Are You Maximizing Your Business Potential?

Greece’s fiscal crisis is a clear indication that the global economy is not totally out of the woods. The “Great Recession” came in with a roar after Lehman Brothers filed for bankruptcy in September, 2008, and by most economists and Government accounts ended in the second half of 2009. Today, the US appears to be experiencing some level of recovery in almost all sectors, albeit against week comparables from last year.

Strategy Development’s copier company clients are experiencing year on year equipment growth and year on year click growth, although against weak comparables from last year in the copier segment. The big question is sustainability—does the short-term growth result in a sustained growth run.

Unfortunately, many companies react based on what is occurring today rather than on sound planning. If business is down—throw some bodies at the problem and when that doesn’t work, and you’ve needlessly drained cash—take an ax to expenses. If business is going well don’t take the time to understand “why” simply enjoy the ride. Yet history demonstrates that without planning and innovation the good times end and the bad times usually get even uglier.

I would suggest that now is not the time to be euphoric about your growth against weak comparables. Enjoy the additional revenue, operating income, and cash flow, but take the time with your senior team to understand where the industry is headed and how your business can properly invest today to be a leader tomorrow. Moreover, don’t assume that “better” is “best,” look for areas to increase revenue, improve gross profit, and reduce general and administrative expense (G&A).

Those of you that have heard me speak on business planning know that I use a concept of “air cover,” where I look for short-term gains in high leverage areas to provide me the investment dollars to grow the business. Service and back office operations were always two of the areas I looked to leverage. Both back office operations and service are quasi production environments. Without deep understanding of these areas of the business it is difficult to maximize gross profit and minimize G&A; yet they usually provide the greatest opportunity to provide the “air cover” you need to invest in growth.

MPS adds complexity to back office operations and service because many aspects of the MPS agreement are foreign to employees of a copier company. E.g., there were 100 devices on the initial assessment, 104 at the first quarterly read—plus three totally different from the initial assessment—then on the second quarterly read there are 103 devices, two reappeared from the initial assessment, and two others are different from the prior reads. And oh yea, the rep added four devices, changed the minimum and CPP rate, and extended the lease out six more months! Service has to deal with five different vendors and 18 different models.

Let’s say service represents 40% of your revenue and with the correct processes you can improve margins by 5%: That added 2% to your bottom line. Let’s assume you are in the 19% - 22% G&A range of most dealers and with the correct back office processes you can reduce that by 2%. You now have 4% operating income improvement to invest in sales. Isn’t that a lot more logical than hoping the new sales employees can outrun their expense? After all that expense coverage from sales never happens but by taking the “air cover model” you now you have money to invest in growth without feeling the severe pinch of cash flow.

Unless you have a team of analyst to run off and research back office operations and service—or you want to go down the trial and error route—you’ll need help. Fortunately for you Mike Woodard, service consultant and Jim Boulden operations consultant from Strategy Development have the experience to help you get your air cover. Every dealer engagement Mike and Jim have entered has had a three to four month payback period with ongoing savings that could be invested in growth. These two guys provide you the air cover!

If you are nervous about entering a consulting engagement enroll your team members in one of the classes they put on through BTA: MPS Operations and Service or Service Management University (SMU). Jim also instructs, along with Ed Carroll and me, BTA’s business planning workshop.

What about MPS? Where do you think you’re going to make those investments! Our MPS clients also experienced year on year click decreases on a comparable basis (same customers) during the recession (keep in perspective we’ve been consulting in MPS since early 2006); but they experience substantial overall growth because they were continuously adding new customers. How is your MPS program going—honestly? I add that qualifier realizing that it is hard to be honest when everybody you speak to says they have an MPS program, and at least in public, tell you it is going “GREAT.”

Strategy Development consults for the most successful MPS providers in the country so we know what great looks like. You want the first indication that “GREAT” may not be that good? When you are quoted a quantity of prints they manage (our start-up MPS clients did that until the figure was bigger than McDonald’s hamburgers sold). Let’s be realistic here: That “3,000,000 print” contract actually means 50,000 prints per month or $750 per month (most companies use 5 years as the multiplier even if the contract is for 3). And “we’re managing 60,000,000 prints” means they manage (maybe) 1,000,000 prints per month or $20,000 per month: Decent revenue for one rep 12 months into the MPS business.

What is good? Hyper growth to simplify the answer but here’s a quick financial look. After 12 months—from dead start—a good MPS specialist will be managing $24,500 in monthly recurring aftermarket revenue. After two years that same single rep will be managing $64,500 in monthly recurring revenue and will have sold $360,000 in equipment the second year; in other words your single rep will be a $1 million plus business by the end of year two. Use these figures to really get successful in the space! If you want to realize these results attend BTA’s Managed Print Services Workshop or download licenses from InfoTrends MPS Sales eLearning workshop through the BTA website (at a discount to members) or directly from InfoTrends.

What about copiers? According to the research firms you will continue to see year on year unit decreases. That doesn’t mean you cannot grow; you will need to increase your market share with better programs or processes than your competitors. Attend our BTA Sales Management program, or if you are a KMBS dealer the KMBS Sales Management Workshop, subsidized by KMBS and instructed by Strategy Development.

Finally, to tie it all together BTA has the Business Planning Workshop.

You probably see a theme here in that Strategy Development and the BTA have a training program for every ailment. Believe me SD didn’t invent the ailments we simply developed training programs to help dealers/resellers overcome the issue they face. We are in the business of helping you achieve success. Primarily, Strategy Development accomplishes that through our consulting engagements but the seven of us cannot possibly think we can touch all 2,500+ dealers with our consulting. BTA is also focused on helping the dealer community achieve success and we choose each other as partners to help dealers thrive.

Things are good now because most companies have very easy comparables from last year but don’t take long-term success for granted. Whether or not you work with Strategy Development, take the time to put together a business plan and take into consideration the environmental issues affecting the industry.