The Nashville-based dealership’s foundation allows them foresight to plan for the future.
Top: RJ Young’s new Nashville headquarters; above: RJ Young’s core executive team and CJ Cannata (from left to right): AJ Baggott, COO; Chip Crunk, president and CEO; Mike Noffsinger, vice president of sales; Hunter McCarty, executive vice president
Imagine being a senior executive at a copier dealership in Nashville, Tennessee. One day, as is your daily routine, you arrive at the office for one of your company’s regularly scheduled meetings led by the CEO. Unbeknownst to you, however, the main item on the agenda is an announcement about a change in management, including the appointment of a new CEO””you!
That’s essentially what happened to John T. Crunk Jr., better known to his employees and colleagues in the imaging industry as Chip. In 1996, upon casually walking into an average RJ Young meeting, Chip and the company’s leadership team was tasked with guiding the dealership moving forward. Despite his regular attendance at these meetings, Chip really had no idea that John T. Crunk Sr., his father, would surprise him and the rest of the company with this news.
Crunk Sr. felt it was the right time to transition the business to his son. After a successful career at the helm of RJ Young, Crunk Sr. believed he had taken the company as far as it could go. More importantly, he was confident Chip could take RJ Young far beyond where it was at the time.
The first order of business was shuffling offices. Chip immediately moved into his father’s office. To establish immediate credibility, Crunk Sr. believed it was important for his son to take over that physical space within the company’s headquarters. He handed over the reins to the company not only in title but also in every professional respect.
Since Chip’s appointment as CEO, the company’s annual revenue has grown from approximately $20 million in 1996 to $125 million through the end of calendar year 2018.
Crunk Sr. made a strategically sound decision. However, in reflecting on the dealerships history, it is evident he and founder Robert J. Young, Sr. had built RJ Young on a foundation of sound decisions.
History Lesson
Young opened the doors to his Ditto duplicating dealership along with four employees in Nashville, Tennessee, in 1955. Within 12 years, the company had become Nashville’s premier photocopier dealer, and over the following years, it would go on to sell office technology from Ricoh, Canon, HP, Muratec, and Océ.
Robert J. Young, Sr. retired in 1986 after selling his controlling interest in the company to Crunk Sr., who had joined the company in 1958. When Crunk Sr. turned the firm’s leadership over to Chip in 1996, he became the company’s Chairman of the Board.
Under Chip’s leadership, RJ Young has grown organically and through acquisitions while expanding its technology and services offerings to ensure the company was continuing to meet its customers’ evolving needs. Today, the company sells Ricoh, Canon, Lexmark, and HP imaging technology.
RJ Young now has 27 locations across the Southeast in eight states with a workforce of more than 600. Its mission is critical and succinct: “To provide office solutions that improve the productivity and efficiency of every business, regardless of industry.”
Regionally, RJ Young is a powerhouse, but right now, there’s no interest in expanding the company’s footprint beyond the Southeast. Chip is prudent in his reasoning, noting that he doesn’t want to go into a market he doesn’t know anything about.
“We’d be crazy to go into the North,” said Chip.
With the company’s strategic mission as its driving mantra, RJ Young plans to further expand its footprint via a shrewd acquisition strategy. Past acquisitions have been small Southeastern dealers that were easily accessible. Chip’s definition of accessible comprises dealerships in locations that he could fly to and from in a day. In his view, it’s critical for him to be actively involved and accessible during the transition and in the aftermath with any company RJ Young acquires.
RJ Young has been actively acquiring other firms since 1996, when Chip took over as CEO. The company’s goal was to become a $100 million dealership, and from Chip’s perspective, the best way to make that happen was expanding across Tennessee by acquiring smaller dealers.
RJ Young’s growth and acquisition strategies are closely intertwined. The company is looking to firmly entrench itself as a dominant player in second-tier markets, locations where manufacturers’ direct branches are not typically found.
Looking ahead to 2019, Chip and his team are actively pursuing more acquisitions. At press time, RJ Young had acquired Digitec in Jackson, Mississippi, with two more deals expected to close in the first quarter of 2019.
While acquisitions have certainly expanded RJ Young’s geographic footprint, they have also aided in its expansion into managed IT. By focusing on process automation and managed IT services, RJ Young is making the necessary changes to remain relevant to customers. Today, managed IT comprises a modest portion of RJ Young’s annual yearly revenues, about 2%, but the vision is to see that segment grow. To bring this plan to life, RJ Young is diversifying its IT offerings, perhaps through adding additional products and services in partnership with a new vendor to create more of a one-stop solution for products and services that align with RJ Young’s existing and target customer base.
The Secret Sauce
According to Chip and his management team, one of the keys to RJ Young’s success is its in-house leasing offering. Chip expressly called out the dealership’s tremendous flexibility with its leasing offering, especially when compared to a situation in which a dealer writes a lease with a bad partner and the dealer ultimately has to pay for it.
By offering an in-house leasing option, something we’re seeing fewer dealers offer, according to our Annual Survey, Chip stated, “You own the entire account. You don’t have to go through a third party to flip a machine, not to mention the cash flow on that. It’s a win-win on every front.”
He also revealed that the machines are worth a lot more to RJ Young when they come off lease because the dealership uses them for parts.
Transition Team
RJ Young is no stranger to transitions, and Chip’s story is an example of a successful one.
Chip understands he won’t be there forever. That’s something that Hunter McCarty, RJ Young’s executive vice president, is keenly aware of as well. Preparing the next generation of leadership requires a proactive approach.
“You need to get young people on board and in senior positions as quickly as you can and nurture them so when you’re ready to exit, or if something [unforeseen] happens, they are good to go,” observed Chip.
This is the preferred method of transition at RJ Young, as opposed to the more autocratic manner in which some dealerships operate where the principals defer this decision until it’s almost too late. Too often, we see dealership owners and leaders discovering that when it’s time to step down, they haven’t properly prepared the business and its people for what’s next.
After our initial visit, we followed-up with McCarty by telephone. He provided additional details on how RJ Young is preparing for the future. One example he provided was about AJ Baggott, who joined the company as its CFO in 2016. After shining in this position and proving he is able to juggle all the financial responsibilities required of a CFO, management expanded his role to include human resources, and most recently, operations. Subsequently, Baggott was promoted to COO.
“Chip’s goal is to move to the next generation of leadership,” explained McCarty. “We’re gradually shifting power to younger people.”
Matt Baker, vice president of service, and Jason Bordwine, director of operations, both in their early 40s, are also in positions to help propel their own careers and RJ Young into the future.
“Our transition style is more about shifting leadership to the younger generation sooner rather than waiting for that day when we step aside,” acknowledged McCarty. “You want to take your best people and put them in front of the best opportunities.”
Words of Wisdom
In this age of acquisitions where venture capital money is reshaping the dealer channel and large dealers are picking off smaller dealers on a weekly basis, Chip has some pointed advice for dealers who aren’t committed to growing.
“If I was $10 million or less, I’d be figuring how to get out of this business,” he opined. “If I was $10 to $30 million, I’d be figuring out how I need to grow or get out of this business. If you’re above $30 million, then you figure out what you want out of the business. Do you want to grow or do you just want to live off it?”
He acknowledged there’s a limit in who can grow. In his estimation, 20% of dealers have the financial resources and interest in doing just that. He added that half of them probably don’t have a second generation in the business capable of taking the dealership to the next level. Others in that first generation may prefer to cash out rather than putting in the work to grow the business.
“Then, there is the next generation leaders that are young and wanting to build it fast””and do it today,” he said. “They will more than likely need an influx of venture capital.”
What’s Next?
In an industry that’s always evolving and always in transition, RJ Young has its fingers on the pulse of what’s next. Some of the opportunities they are evaluating may not always be right for them, or pan out as planned, but this dealership has proven it is consistently open to change and preparing for the future.
In addition to increasing its managed IT business, Chip and his team are also seeing opportunities in production print, a growing area for the company thanks in large part to RJ Young’s access to Ricoh and Canon technology. Meanwhile, transitioning the company from a box mentality to a solutions-focused mentality is a work in progress, according to Chip.
RJ Young is also looking at new ways of contracting with customers. Even though it doesn’t sell Konica Minolta, the company is closely watching Konica Minolta’s One Rate program, which the RJ Young team is seeing as a guaranteed revenue stream for the dealer as well as a budget stream.
Overall, Chip said his goal is to become a $200 million dealership. Based on the current leadership team that is driving the company and its next generation of leaders who are already playing significant roles, we feel confident that’s an achievable goal.
Above: Both Hunter McCarty (pictured here) and Chip Crunk were generous with their time, providing us with an in-depth overview of RJ Young’s history and business strategy. Both executives are class acts and we welcomed their astute industry insights and frank advice for dealers navigating the changes in today’s marketplace.
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