I was driving to Atlantic City last Friday with a buddy that owns a technology company and he asked me that question. This guy is no dummy: Wharton MBA, has owned his technology company for 25+ years, so he has had to reinvent himself numerous times, owns 50+ rental houses and an insurance brokerage he funded and serves as chairman. The last person to ask me that question was a highly respected attorney who wrote the textbook for his practice area used in law schools. Do people still use copiers?
It’s not difficult to see why people may ask that question. The use of paper is changing dramatically. About six weeks back another friend, a realtor, had a client that was going to put in an offer for a house. That realtor told me that she loved DocuSign and I asked her why. She said it saved her hours of time to get her transaction closed. In the “old days,” two months back, she would have had to prepare all of the paperwork, print out two copies and then drive to her client’s location to have them sign the documents. Once they were signed she needed to drive to the realtor representing the seller and drop the paperwork off. Presumably, that realtor took the paperwork to her client to have signed, had them retain a copy, then went back to her office and made a copy of the other original for her file before driving that original back to my realtor friend, who made a copy for herself then drove the original to her client.
My friend went on to say that with DocuSign she prepared the paperwork electronically and e-mailed it to her client with an authorization to sign the contract using the DocuSign application. After her client signed they e-mailed the agreement back to my realtor friend and she then e-mailed it to the other realtor with an authorization for her client to sign using DocuSign. Once the buyers authorized the agreement they had their own copy, which they didn’t need to print, and could e-mail “an original” back to their realtor, who could download and save a copy before e-mailing it to my realtor friend, who could download and save a copy before e-mailing it to her client. Not a single mile driven, not a single page printed when two months back it would have been 100+ pages and dozens of miles of driving.
Nobody in the transaction gave a second of thought to not using paper, yet paper was eliminated. Convenience is what drove the change in behavior and the lack of paper use was an outcome of the behavioral change. As I think about it the transaction was made totally green because not only did they eliminate paper, but they also eliminated the use of gasoline and the emissions from the car. But again, “green” wasn’t the goal just an unintended benefit of the change.
My answer to the question “Do people still use copiers” is a resounding “Yes,” but that yes is qualified with less and less and I believe that trend will accelerate.
About three years back, I worked with a start-up MPS provider in San Francisco. Having helped scores of companies launch true MPS practices—those focused to major accounts—I thought I was pretty good at selecting the target market based on employee count and industry vertical. San Francisco proved some of my past experience didn’t pertain. This MPS provider would call on new technology companies, companies in business less than five years but with 250+ employees and they would have one copier and five printers. That’s a 40:1 ratio of employee to device in a knowledge worker environment, meaning every employee had a computer, and most of the devices weren’t even copiers. Some of the companies only had printers. This wasn’t one or two companies, but rather almost every new technology company they called on. It was amazing to me, but it also showed me what the future could look like; Companies that don’t develop processes around paper don’t need output devices.
I’m not trying to yell “fire” in a crowded theatre because most legacy companies’ processes are paper based and people are slow to change. You want a perfect example of that? How many reading this article—in the “document management business”—are still paper based? I have worked with dozens of “copier companies” where the sales professional doesn’t have access to the customer’s present documents without going to a filing cabinet despite the fact that the company sells DocuWare or some other document management software. They sell it, but haven’t implemented it internally in all of their processes.
Tech companies are clearly leading that change both internally and through the products they sell. Highly regulated industries like healthcare and banking are making the transition as well. So what should the traditional copier company do at this point? I believe there are four areas of focus.
- Get your G&A expenses to below 10%
- Focus on gaining market share in the traditional core business of print
- Hire/train your sales professionals to a new model
- Help companies eliminate paper and sell them the software solutions and consulting services that help them reduce paper usage
Some will say “How about service returns”? I didn’t mention service because the industry seems to have that dialed in. I don’t encounter many copier companies that don’t have service margins in the 47% and up range, with many in the 55% range. The only thing I’d look at with service is how much of your margin is coming from contracts where the customer isn’t hitting their minimums. I think every service leader and business owner should know this figure cold, and it should become part of your company dashboard. I say that because I don’t see it continuing. I can’t imagine that customers won’t start demanding more flexible contracts as they come to realize their paper usage is dropping. Forewarned is forearmed so plan for that day and make certain your service operations are performing without that revenue.
We are in a high profit business, but we, unfortunately, have high expenses to go along with those high profits. With sales expenses hovering in the 30% of equipment range and G&A in the 17% of total sales range they become unsustainable as the industry continues to mature. Work to automate processes and get your G&A to sub 10%.
For all of the changes going on with paper the print business is still highly profitable and does produce a lot of cash, when run correctly. In the Boston Consulting Group chart the imaging business would be in the lower left, cash cow. That doesn’t mean you cannot grow the business; You can. But you need to grow by taking market share from your competitors. As with all companies trudging through maturity, consolidation is one approach to gaining market share and I strongly encourage those companies with the business model in place and that generate enough cash to continue to buy competitors and add to your print devices in the field. Each device produces predictable monthly revenue and that is highly desirable.
Driving your expenses down will provide you with a competitive advantage to take customers from your competitors. Each device you capture will produce that predictable annuity stream for you so gaining those customers has to be a focus for your sales team. Unfortunately, most companies in the imaging space are not good at managing their sales team. You want to verify if you fit this model? Just answer a few simple questions:
- Do you have a few highly tenured sales professionals that produce the majority of your equipment revenue and profits?
- Do you have difficulty in getting new sales hires to stay? Do you have one highly tenured group and then a group with less than one year?
- Can you look out a month or two and predict with some degree of certainty what your equipment revenue will be a month or two out?
If you answered yes to the first two and no to question 3 you have a really poor sales process in place. If you answered no to the first two and yes to question 3 you have a really good sales processes in place. For those that are in, or close to, the former I’ll detail out how to develop a professional and productive sales organization in part two of this article in next week’s ENX/The Week in Imaging.