Marco’s Steve Gau and Clint Dorgan from zero to $16 million in ten years.
Above: Clint Dorgan seated and Steve Gau standing.
If Steve Gau could turn back the clock, he would have added production print to Marco Inc.’s product offerings a whole lot sooner than 10 years ago.
During the latest leg of our CR-CONNECT 2020 Virtual Dealer Tour, we connected via Zoom with Gau, Marco’s vice president, copier division, and Clint Dorgan, Marco’s production print sales manager, who shared the dealership’s production print journey with The Cannata Report.
It was Dorgan who prodded Gau toward starting a production print division during a meeting some 11 years ago. Marco’s Konica Minolta rep had recommended Gau connect with Dorgan, who was looking for a new opportunity. Dorgan’s impressive résumé in the segment reached back to when he owned a print shop in his native Australia and subsequently moved to the U.S. to open the direct operations for a Swiss company that sold printing hardware to commercial printers. That opportunity led to positions with a dealership where he sold Canon and Konica Minolta production machines, followed by a job with Ricoh direct as its production print specialist.
“I was sitting down with this crazy Australian and he’s proposing how getting into production print would work,” recalled Gau. “He told me his plan. We stood up, shook hands, and I said, ‘We’ve got a deal.’”
Yet, after Dorgan left, that’s when second guessing began.
“I was like, I’ve got two problems,” recalled Gau. “One, we don’t even sell production print, and two, I wasn’t the final decision-maker at that time and had just hired a guy for the biggest guarantee we’ve ever handed out in the copier division to sell a product we don’t sell.”
As things turned out, none of those obstacles posed a problem. Today, Marco has about 700 true production print units—all Konica Minolta—in the field.
Starting Line
Dorgan is responsible for all things production print at Marco, including industrial print and specialty print products. His plan to get the business started was simple, and Gau concurred: Sell production print hardware to anyone at any price just to build a base. By the end of the second year, Marco became more discerning about who it sold to, and by the fourth year, was selling production to the customers it wanted at its price.
“I know that sounds simplistic, but that’s what we did,” said Dorgan. “Year one, Steve gave me a budget of a million bucks, thinking there’s no way I’m going to sell that much the first year. I’m proud to say we did just shy of 1.3 million in year one.”
Gau and Dorgan view the company’s willingness to sell production print to anyone—even at a loss—as a marketing strategy.
“It was the cost of doing business,” acknowledged Gau.
Above: One of the best decisions Marco’s Steve Gau (right) ever made was hiring Clint Dorgan (left) more than a decade ago. It was a significant financial commitment and a crazy decision at the time considering Marco wasn’t yet selling production print, but both can laugh about it now.
“We would set least, likely, and lucky goals,” recalled Gau about the company’s yearly budgets. “Likely was where we thought we would end up for the year, least would be the least acceptable number where we could say we still did a decent job, and lucky was if everything went well.”
In 2010, Marco’s least, likely, and lucky goals for production print hardware sales were $400,000, $500,000, and $600,000. Service revenue goals were $50,000, $75,000, and $100,000.
“Profit-wise in 2010, we thought that if we hit $500,000 in hardware at 25% gross profit, and sell $75,000 in service at about 30% gross profit [GP], we’d get $135,000 of GP and lose $65,000 in contribution margin,” noted Gau.
By 2013, the company was shooting for $2.9 million in hardware and $1.13 million in service revenues with a contribution margin of $523,000.
“We made all those [goals],” said Gau. “We had to establish that base and get some references because who wants to buy production print from someone who doesn’t have any techs or any of these other things.”
When Dorgan joined Marco 10 years ago, the tenure of the average technician out of the St. Cloud, Minnesota, office was 15 years. Even though these techs hadn’t worked on many production machines, Gau and Dorgan found it wasn’t that difficult to train them to service the production print products—the earliest of which were the Konica Minolta 1050 and 1052.
“Techs are like auto mechanics,” said Gau. “It doesn’t matter what the brand says on the front, if they can get the parts, they can figure out how to fix it.”
Marco developed an internal training program and also acquired a group of techs when a dealership they worked for was acquired by IKON.
Customer Focus
The initial plan was to stay away from commercial printers and corner print shops.
“In my previous life, that was probably 50% of the business,” explained Dorgan. “There’s a lot of sole proprietorships. Unfortunately, that comes with its own set of issues. It’s a challenging group to get credit for, and they pay when they get paid by their customers.”
This customer segment also has high expectations about print quality and color matching because they resell what they print.
“When you’re selling to a print shop or a print-per-pay, they want that blue to be exact,” said Gau. “The last thing we wanted was to send techs out there who used to be fixing 45-page-per-minute black and white or color machines and now call them production print specialists. That’s the last vertical we need to get involved with if we’re looking for references. It wasn’t the right place for rookies to be. We had to earn our stripes in corporate CRDs (Centralized Reprographics Departments).”
All that said, more than a few of those initial customers turned out to be commercial printers.
A initial strategy that worked well was encouraging customers who were outsourcing large print jobs to bring that work in-house. One of those was a large grocery store chain in central Minnesota.
Today, Marco’s customer mix is mostly commercial with some quick-print and in-plants, as well as grocery store chains, hospitals, insurance companies—pretty much any vertical.
“You need to sell to all of those,” said Dorgan. “And you need to be good in commercial print because it’s a big part of the market.”
A Nice Chunk of Business
By the end of 2019, production print hardware and service revenues had soared to $16.73 million, of which hardware revenues, not including wide-format, represented $9.73 million with service close to 8%. Adding to these revenues, another $4.46 million came from wide-format. Overall, these numbers represented 15.9% year-over-year growth.
“That was a record year,” said Dorgan, “But it was pretty much what we thought we’d do.”
“That’s true production print, no fast plastic,” emphasized Gau. “That’s what Mr. Frank Cannata would consider, ‘the real deal.’”
Above: “As Konica Minolta continues to expand our production and industrial print offerings, dealers such as Marco who have embraced diversification and built a strong and sustainable business in these segments, offer a model for success that other dealers can emulate.” Dino Pagliarello, Senior Vice President, Product Management and Planning, Konica Minolta Business Solutions U.S.A.”
Marco also sells the MGI machine from Konica Minolta and is considering adding the company’s labeling and packaging hardware to the production and industrial print mix, as well as its embellishment products.
Today, Marco has production print specialists who are responsible for selling what Dorgan called the entire product set, from the $50,000 production device to the million-dollar-plus MGI machine. The company also has reps with commercial print and pre-press backgrounds that support its sales reps. It also uses Konica Minolta resources when necessary.
Selling industrial print machines such as the MGI is a little more complicated than selling traditional production print hardware.
“It’s like a shotgun effect with a narrowed down funnel effect once it gets real,” said Dorgan. “What we’ve learned over the last two and a half years of selling industrial print is that you can spend a lot of time working on opportunities, but if you didn’t qualify it correctly, you just wasted three weeks of your time and their time.”
Surviving the Pandemic
Despite the pandemic, the numbers at Marco on the production print side of the business have held up. According to Gau, the company is at 70% of budget for the year in production print hardware. Meanwhile, production service revenue is ahead of budget by 2.2%. Though Gau did concede Marco won’t hit its top-line revenue numbers, its service revenue will likely stay on pace with last year.
“From a profitability standpoint, we’re going to be fine,” said Gau. “But unfortunately, it’s because of the changes that go along with people not using the equipment or buying equipment. We don’t need as many people to set up, deliver, and install, or the after-market support.”
Dorgan has been feeling optimistic more recently about the production print business, as he sees pockets of business open and more customers reaching out to his team.
While Gau feels Marco will be fine from a profitability standpoint, he thinks production print sales will not come back as quickly as A3 and A4 sales as businesses reopen.
“Production print, especially with high-end equipment, what happens is print-for-pay customers don’t make three, four, and five-year commitments unless they have customers who are making three, four, and five-year commitments to them,” he said. “Remember, even though we didn’t start our business focusing on print-for-pay because of the reasons we talked about earlier, it is a big part of our business today.”
On the bright side, he thinks in-house CRD printing could see a resurgence as more organizations bring jobs that were being outsourced in-house.
Learning Curve
Asked if he would have done anything differently when starting Marco’s production print division, Dorgan said he would have hired his “right-hand man,” meaning a color specialist, straight away rather than waiting a year and a half.
“That’s when we really hit the ground running,” said Dorgan. “We were talking the talk, but when the crap hit the fan, could we walk the walk and send technicians out to fix that color issue?”
Fortunately, now that Marco has multiple color specialists across the many markets it serves, the dealership has no problem keeping those discerning production and industrial print customers satisfied.
“When things are good, everyone’s happy,” said Dorgan. “It’s how you react and how quickly you react when things go wrong. That’s why we’ve excelled over some competitors.”
Reflecting on the dealership’s decade-long success, Gau would have entered into the production print arena even earlier, and that includes hiring Dorgan.
“Everybody in the Twin Cities knew Clint Dorgan,” said Gau. “He was the premier name in the production print space. I wish Clint had walked into my office with his crazy accent and his crazy proposal, convincing me to do something that I wasn’t supposed to be signing us up for five years earlier. To this day, Clint has sold more production print units in the Minneapolis/Saint Paul marketplace than any other rep that works here. Having him on board legitimized our Twin Cities production print operation.”
Long-Term Vision
Gau firmly believes that production and industrial print is essential for the sustainability of the industry and of the dealer channel. He references recent statistics that show a serious decline in office clicks, even if he’s skeptical of some of the dire projections.
“Figure the average selling price for a production machine is $58,000,” said Gau. “You probably need to sell 12 to 15 mid-range products just to get the same amount of revenue and same amount of clicks. Even if you took your eye off the ball in an area like copier solutions or A3, and reinvested that time and dollars into this space, you’ll be better off because there’s no information coming from any source that predicts A3 is going to keep growing. A lot of sources predict that production, industrial, and specialty print will grow.”
He added that moving into production print is as important to dealers as managed IT.
“Unless you want to become an IT VAR [value-added reseller], an IT reseller, or an IT services company, you should be building on the production print and industrial print space,” stated Gau. “Not that I want more competition from smaller dealers who maybe don’t have the wherewithal. Or, in a lot of cases, they probably have the wherewithal, but the owner doesn’t want to take the risk. They should all be jumping in, especially when you have partners like Konica Minolta. This is what you want to do to build a strong brand, a strong dealership, and a strong customer following for years and decades to come.”
Fast Plastic
Both Gau and Dorgan don’t consider light production machines production print. That’s what Gau calls “fast plastic.”
“Almost every manufacturer has this weird category between MFPs and production that they call light production,” said Dorgan. “Some dealers—and it’s not for me to say they’re wrong—include those machines in what they would determine to be a production division. I don’t have the patience for dealing with fast plastic machines, trying to put them into a real production environment and then dealing with the hostile phone calls that can come after it. You can’t sell fast plastic to a big commercial printer and expect they’re not going to complain about it.”
Seeing is Believing
Gau raves about Konica Minolta’s Customer Engagement Center in New Jersey where dealers can bring customers to see first-hand the company’s many production and industrial print products. Though it is not currently feasible for everyone amid the current pandemic, Marco views visiting this valuable resource as essential for any of its East Coast locations that are within two to two-and-a-half hours of the facility.
“If we’re not bringing one customer there a week, we’re losers,” said Gau. “That place is unbelievable. Having a center like that gives every dealer the opportunity to get into production print.”
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