragons, the Linneys, the GIs and the Delta Groups and the lead supplier model. Our sorts of businesses are being seen as a much better fit for £2m-£4m contract than say a huge print management group.
But you still need to be big enough to offer security?
Has that been one of the drivers of consolidation?
I think it has. But another is that it’s a really tough sell if you don’t offer a full breadth of services, unless you’re offering something really niche or bespoke. I think that’s what gets the engagement with clients. The number of times that we’ve sold a digital or data offering and ended up winning the print instead, or the other way round, is brilliant. It means that we can always win something. If you’re just going in with one service and it’s a no, there’s nowhere else to go after that. Whereas we have a number of angles, to be fair a lot [of our peers] have too. I also think that’s a USP against those print managers that don’t innovate or add value.
Do you think having multiple strings to your bow is key?
Its key on so many levels. If you look at, say Simon Moore at Eclipse, there’s a reason he sold to GI. I’m sure it’s not just because he got a fantastic price and it was the right time, but it was probably because, essentially, he was just offering printing. He had one of the best print businesses in the country, but he could see that the clients were asking for more services and he, and I’m sure GI too, could see that you need to be able to do it all. I’m not saying that clients will always buy it all, but they like the story and it gets you round the table.
Do you have a group sales approach then?
We do, but the biggest challenge is educating people within the business. But we have a team of people on the marketing and new business side that are very focused on the group approach. We’re also seeing that once you get a critical mass you find that people start coming to you. There are a lot of consultants out there now also questioning if print management is right for their clients, and pointing them towards the lead supplier model. I truly believe that print management does a very good job and has a place, but it’s not a case of one size fits all.
And I suppose all you’re doing is aping what the print managers do: offer a full range of BPO services.
And that’s where the money is for them. It makes total sense to for them to focus on that space. How are they really going to drive margin in £2m-£3m, third-generation print management contract – they might want it from a turnover perspective, but they’re not going to make any money from it. They’re much better off managing Google or HSBC, or whoever, globally.
Is anyone making money in print anymore then?
I think things have been tough for a lot of people for a while, but the positive things is that it means we’re all looking at margin much more closely than they used to. The sector is working really hard for even smaller margins. Print has always been hard, but there needs to be a level were its sustainable and people can invest in technology. I think the industry has reached that bottom point, and it’s an upward trajectory now. We’re as lean and efficient as we can be. Our [the industry’s] people get it and we all know where the market rates are, so I do think that at the end of the day the price point can only go up. I’m not some evangelist that thinks we’re going to get double-digit price increases, but people need to start talking about the value of print, the value of direct mail and what it actually brings to the client organisations.
So, what’s stopped the industry from pushing through increases?
I think as an industry we’re always reluctant to have those conversations, because we’ve been price conscious for so long. But Google puts its prices up every year, Facebook puts its prices up every year. People find the budget for that.
So, it’s about moving the conversation from cost to value?
It’s the way the industry has to go. I think a lot of people are trying to have those conversations and I think between us, we can drive it now because there’s enough of us that understand it’s a value conversation. I think we’re all on the same side now too. The industry goes through cycles. Printers used to make lots of money, then it was the agencies, then it was the print managers – now none of us are making enough money anymore. So, we all have to drive that value proposition, it’s in all of our interests if we want to move forward.
Does there have be a righting of capacity though for that to happen?
I believe the market still needs further consolidation, whether that’s companies going out of business or M&A. Either way capacity needs to come out, but we all know that a company can take a long time to fail and all the while it’s dragging the price point down. So, even if capacity does right itself we have to be careful not to commoditise our product even further. Every business strives to be better, faster, cheaper – but we have to find a sustainable price point. I believe we can do that if we talk about and prove the value.
With all the analytics and software in the market, we can prove it. We can say ‘this is the value I’m offering and this is the price I’m charging’ and as long as we have that conversation at the right level it’s not a difficult one to have – provided you have the proof.
Do you have to be prepared to back up the talk with action and walk away if the deal’s not right?
I think there’s a lot more of that going on now. And, to be honest, once you reach the bottom of a viable price point it’s much easier to walk away. And I’m sure our rivals will tell you the same thing, the bottom price is the bottom price. And if a client doesn’t understand that then you have to ask if they’re the right client.
Also, if a deal is won purely on price it’s only going to go one way?
Very much so. And I think clients also want to work with a smaller group of suppliers as, like all of us, they’re under pressure and have smaller teams. So, working with a smaller group of trusted suppliers makes sense. It also means that, if you’re one of those trusted suppliers, you have more chance to add value. I think that’s why the lead supplier model works well for clients too, because we’re all much better at servicing our customers now. If you roll back 15 years, we were all, maybe, too focused on what was right for us as printers, not necessarily what was right for the client. But one of the positives of a market with overcapacity is that it means we have to offer service, over deliver and really understand what customers need.
What are the key things you’ve learned during your career?
It’s a small market, so treat people how you would like to be treated – my parents instilled that in me. Relationships are key. Always look to innovate, and look outside of the industry for inspiration and, the big one, know your customers inside out.
And the biggest challenge?
Losing our biggest client, it was about 15% of sales. They wanted a price point that just wasn’t sustainable.
Ouch, when was that?
I know. Around 2014. It was a £6m-£7m customer. It was moment of truth, we had to decide if we needed to take capacity out, because you can’t replace that much work overnight, or back ourselves that we would replace it over time. I told the board that if they gave me time, we would replace that business. It was my most stressful time because I ‘owned’ that relationship. I was very confident that we would retain the deal. I was wrong. It was quite scary, but I was really proud that my team went out and replaced that work – it took some time but we did it, and it actually made us much stronger.
It must have been especially tough for you personally though, as you mentioned you’ve always prided yourself on delivering the numbers.
I took it really personally. I believe in taking responsibility, it was on me – I owned it. It was stressful, but a great learning curve.
And I guess it was the making of you because you stepped up from sales director to joint MD after that?
I suppose it did. I’ve always said to people in the business take ownership and don’t be afraid of mistakes, just make sure you learn from them. And I certainly learned from that experience.
Final question: in terms of being the MD of a family business though, how does it work, as you’re never going to be part of the family?
Any family business is going to have challenging dynamics, but you navigate that and it makes for some interesting board meetings. But both Nod and Luke are very good at listening to their people – and that’s key. Everyone has a voice, some will always be louder than others, but everyone has one. And that drives a collective approach to making decisions, so I suppose we’re all part of the family in those instances.
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