It’s been less than 20 years since Frank Cucco started Impact Networking out of his home basement in the sleepy suburbs of Illinois with founding partners Dan Meyers and Nathan Robinson, armed with an employee staff of four. Even then, Cucco had a vision of becoming a $30 million office technology dealership, with designs on someday reaching the $100 million mark. His detractors snickered.
Well, that “someday” just so happens to be today. That $100 million plateau has been accomplished, and Cucco now has his sights set on a level that has proven to be elusive in this channel: $500 million. Laugh if you wish, but there’s no denying that Cucco has shown to be a man of his word.
The Lake Forest, IL-based dealer, which now goes by Impact, boasts 450 employees in 15 locations across three states. Cucco’s latest invasion is the state of California, where Impact set up shop last fall backed by the acquisition of Lance Allen Document Solutions. Earlier in 2017, Impact acquired its second-largest competitor in the Chicago market, Illinois Paper & Copier, which added Ricoh to an existing product line that includes Konica Minolta, KYOCERA and Lexmark. The dealer now addresses the Chicago, Milwaukee, Indianapolis, Los Angeles and Madison, WI, markets.
An analog copier provider at the onset, Impact has found its sweet spot to be solutions selling to its roster of 20,000 clients, adding software, MPS, managed IT, design and marketing to its base of hardware offerings. We sat down with Cucco, Impact’s CEO, to gain insight into the organization’s meteoric rise, along with his plans to expand the company’s geographic footprint while maintaining a corporate culture that speaks to the forward-thinking needs of its client base.
How is business this year?
Cucco: It’s been very good, we expect to do in excess of $100 million. Traditionally, we’ve been growing at a rate of 26 percent per year. That number gets harder to attain as we get bigger, so we’re on pace to grow 18 percent this year. What’s enabled that growth is transitioning into sophisticated solution deals with software and managed IT, using a monthly recurring revenue model. Most of our deals are contracted for 60 months. Once we get into those accounts, we cross-sell other products. We’ve also done two acquisitions this year, Illinois Paper—a $28 million company—and a small firm in Los Angeles, Lance Allen Document Solutions. We’re going to continue to use a model of organic growth targeting our 20,000 current accounts, broadening the products we offer them and will also use acquisitions to grow over the next five years.
What does Impact Networking pride itself on?
Cucco: It is definitely our corporate culture; everything’s driven by the 450 employees. The company name means nothing and the products are insignificant compared to having a culture of employees that are excited to do whatever is necessary to grow the company. It’s about having the correct culture in the company and maintaining it as we get bigger, which is not easy when you have multiple locations.
What were the factors that led you to target Illinois Paper & Copier?
Cucco: They were our second largest competitor in Chicago. It was a nice volume of revenue and a good book of high-end business. They sold a lot of production equipment, which we were interested in. The strategy was to get rid of a fierce competitor in the Illinois market and get us over the $100 million hump. We chose to do a larger transaction rather than a bunch of smaller ones, which is a lot of work. Illinois Paper has a good list of clientele, but didn’t offer four of the things that we do. They were a hardware and paper company, and we were able to drill into their clients and broaden the products that are presented to them. They also don’t do a lot of recurring revenue, so we’re converting those clients. It’s been very successful.
Integration is always an important aspect in a deal. How has the experience been overall?
Cucco: From a standpoint of systems, the integration was fairly smooth. The companies’ cultures were opposites, however. We faced some substantial hurdles and lost employees. But the employees that are still with us understand Impact better, they’ve been to our quarterly meetings and grasp what we’re trying to accomplish. When you buy your competitor, at first they’re still your competitor. There’s been years of socialization toward hating each other. It’s been an excellent transition, but there were some cultural difficulties early on.
What takeaways did you have from the integration? Any lessons learned?
Cucco: You should not coddle people and give them their way; you need to put your model in and move forward. We tried to maintain comp plans that (Illinois) used because we didn’t want to upset people. We did a lot of workarounds to try to make them happy and keep them in the mindset of that old company. I think that was a mistake. Going forward, we’ll go with our model.
Tell us about your Los Angeles expansion initiative
Cucco: LADS was a very old-school company, selling copiers and printers, noncontracted work with a break/fix model. Since we opened from a cold start, we wanted to bring on their clientele and try to broaden it out. They had 600 clients, only 250 of which were contracted, but it provided a foothold. We had 125 of our own shipments into L.A., so we wanted to get a stronger base of clients. From a software standpoint, LADS didn’t do anything. Based on the calls that we go on, we’ve learned that market really wants a company that can bring these solutions to the table. They haven’t seen a lot of that out there, which I find surprising. We started Sept. 1 and our office is scheduled to be completed by the end of 2017.
What was the impetus behind going into Los Angeles?
Cucco: L.A. is the second-largest market in the U.S. for the products we sell. The competition is minimal, coming mainly from hardware manufacturers direct. Most of the companies we compete against are smaller dealers that don’t have our offerings, so we thought our model and the size of the market would provide growth opportunities. We feel that, like McDonald’s, we can open anywhere using our model and replicate it. The L.A. market may actually provide a greater opportunity than Chicago and our other two markets. I think we can do it even faster, because we’ve learned a lot during the past 18 years. We make substantial investments in any market we go into, and we’re there to stay.
Are you looking at other markets currently?
Cucco: If it makes business sense from a product standpoint and the ability to write contracted deals…if we can get adequate payback, we’re up for anything. The industry is going that way; there’s huge consolidation and we’re trying to take advantage and get Impact to the next level.
Tell us about the significance of adding Ricoh to your product line
Cucco: It’s a big benefit for both of us. I can take care of all their clients that have Ricoh equipment from a parts and service standpoint, and they get the benefit of our distribution network. We’re moving hardware for (Ricoh), they like what we’re doing, and they’re thinking of expanding us into additional markets. The trick is having multiple kings to be able to support…we’re carrying Konica Minolta, Ricoh and KYOCERA, and we have budgets and quotes with all three. That’s why Impact has to continue to grow, to be able to provide the distribution these manufacturers want.
Did the deals require Impact to add more sales and service personnel?
Cucco: With LADS, we picked up their service staff and also got one of the people who maintained all of their accounts. We have 75-80 technicians going through the Ricoh training. We have 100 sales people on the street in those states. With a more substantial product offering, you can really tailor it to the client. The client understands you’re not just trying to push what you sell. It’s the same with our software offering and the other things we do. We try to offer the best product available at the highest quality.
Is there a product or solution that you are looking to add in the near future?
Cucco: We’re looking to get into a higher level software in the next year or so. Right now we do DocuWare and Kofax. It took us a substantial amount of years to become really efficient and have all the engineers it takes to support them. Now we’re building product on top of that infrastructure. We want to get deals that are worth several million dollars.
What do you look for in your employees? How do you recruit and retain good ones?
Cucco: We have four full-time recruiters who staff everyone in the company. For hardware, we only hire directly out of college. We’ve created partnerships with colleges to support their sales organizations and we host them at our corporate facility in Lake Forest, IL. We donate to those schools and judge their events. We’ve been successful bringing people over from these universities and that’s how we grow our sales force.
The key to tenuring them is we have a tiered comp plan. From an entry-level standpoint, we give them a reasonable salary, $40,000, and provide a car. All the cars are branded Impact and are monitored through GPS. It’s a benefit to the young employees that they don’t have to go ask their parents to sign off on a car. The benefit to Impact is, we know what they’re doing and where they are, and we get the marketing from it. Once we get them to the associate level, we lose very few hardware sales people.
What was your biggest challenge in the past year?
Cucco: The No. 1 thing is to maintain a family-type culture, where everyone has access to myself and the partners. It’s all about being excited and achieving goals as a team. We’re good at getting our message across. The entire company participates in our quarterly meetings, and we’re completely transparent with our financials, goals and strategies—what we’re trying to do and what it’s going to mean for employees.
The L.A. expansion provided opportunities for eight of our people to get promoted to manager. In Chicago, it may have taken them years to be promoted because that office already had key people in place, which limited opportunities. If we didn’t expand into L.A., at some point those talented people wouldn’t want to be here anymore because they would feel they don’t have any upward mobility. This is an example of how to create excitement for the employees and provide opportunities to take on bigger and better things.
Who do you see as your biggest competition, and how do you differentiate your company from them?
Cucco: Our biggest competition is from manufacturers direct or larger dealers. It’s a changing model and the good thing is most of these companies aren’t changing along with it. If you’re going to continue to sell hardware day in and day out, and continue to fight on price with what customers perceive as a commodity, either someone like me is going to end up buying you or you’re going to go out of business. It’s one thing to say you do things, it’s another thing to provide a quality experience and actually do the solutions you’re talking about. Not many companies can deliver on their marketing promises.
We’ve had instances where clients have left Impact because of pricing, but they came back because our competitors couldn’t deliver on what they promised. We’re not going to play the pricing game. We’re going to be the company that sells to mid-sized businesses that want to pay our price for a solution, not to buy a piece of hardware. The manufacturers direct generally third party outsource the solutions, but we have everyone in house to handle it. With the smaller, more established dealers, their leadership is older and they don’t want to risk what they have in trying to create managed IT departments or software-type solutions. You need those investments to create a more futuristic, visionary company.
What are your goals for 2018?
Cucco: Our main goal is to make a substantial push into L.A., get the right people in place and open additional locations there. If we’re going to do managed IT, we’re going to focus on that until we get it rocking and rolling. We did the same with software; we tend to pick out one major initiative and we focus on making it successful. If you don’t have ambitious goals and big dreams, it’s not as exciting to do what you do. I’m always putting everything on the line every day. That’s what excites me. I love to be in the whirlwind of activity and growth.
What is the one task you do for your company that is the most important?
Cucco: It’s all about providing opportunity and growth. That comes from having a vision for the future and where we want to be. Without growth, all else stops. There industry is full of examples where companies have stopped growing and it can be destructive. My main focus is providing opportunities for the employees in an environment where they can be highly productive and successful.
What is your most favorite part of the job?
Cucco: People ask why I haven’t sold or retired, but I’m still excited about coming into work every morning. We have the opportunity to become a substantial company. When I told people we would reach $30 million, they thought I was a joke. When I told them we would be a $100 million firm, they didn’t believe me, but I feel this company can reach $500 million with the right solutions. My goal is to be in that stratosphere, something that’s never been done in the U.S.
What do you like to do for fun?
Cucco: I do a lot of fishing and hunting. That gets me out of the crazy chaos environment for a period of time and allows me to be on my own, doing something in nature. I enjoy traveling and anything related to the outdoors.