1 in 4 Court Reporting Companies May Be Unprofitable

In my Collective Power of Stenographers post, we explored how court reporters collectively out-earn every company in business today. In Aggressive Marketing — Growth or Flailing, we took a look at VIQ Solutions, parent of Net Transcripts, and saw how a transcription company could be making millions in revenue but be unprofitable. This all set me down a path of learning about zombie companies, companies that are not making enough to meet debt obligations, or just barely enough to make interest payments. You can watch Kerry Grinkmeyer describe how that happens here. This isn’t very rare. A Bloomberg analysis of 3,000 publicly-traded companies found one in five were zombies. The main takeaway? Companies can make lots of money and still be taking losses.

I had the pleasure of looking through the Kentley Insights June 2019 Court Reporting and Stenotype Services market research report. I do want to be upfront about it: I have some reservations about the methodologies and some of the reporting. Very much like the Ducker Report, as best I can tell, it’s based off a sampling of respondents from in or around the field. There are parts of the report that are arguably a little incomplete or unclear. For example, being industry experts, we all know the vast majority of the work is done by independent contractors. Independent contractor isn’t a term that appears in the report. Unsurprisingly, when we reach the job pay bands and employment section, it says there isn’t detailed data on the industry and compares us to the telephone call centers industry. So this report is not a must-have for court reporters, but it does have some interesting insights.

Those remarks aside, when we get to the profitability section of the report, we get to see something pretty striking. Based on their data, more than 1 in 4 court reporting companies are not profitable. Average net income as a percent of revenue for the ones that are profitable? About 9.3 percent. For the ones that are not profitable, a loss of about 9.6 percent. And a pretty chart that says as much.

I never want to see the term capital benchmarks again.

On the following page, there’s a forecast for operating expenses and industry revenue. That’s summed up in another pretty chart.

This was pre-pandemic, by the way.

If we look at the trends here, it’s pretty clear that the forecast is for expense growth to eclipse and outpace revenue growth. If that keeps up, the unprofitable companies are going to be looking at bigger losses year after year. Given all the information I have today, I surmise that the smaller court reporting companies are the more profitable ones and the bigger ones are the ones struggling. There are sure to be some outliers, like small court reporting shops that go bankrupt and leave their independent contractors unpaid. But overall, the smaller companies can’t afford to remain unprofitable for very long, so it’s probably the “big dogs” eating that 10 percent loss. If I’m right, that may also mean the push to go digital is the dying breath of companies that can’t figure out any other way forward. In February, I wrote “…we only lose if we do not compete.” That is becoming more evident with time and data. It is a great time for the stenographic reporter to open up shop and be a part of the 74%.

Speaking of data, if everybody that read this blog donated $1.50, we’d have enough money to stay ad-free for the next two decades. To all donors we’ve had to date, thank you so much, put your wallets away. To everybody else, check out this cool song from M.I.A. about taking your money.

Creating a Degree-Granting Institution in New York

Over two years ago I had written New York State to learn about how to legally establish a degree-granting college in New York. At that time there was not a process to do so in New York State. Now an application process has opened up and the application may be found here.

Succinctly, we will benefit from New York Stenographers being aware that they can apply to create degree-granting institutions. While I am a staunch supporter of all forms of stenographic learning, I made my way through a brick and mortar, degree-granting college, and received my Associate’s Degree in Occupational Studies, Court Reporting.

We will benefit from entrepreneurs getting together and reinventing how we teach this thing. We will benefit from schools offering financial aid to students that need it. Though this information is only a small piece of a complicated puzzle of how to open a successful school, I do hope it reaches people who have interest in perhaps designing programs of their own and building a better environment for students. At the very least, we’ll have more colleges reaching out to high school students and informing them this is a career option.

For-profit colleges are a tough market, often dependent on the employees they hire to remain in compliance with federal aid requirements and subject to scrutiny from the public. Perhaps now that New York State has opened up this application process we can see more dedicated professionals work on this issue and secure funding for schools that make programs as great as Plaza or New York School of Court Reporting. Perhaps institutions that are currently operating will take steps to grant degrees if they do not already.

For better or worse, in my experience, parents and students consider degree-granting institutions more legitimate and are more likely to put time and money into career-building if an institution or school provides a degree. Though New York currently has no educational or professional bar to becoming a stenographer, there is definitely a social stigma attached to having no degree that we cannot ignore if we hope to attract more students to this wonderful profession.