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.

Historic Rate Data: A First Look

Some time ago, an intrepid, benign reporter posted documents revealing historic rate data from the west coast. One document showed that in 1995, on PI cases, the rate was $2.81 per page. Also revealed from 1995, $3.60.  In 1998, a document showed $3.55. Almost a decade later, 2005, $3.55 a page. 2006, $3.65 a page. 2018, $3.80. Why is it important for us to learn about and publish historic rate data? Education. Every reporter is probably aware that it is now the tail end of 2019. Though I don’t have a fancy document to show it off, I can tell everyone that there are freelance reporters working for less than those 1995 rates today.

Why is this important? Inflation. Every year, the government prints more money and it enters circulation. Higher supply of money means lower value of every dollar that exists. Buying power decreases. You’ve seen this in action. Maybe your groceries seem a little bit more expensive as the years pass. Maybe a membership fee has increased. Prices can be impacted by all sorts of things. One factor is inflation.

As a matter of fact, if you use the Bureau of Labor Statistics inflation calculator, it shows that that $2.81 PI page in 1995 had the buying power of 2019’s $4.69. What does this mean? Someone making $2.81 a page in 1995 was making the 2019 buying power of $4.69 a page. To have the same buying power and no raise, a 1995 reporter making $2.81 a page needs to be making $4.69 a page in 2019. As someone that was convinced to take my first jobs at $2.80 a page in 2010, I feel there is a great deal of value in investigating rates geographically and over time. If we do not mobilize and keep each other informed, we will continue to churn out students who know no better and accept deals that are largely skewed against them.

I am happy to take and report more historic rate data. If you choose to send me documents, anecdotal or memory-based rate data, or anything helpful in that regard, please take the time to tell me the location, rate, type of job or upcharge, and perhaps input on whether such rates are high, average, or low for your market.