I recently read an ELFA presentation (Equipment Leasing and Finance Association) titled, “As the drum turns….The World of used Copiers.” Can you picture 300 – 400 leasing company representatives in a large room listening to this stimulating presentation? The world of used copiers—where was I for this one!
IDC’s research was referenced throughout the presentation—and along with InfoTrends and Gartner—I consider IDC a reputable research firm. Clearly the point of the presentation was to highlight changes in the used copier space. That aspect of the presentation was eye opening for me simply from the perspective that used color MFDs from the same vintage as mono MFDs actually sell for less on the used market.
The presentation had numerous examples but I’ll simply take one that is representative: A Canon iR5570 with a list price of $17,100 had a “remarketer sale price” of $1,350, or 8% of the original equipment price (OEP) and a Canon iRC5870U, with a list price of $19,100 had a remarketer sale price of $300, 2% of OEP. With the lower lease approval rate driving increased rental of lease end devices I assume the remarketer sale price will continue to decrease, forcing leasing rates higher since residual value is part of the equation to determine lease rate.
Increasing lease rates won’t be any fun for those companies that still rely 100% on the “bigger better faster same price” model of moving your year on year aftermarket price increases over to the funding side of the lease to sell a new box and take care of the buyout, reducing your aftermarket revenue and generating a commission for a rep. But for those companies that still work on this zero sum game the good news is that according to IDC, as reported by the ELFA in this presentation, average unit sales prices (AUSP) have dropped precipitously. That drop will allow you to continue to fund the buyout of the swap and maintain the “bigger better faster new price” suicide march [not the point of this post but think about it….you are selling a MFD at a lower price than you did four years earlier, reducing the aftermarket rate to below what the current placement started at four years earlier (and far below the current rate with three years of compounded increases) and probably paying your sales rep the same amount as you did four years ago to place the other unit since it probably has about the same amount of “GP” in the deal….how’s that work financially?).
Just how big is that AUSP decrease? Let’s first talk about mono-connected boxes and use the seven year look that ELFA used in their analysis; this is an absolute seven year decrease and not a compounded annual decrease—in other words, it is the decrease from seven years back until 2009. Segment 2 (43%), segment 3 (30%), segment 4 (24%), segment 5 (27%) and segment 6 (12%). Even scarier was color, using the same methodology, segment 1 (49%), segment 2 (54%), segment 3 (55%), segment 4 (25%) and segment 5 (61%).
Strategy Development has spoken about using environmental information in your planning and in previous posts on this blog we have already highlighted some of the year on year unit placement decreases. Now you have information on unit placement decreases, there is indication that lease rates will rise (interest rates can’t stay at zero forever and used equipment pricing isn’t holding), and AUSP is decreasing. Juxtapose those issues against more and more non-contract devices moving to contracts (MPS) and your ability to reduce your general and administrative expense and increase your service margins and you have some great environmental issues on which to build a solid business plan.
We will be running our BTA Business Planning Workshop in October in the Miami area—hope to see you there so that you can seize the future!
Showing posts with label Strategic Plan. Show all posts
Showing posts with label Strategic Plan. Show all posts
Saturday, May 29, 2010
Tuesday, May 18, 2010
Should You Acquire Companies To Grow
There is a common belief that acquisitions are the sure fire method to growth: Are they? You first need to analyze logical reasons to acquire another company:
To enter a new geography: You want to expand geographically and your analysis demonstrates that acquiring a company will provide a faster return on investment (ROI) than a start-up operation
To gain new customers for your offering: You are in the copier business and believe that if you buy a company in an adjacent space you will be able to continue to sell them the products or services of the company you acquire as well as gain their copier business.
To expand your portfolio: This is the opposite of the gaining new customers for your offering in that you buy a company with the expectation that you will be able to sell their products or services into your accounts.
Selling into the acquired customer base and selling the acquired technology into your customer base are the most common and logical reasons to buy companies. You see this all of the time in the tech world, with examples including HP’s acquisition of EDS, Google’s acquisition of Double Click and AdMob, and Oracle’s dozens and Cisco’s hundreds of acquisitions.
The most common acquisition in the copier space today is undertaken with the goal of acquiring to gain base. At one point, when unit sales were increasing year over year that made a lot of sense— but does it today? If your only goal is to replace the MIF—and you aren’t a manufacturer so you aren’t gaining any economies of scale at the factory—I think it is difficult to justify. You are paying for 1,000 units of MIF to hopefully, and it is a risky assumption today, to sell 1,000 units over the next (four) years.
Price always matters, but in a declining year over year space price is paramount. If you buy a MIF of 1,000 units today you can almost bet it will be 800 in two or three years so make certain you take that into consideration when calculating out the value of the base you are buying. Don’t overpay or your payback period may stretch into a decade, which would be an unacceptable ROI.
If there is a small but competent MPS company in your area they may make for a good acquisition so you can bring their expertise into your copier base, assuming you have the correct type of companies in your base. If you are an MPS company you may consider acquiring a copier company that has the proper mix of customers. For an MPS company acquiring a managed services company for their expertise in the desktop IT space and remote monitoring and resolution is also a consideration.
The bottom line—acquisitions may be a great growth strategy for your company. Like all major business decisions give it careful consideration before jumping in.
To enter a new geography: You want to expand geographically and your analysis demonstrates that acquiring a company will provide a faster return on investment (ROI) than a start-up operation
To gain new customers for your offering: You are in the copier business and believe that if you buy a company in an adjacent space you will be able to continue to sell them the products or services of the company you acquire as well as gain their copier business.
To expand your portfolio: This is the opposite of the gaining new customers for your offering in that you buy a company with the expectation that you will be able to sell their products or services into your accounts.
Selling into the acquired customer base and selling the acquired technology into your customer base are the most common and logical reasons to buy companies. You see this all of the time in the tech world, with examples including HP’s acquisition of EDS, Google’s acquisition of Double Click and AdMob, and Oracle’s dozens and Cisco’s hundreds of acquisitions.
The most common acquisition in the copier space today is undertaken with the goal of acquiring to gain base. At one point, when unit sales were increasing year over year that made a lot of sense— but does it today? If your only goal is to replace the MIF—and you aren’t a manufacturer so you aren’t gaining any economies of scale at the factory—I think it is difficult to justify. You are paying for 1,000 units of MIF to hopefully, and it is a risky assumption today, to sell 1,000 units over the next (four) years.
Price always matters, but in a declining year over year space price is paramount. If you buy a MIF of 1,000 units today you can almost bet it will be 800 in two or three years so make certain you take that into consideration when calculating out the value of the base you are buying. Don’t overpay or your payback period may stretch into a decade, which would be an unacceptable ROI.
If there is a small but competent MPS company in your area they may make for a good acquisition so you can bring their expertise into your copier base, assuming you have the correct type of companies in your base. If you are an MPS company you may consider acquiring a copier company that has the proper mix of customers. For an MPS company acquiring a managed services company for their expertise in the desktop IT space and remote monitoring and resolution is also a consideration.
The bottom line—acquisitions may be a great growth strategy for your company. Like all major business decisions give it careful consideration before jumping in.
Tuesday, December 8, 2009
Where’s the Silver Bullet
I talk to many business owners that are looking for the cure to their ailment—and they would prefer something that cures them quickly. What is the ailment? Lower revenue and operating income. Some want to recreate the good old days of growth and can’t understand why that would be so difficult. Heck, in the 80’s we just worked hard and revenues increased: Why can’t we do that now? Are the new Generation X, Y, or Z kids simply lazy? My experienced reps just can’t seem to get the appointments they were once able to achieve. They’re all spoiled—we need to put them back on draw against commission and make the hungry!
If only it were that easy. Let’s start with the most obvious, although constantly over looked fact that it is not the 80’s anymore. That means that copiers are not a growth technology any longer. It means that the product extensions that allowed us to continually move upstream and replace other products is almost gone (HP, Xerox, and some other players are going full bore after displacing all printing presses with sheet fed and cut sheet high speed “digital presses” as one of the last product extensions left to conquer). Our color devices have brought outsourced work back in house and replaced presses as has our segment six production devices. B2C went main stream and penetration has stalled in the 30% range. Fax machines have gone the way of the typewriter. Copier (and printer) placements are down substantially over the last two years and are projected to continue to decrease, albeit at a slower pace.
The 80’s brought us Bill Gates (and Paul Allen but he is almost forgotten) and Microsoft, Steve Jobs and Apple, and IBM’s invention of the PC. Since then Larry and Sergey founded Google, who can even remember those two guys from Yahoo and Al Gore invented the Internet! Copiers are not “high tech,” or more appropriately, “sexy” devices to sell. Your fraternity or sorority buddies might be envious of your job at Google, Facebook, or Genentech, but selling copiers won’t elicit that same feeling.
It is a great industry with solid profits and recurring revenues, and sales professionals can still make a good living, but we have to face reality and understand that people aren’t standing in line to apply for jobs in our industry. For those of you who weren’t in the business in the 80’s I can recall when a Sunday ad in the paper (Do they still exist?) resulted in a lobby packed with applicants on Monday. The only chance you had to get the job, which was straight commission (draw) was to show up Monday…..with a wagon or van close behind.
What does all this mean? It is tougher to grow in a declining market than in an increasing market and your potential employees, and customers for that matter, have a lot more information available to make a decision. So how do you thrive in this new environment? Get real about putting together a solid business plan and stop wasting your time looking for the silver bullet. Maybe you don’t have the best website on earth, maybe your reps can set more appointments, maybe you do need some basic sales training…..anything is possible. But I’d bet that your rep’s telephone and sales skills aren’t any worse than they were 20 years ago and you grew then.
The aforementioned internet provides job seekers with lots of information. Want to know what salary or commissions to expect for your education and experience? Go to salary.com or one of their competitors. Want to know what a company pays the specific job you are interested in? Go to glassdoor.com or one of the thousands of blog sites available. Sales professionals are fungible—they can take a job with you selling copiers, they can sell medical supplies, pharmaceuticals, software, or ads on Google. The common thread of those last four is that they pay salaries. Now if you are ambitious you will take the opportunity with an “unlimited” variable compensation component over one with fixed bonuses. But will you take the opportunity of unlimited compensation—with no foundation (salary) over one with a solid base? Not if you could get the latter; for those not paying a salary that is known as adverse selection. You only get a pool of candidates that cannot get the jobs that pay a salary. Wonder why your turnover is 100% and your productivity is low?
As for growth, it isn’t in the copier space. Just in case you don’t believe me take a look at unit placements in any InfoTrends, IDC, or Gartner research. Placements, in the 1,300,000 area in 2007, have dropped to 900,000 or so in 2009. What does that mean? If you maintain your market share you will sell 30% fewer units in 2009 than you did in 2007. It is that simple. Add to that lower average unit selling price and your equipment revenue for equal market share is off more than 30%. Those units are never coming back…..they are actually going lower.
The industry has been talking about it for years but if you are not focused on clicks over placements you are chasing a quickly declining revenue stream. The answer—managed print services.
Done correctly MPS is a totally different business than you are in today. It is a solution that is focused to growing your aftermarket—it is not focused on equipment. So whether you sell Canon, Ricoh, Konica Minolta, Sharp, HP or one of the many other brands is irrelevant. You will sell equipment into your MPS agreements—and brands do have value, as any first year marketing student will tell you—but providing a consultative outsourced approach is what companies are buying with MPS.
So take the time to put together a solid business plan that has your company transitioning to clicks over equipment revenue. Transitioning is the key as you don’t want to throw out the baby with the bath water. The number you need to talk about day and night is your recurring revenue stream. With focus you can easily grow that revenue 30% or more year on year. If you want to find the silver bullet for selling more copiers I wish you luck. If you want to continue to lead a growth company that generates significant profits forget the bullet and hunker down with your senior team to put together a plan that gets you growing.
If only it were that easy. Let’s start with the most obvious, although constantly over looked fact that it is not the 80’s anymore. That means that copiers are not a growth technology any longer. It means that the product extensions that allowed us to continually move upstream and replace other products is almost gone (HP, Xerox, and some other players are going full bore after displacing all printing presses with sheet fed and cut sheet high speed “digital presses” as one of the last product extensions left to conquer). Our color devices have brought outsourced work back in house and replaced presses as has our segment six production devices. B2C went main stream and penetration has stalled in the 30% range. Fax machines have gone the way of the typewriter. Copier (and printer) placements are down substantially over the last two years and are projected to continue to decrease, albeit at a slower pace.
The 80’s brought us Bill Gates (and Paul Allen but he is almost forgotten) and Microsoft, Steve Jobs and Apple, and IBM’s invention of the PC. Since then Larry and Sergey founded Google, who can even remember those two guys from Yahoo and Al Gore invented the Internet! Copiers are not “high tech,” or more appropriately, “sexy” devices to sell. Your fraternity or sorority buddies might be envious of your job at Google, Facebook, or Genentech, but selling copiers won’t elicit that same feeling.
It is a great industry with solid profits and recurring revenues, and sales professionals can still make a good living, but we have to face reality and understand that people aren’t standing in line to apply for jobs in our industry. For those of you who weren’t in the business in the 80’s I can recall when a Sunday ad in the paper (Do they still exist?) resulted in a lobby packed with applicants on Monday. The only chance you had to get the job, which was straight commission (draw) was to show up Monday…..with a wagon or van close behind.
What does all this mean? It is tougher to grow in a declining market than in an increasing market and your potential employees, and customers for that matter, have a lot more information available to make a decision. So how do you thrive in this new environment? Get real about putting together a solid business plan and stop wasting your time looking for the silver bullet. Maybe you don’t have the best website on earth, maybe your reps can set more appointments, maybe you do need some basic sales training…..anything is possible. But I’d bet that your rep’s telephone and sales skills aren’t any worse than they were 20 years ago and you grew then.
The aforementioned internet provides job seekers with lots of information. Want to know what salary or commissions to expect for your education and experience? Go to salary.com or one of their competitors. Want to know what a company pays the specific job you are interested in? Go to glassdoor.com or one of the thousands of blog sites available. Sales professionals are fungible—they can take a job with you selling copiers, they can sell medical supplies, pharmaceuticals, software, or ads on Google. The common thread of those last four is that they pay salaries. Now if you are ambitious you will take the opportunity with an “unlimited” variable compensation component over one with fixed bonuses. But will you take the opportunity of unlimited compensation—with no foundation (salary) over one with a solid base? Not if you could get the latter; for those not paying a salary that is known as adverse selection. You only get a pool of candidates that cannot get the jobs that pay a salary. Wonder why your turnover is 100% and your productivity is low?
As for growth, it isn’t in the copier space. Just in case you don’t believe me take a look at unit placements in any InfoTrends, IDC, or Gartner research. Placements, in the 1,300,000 area in 2007, have dropped to 900,000 or so in 2009. What does that mean? If you maintain your market share you will sell 30% fewer units in 2009 than you did in 2007. It is that simple. Add to that lower average unit selling price and your equipment revenue for equal market share is off more than 30%. Those units are never coming back…..they are actually going lower.
The industry has been talking about it for years but if you are not focused on clicks over placements you are chasing a quickly declining revenue stream. The answer—managed print services.
Done correctly MPS is a totally different business than you are in today. It is a solution that is focused to growing your aftermarket—it is not focused on equipment. So whether you sell Canon, Ricoh, Konica Minolta, Sharp, HP or one of the many other brands is irrelevant. You will sell equipment into your MPS agreements—and brands do have value, as any first year marketing student will tell you—but providing a consultative outsourced approach is what companies are buying with MPS.
So take the time to put together a solid business plan that has your company transitioning to clicks over equipment revenue. Transitioning is the key as you don’t want to throw out the baby with the bath water. The number you need to talk about day and night is your recurring revenue stream. With focus you can easily grow that revenue 30% or more year on year. If you want to find the silver bullet for selling more copiers I wish you luck. If you want to continue to lead a growth company that generates significant profits forget the bullet and hunker down with your senior team to put together a plan that gets you growing.
Saturday, September 26, 2009
Global Printer, Copier, MFP Market Sees 20 Percent Decline In First Half Of 2009
Office printing devices drove the overall decline in the global print market, with a 24.5 percent decrease in the first half of the year compared to the first half of 2008.
Some great information for you to use in your FY2010 planning. With units declining how do you increase your market share and find other sources of revenue--like MPS.
http://www.crn.com/hardware/219500374;jsessionid=KFQSF1LOTLXB1QE1GHOSKH4ATMY32JVN?cid=CRNFeed
Sunday, June 21, 2009
Strategy Development & The BTA Launch Business Planning Workshop
Bryn Mawr, PA (June 2009) — Dealers are seeking strategies to grow revenue and profits in the face of year-over-year industry unit placement declines, a shift from A3 to A4 products, a difficult financing environment and new competition for pages from other channels selling print management solutions.
Although there are many training programs that address different aspects of planning or focus on improving results in functional areas, there is no single program that comprehensively brings together all functional areas into a cohesive plan of action — until now. The BTA Business Planning Workshop is a 2.5 day program developed and instructed by the consultants from Strategy Development. Attendees will learn through a combination of instruction, case studies and class discussion how to build and execute a business plan that becomes a roadmap to achieving business goals.
A snapshot of some of the content from this workshop:
· How to use your financial statements to make good business decisions
· Using the Strategy Development Balanced Scorecard to maximize results
· Conducting SWOT analysis and using the data to grow
· Using industry trends to plan for a profitable future
· Launching new initiatives
· Driving productivity: A key to high profits
· Engineering processes to improve workflow and employee satisfaction
· Cash management
“We have been able to help scores of dealers across North America launch print management initiatives, improve their equipment sales effectiveness and improve back office and service operations,” said Tom Callinan, managing principal of Strategy Development. “But short of a consulting engagement with our team, until the launch of the BTA Business Planning Workshop there has been no single program available that allowed the dealer to get a holistic view of growing their business and profits.”
“Our members have benefited greatly from the expertise of the Strategy Development team and we are looking forward to enhancing our training curriculum with this comprehensive workshop,” added Brent Hoskins, BTA executive director. “Business planning is one of the most requested educational areas from our members, so we are happy that we can now provide that education.”
The inaugural BTA Business Planning Workshop will be held October 6-8. For information e-mail Tom Callinan at callinan@strategydevelopment.org or call 610.527.3317.
Strategy Development, a management consulting firm focused to the technology and outsourcing space, specializes in business planning, sales effectiveness, advanced sales training, and operational and service improvement. For more information visit Strategy Development at www.strategydevelopment.org.
The Business Technology Association (BTA) serves office technology dealerships, manufacturers, distributors and service companies. Its members sell and service and/or manufacture service hardware, software and supplies that help businesses be more efficient and save money. Through education, information and guidance, BTA members are the premier source of the technology used by businesses throughout the United States every day.
Although there are many training programs that address different aspects of planning or focus on improving results in functional areas, there is no single program that comprehensively brings together all functional areas into a cohesive plan of action — until now. The BTA Business Planning Workshop is a 2.5 day program developed and instructed by the consultants from Strategy Development. Attendees will learn through a combination of instruction, case studies and class discussion how to build and execute a business plan that becomes a roadmap to achieving business goals.
A snapshot of some of the content from this workshop:
· How to use your financial statements to make good business decisions
· Using the Strategy Development Balanced Scorecard to maximize results
· Conducting SWOT analysis and using the data to grow
· Using industry trends to plan for a profitable future
· Launching new initiatives
· Driving productivity: A key to high profits
· Engineering processes to improve workflow and employee satisfaction
· Cash management
“We have been able to help scores of dealers across North America launch print management initiatives, improve their equipment sales effectiveness and improve back office and service operations,” said Tom Callinan, managing principal of Strategy Development. “But short of a consulting engagement with our team, until the launch of the BTA Business Planning Workshop there has been no single program available that allowed the dealer to get a holistic view of growing their business and profits.”
“Our members have benefited greatly from the expertise of the Strategy Development team and we are looking forward to enhancing our training curriculum with this comprehensive workshop,” added Brent Hoskins, BTA executive director. “Business planning is one of the most requested educational areas from our members, so we are happy that we can now provide that education.”
The inaugural BTA Business Planning Workshop will be held October 6-8. For information e-mail Tom Callinan at callinan@strategydevelopment.org or call 610.527.3317.
Strategy Development, a management consulting firm focused to the technology and outsourcing space, specializes in business planning, sales effectiveness, advanced sales training, and operational and service improvement. For more information visit Strategy Development at www.strategydevelopment.org.
The Business Technology Association (BTA) serves office technology dealerships, manufacturers, distributors and service companies. Its members sell and service and/or manufacture service hardware, software and supplies that help businesses be more efficient and save money. Through education, information and guidance, BTA members are the premier source of the technology used by businesses throughout the United States every day.
Saturday, April 18, 2009
Developing An Effective Print Management Sales Process
Part two of this six part series was recently published in ENX Magazine. You can follow the link to view this article.
http://enxmag.com/2007/new%20site%202007/website/2009_MONTHS/april2009/article_DevelopingEffectivePrintManagement_tcallinan_apr09.htm
If you would like to launch a print management / MPS program at your company please contact the professionals at Strategy Development or attend the BTA Print Management Workshop:
http://www.bta.org/i4a/pages/index.cfm?pageid=2127
http://enxmag.com/2007/new%20site%202007/website/2009_MONTHS/april2009/article_DevelopingEffectivePrintManagement_tcallinan_apr09.htm
If you would like to launch a print management / MPS program at your company please contact the professionals at Strategy Development or attend the BTA Print Management Workshop:
http://www.bta.org/i4a/pages/index.cfm?pageid=2127
Wednesday, April 15, 2009
Service Technology Solutions
A recent industry research report indicates best-in-class service organizations (top 20%) are more than twice as likely as all others to have embraced technology solutions. These leading service organizations, having already placed there bets, are experiencing real savings and operational excellence. Of the remaining best in class service organizations, almost half have indicated they will be investing in service technology solutions within the next 12 months.
So, what are today's most beneficial technology enablers?
So, what are today's most beneficial technology enablers?
- Mobile Field Service - automated dispatch, parts management, real-time data access for technicians (service history, parts inventory), signature capture, sales at the time of service, communications.
- Scheduling and Routing - automated call assignment and routing based on technician location, customer entitlements,training, parts availability, traffic patterns.
- Remote Product Monitoring - Automated service call generation using equipment generated service alerts, supply fulfillment, billing meters.
- Forecasting and Planning - use of advanced F&P technologies that review history, trends, and real time developments to plan staffing (technicians) and inventory (parts/supplies).
- Business Intelligence and Analytics - service performance reporting & benchmarking.
The adoption of the right technology, using a thoughtful strategy, is critical to enabling service organizations achieve success. If you have questions about service technology solutions and how to justify the required investment, please contact me at woodard@strategydevlopment.org
Sunday, March 1, 2009
How Much Will The Copier Industry Change?
Significantly, if you pay attention to the research companies! I recently read a research report that indicated that mono copier based MFD placements had declined from 1.1 million in 2007 to 900,000 in 2008 and will decline another 20% in 2009. This analysis showed mono copier based MFD placements in the low 500,000s by 2012 (in case you missed it that is less than half of the 2007 placements). Think the answer is a shift to color? Not according to this report that showed color placements fairly static, rising from 250,000 in 2007 to 292,000 in 2012, after initially falling in 2008 and 2009. Nice percentage increase but only 40,000 units.
So a research group and their crystal ball are suggesting a “sea change” in the copier industry! Maybe they are wrong; it certainly would not be the first time. Maybe they are only half accurate and the industry will decline from 900,000 mono placements (let’s give them credit for accuracy on an event that already occurred, 2008) to 750,000, and color will remain under 300 thousand units. What will the industry look like when total placements decline from approximately 1.35 million in 2007 to 1 million in 2012? That is a 30% decline in placements. I would keep in mind they are stating that will occur this year, so they would have to be really far off in their predictions.
Let’s throw in the shift to A4 copier based units. Regardless of your desire, over the long term A4 will replace many A3 units at a lower average unit selling price (AUSP). Since we still have the same major copier manufacturers today as we did last year we clearly have a production over capacity issue: There are more factories pumping out more copiers than can be absorbed by end users. Over capacity—as any economist will tell you—leads to lower prices (the old supply and demand theorem). So you have a couple of dynamics suggesting AUSP will continue to decline.
Don’t jump off that ledge just yet! How do you deal with this news? In a word, “PLAN” for it. It wouldn’t surprise me if one or more copier manufacturer merged operations or was acquired by another manufacturer; in this situation operations being defined as technology and channel (dealers). It also wouldn’t surprise me if we had 50% fewer dealers by 2012. Fewer product placements will result in less distribution, either planned or unplanned. This is another fact to discuss with your economist friend.
So PLAN on being one of the thriving survivors!
Put together a strategic business plan that models out the change over the next five years. Launch and perfect a print management program. After all, where do you think some of that decline in copier placements is going? Yes, to printers! Not all of it as printer placements are also declining but there is a shift. And, all of that additional aftermarket revenue coming out of the printer fleet has the potential to more than offset the decline in copier hardware revenue—at a higher profit margin.
Focus on productivity in all departments. Lower equipment AUSP will translate into lower gross profit dollars, even if you maintain your gross profit percentage. Optimize operations so you can operate your back office with high customer service and low cost: Focus to processes and automation. Maximize your return on service. Drive improvements in all areas year over year: Stay focused and maintain a high intensity level.
You don’t want to be one of the “unplanned exits” from the industry and by planning now not only will insure your place in history but you will insure a high profit business. Copiers and printers are not going away, they are just fading slightly. It will remain a great business for those with a plan!
So a research group and their crystal ball are suggesting a “sea change” in the copier industry! Maybe they are wrong; it certainly would not be the first time. Maybe they are only half accurate and the industry will decline from 900,000 mono placements (let’s give them credit for accuracy on an event that already occurred, 2008) to 750,000, and color will remain under 300 thousand units. What will the industry look like when total placements decline from approximately 1.35 million in 2007 to 1 million in 2012? That is a 30% decline in placements. I would keep in mind they are stating that will occur this year, so they would have to be really far off in their predictions.
Let’s throw in the shift to A4 copier based units. Regardless of your desire, over the long term A4 will replace many A3 units at a lower average unit selling price (AUSP). Since we still have the same major copier manufacturers today as we did last year we clearly have a production over capacity issue: There are more factories pumping out more copiers than can be absorbed by end users. Over capacity—as any economist will tell you—leads to lower prices (the old supply and demand theorem). So you have a couple of dynamics suggesting AUSP will continue to decline.
Don’t jump off that ledge just yet! How do you deal with this news? In a word, “PLAN” for it. It wouldn’t surprise me if one or more copier manufacturer merged operations or was acquired by another manufacturer; in this situation operations being defined as technology and channel (dealers). It also wouldn’t surprise me if we had 50% fewer dealers by 2012. Fewer product placements will result in less distribution, either planned or unplanned. This is another fact to discuss with your economist friend.
So PLAN on being one of the thriving survivors!
Put together a strategic business plan that models out the change over the next five years. Launch and perfect a print management program. After all, where do you think some of that decline in copier placements is going? Yes, to printers! Not all of it as printer placements are also declining but there is a shift. And, all of that additional aftermarket revenue coming out of the printer fleet has the potential to more than offset the decline in copier hardware revenue—at a higher profit margin.
Focus on productivity in all departments. Lower equipment AUSP will translate into lower gross profit dollars, even if you maintain your gross profit percentage. Optimize operations so you can operate your back office with high customer service and low cost: Focus to processes and automation. Maximize your return on service. Drive improvements in all areas year over year: Stay focused and maintain a high intensity level.
You don’t want to be one of the “unplanned exits” from the industry and by planning now not only will insure your place in history but you will insure a high profit business. Copiers and printers are not going away, they are just fading slightly. It will remain a great business for those with a plan!
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