Remaining relevant in an evolving market requires expanding its product and services offerings.
Diversification checklist: managed IT, check; MPS, check; A4, check; inkjet, check; production print, check; wide format, check; document management, check; coffee, water, and ice machines, check; air purification systems, check.
That is how Kelly Office Solutions in Winston-Salem, North Carolina, rolls on the diversification front.
The company may not be one of the biggest dealers in the U.S., but it has a sizable presence in the markets it serves and understands that remaining relevant today requires selling more than traditional A3 MFPs.
Above: Kelly Office Solutions’ management team, Brice, Tim, and Blake Renegar
During a recent Zoom call, The Cannata Report sat down with Tim Renegar (his co-owner, Peter Kelly is semi-retired), and sons Blake, who oversees the managed IT division, and Brice, who supervises the division that sells coffee, water, ice machines, and air purification systems.
Buyer beware, Kelly Office Solutions is not for sale. It is a family business with a solid succession plan.
Tim has been selling copiers for 44 years. He started his career selling for a small family dealership after completing his first year of college. The plan was to fund his wife’s college education, then return to school once she graduated, but success derailed that plan.
“The next thing I knew, we had a house, two new cars, and I was doing better than most of the guys I knew that had graduated, Tim recalled. “I said, ‘Well, I’m doing just fine, I’m sticking with this.’”
Throughout his career, Tim has worked on the independent and direct sides of the channel. After IKON acquired the first dealership where he worked, he joined another independent dealership. He helped the owner grow the business to $51 million with 220 employees before Sharp acquired it in 2008. Tim served as president of Sharp North Carolina for three years, but it wasn’t a good fit for him.
Above: Kelly Office Solutions’ co-owner Tim Renegar has been in the industry for 44 years and counting.
“I’m not a corporate guy and not good at taking directions from people that have never done what I do,” he admitted.
In 2011, he approached Peter Kelly, then solo owner of Kelly Office Solutions, a dealership founded in 1947 as a typewriter company, about buying into his business. Kelly agreed and today has a savvy and enthusiastic partner who now runs the day-to-day operations. In 2010, the company had 16 employees. Today it has more than 70, along with two additional locations in Greensboro and Charlotte, which opened in 2011 and 2016, respectively.
Product and Vendor Mix
The dealership is segmented into three groups. The technology group sells copiers, printers, wide-format machines, document management, and MPS. The second group sells managed IT, and the third, the pure water division, sells water, ice machines, coffee, and a new offering, air purification systems.
Kelly Office Solutions has grown to become the sixth-largest Ricoh dealer in the Southeast. It also sells Konica Minolta and is one of the few dealers in the country authorized to service and sell Canon wide-format machines. A recent addition is Brother’s A4 line, replacing the now-defunct line of OKI A4 machines that Kelly Office Solutions used to sell. The Brother A4s are now the go-to device in Kelly’s MPS program.
The company also sells Epson wide-format machines and will soon be adding Epson’s A3 and A4 inkjets. Tim sees an opportunity for those devices with customers looking for reliable machines with low operating costs and customers with employees who are working remotely.
“Companies want output that’s reliable and good, but it doesn’t have to be the extreme quality in all cases that you get from a toner-based system,” opined Tim.
With A3 clicks trending downwards, Tim has no qualms about replacing those clicks with A4 clicks.
“We would be burying our heads in the sand if we said that we’re going to still sell A3s and everything’s going to be just fine,” he said. “That’s just not the case. A4 is exactly where we need to be.”
Ramping up the A4 business means altering the mindset of long-time copier sales reps used to the higher price tags and commissions associated with A3.
“We want clicks,” said Renegar. “Our reps may go, ‘Well, I don’t make as much on them.’ Look, you’re making something, but you’re not making anything if you don’t get the deal.”
With Canon, Konica Minolta, and Ricoh, Kelly Office Solutions does business with three of the biggest names in production print. Besides Canon wide-format, Kelly also sells Ricoh production. Konica Minolta has been more restrictive about offering smaller dealers like Kelly Office Solutions higher-end production devices. Still, Tim believes production is a must-have for a dealer out to capture more clicks.
“Production print, specialty label printing, wide-format printing, if you’re not paying attention to that, you’re going to run a big risk because those areas are still profitable,” he said. “If you haven’t made that investment as a dealer, you’re probably going to run into some real roadblocks.”
“As we diversify beyond copy and print, managed IT is a natural next step for our business,” said Blake, who has been running that division since its launch six years ago. In the beginning, Collabrance provided the NOC and the help desk as well as overall IT knowledge.
“They did an awesome job getting us off the ground,” said Blake.
The dealership still uses Collabrance on the back end for some accounts as well as a local IT company for help desk services, cloud hosting, and 24/7 onsite support.
Initially, Blake was doing all the selling supported by a single engineer responsible for service and support. Today, Kelly Office Solutions has a team of four in-house engineers as well as Blake, who still sells and manages the team.
“It’s become much more profitable because we’re not paying other folks to do work that we can do,” said Tim.
The IT business has grown substantially since 2018 and even saw an uptick last year as it helped clients set up employees for remote work. Currently, managed IT is responsible for about 9% of the dealership’s total revenues.
“We’ll probably do a little over $1.5 million in revenue by the end of this year,” said Blake.
Blake attributes the division’s growth to moving upstream and working with more profitable and prestigious companies.
Blake and Tim acknowledge the harsh realities of the managed IT business.
“You’re going to lose money for several years before you get things ramped up,” said Blake, who also emphasized the need to provide those accounts with quality back-end support. And that costs money.
“As an owner, you better make sure that if the core business is copiers and printers that it is clicking along at model or better,” added Tim. “You need to be meeting your financial objectives and have some [cash] reserves.”
Something in the Water and the Air
The pure water division has done well overall, even though coffee and water sales took a hit in 2020 when everyone started working from home.
“We started as a simple water sales company, and the further I progressed in it, it sounded natural to start selling ice and coffee because they go hand in hand,” recalled Brice, who joined the company in 2016 after graduating from college.
The ice machines have become one of the pure water division’s top sellers. Those machines don’t require a lot of service, a positive for customers and the dealership.
The latest addition, air purification systems, are ideal for a world ravaged by COVID. Brice expects this product line to resonate with customers. Because the machines are designed to purify certain cubic feet of air, most customers will need multiple units. There is also a recurring revenue piece as the machines’ HEPA filters require changing once a year, and the active cell every 24 months. The plan is for every rep in every division to sell these units.
Even though it has made a couple of acquisitions, it doesn’t have a reputation as an acquirer. Lately, Tim is considering expanding beyond the north-central portion of the state, known as “The Piedmont Triad,” and looking further south.
Above: The demo area in the Winston-Salem headquarters offers an inviting atmosphere for customers to check out the
technology that Kelly Office Solutions sells.
“We’re looking for clicks, so I’m always willing to talk,” said Tim, who is also interested in acquiring IT companies.
Tim is the current president of the Business Technology Association (BTA) and recently agreed to serve a second one-year term, which has only been done eight times in its 95-year history. He said being part of that organization is instrumental for introducing dealers to potential acquisition opportunities.
“They’ll pull you off to the side in one of those meetings and say, ‘I don’t want to sell to one of these big guys. I want to keep my feet in it but don’t want to be in a suit.’ There’s a lot of conversations out there.”
The Renegars are a close family, which is an asset, particularly since they work side by side every day.
“We’ve always enjoyed being around each other and we enjoy working together,” said Tim. “My sons are my best friends. Do we have times where we disagree? Yes.”
It wasn’t difficult convincing Blake or Brice to join the business, and each made an immediate impact. Before coming on board, Kelly Office Solutions did not have managed IT or pure water divisions.
“They built them into what they are today,” said Tim. “They’re selling, they’re managing, and they’re learning the administrative pieces. They’re in every staff meeting, so they know everything about the rest of the company as well. They’re the succession plan.”
“We were given a great opportunity to grow and develop something within the company that had never been done before,” added Blake. “Most folks don’t get that shot, especially this early in your career. That’s what gets us in here every morning and keeps us motivated.”
“We’re very appreciative of the opportunity,” said Brice. “It’s unheard of to graduate college and run a business. I love doing this, and I love working with family. That’s the best part.”
While Blake and Brice are being groomed to take over, Tim has no plans to leave any time soon.
“I enjoy being part of the game. Let’s face it, I’ve been doing this a long time. I figure if Frank Cannata can do it until he’s 115 like he is now, I can certainly keep going for a little longer,” he laughed. “If I stop enjoying it and feel like I can’t contribute, then I’ll stop.”
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