Cash In On POS Service
This POS (point of sale) VAR has grown to $30 million in sales by
developing its hardware sales organization to complement its successful
With projected sales of $30 million and an estimated growth rate of
15%, you might think that AM/PM Service Limited is a VAR that sells a
wide variety of technology products. However, that
is not the case. Vancouver, British Columbia-based AM/PM sells and supports only POS hardware and software products. AM/PM is achieving this level of success in a competitive POS market where some VARs are happy just to maintain existing sales levels. Dale Sapieha, national accounts manager for AM/PM, explains what it took to reach the top of the POS market in Canada — and what it takes to stay there.
Make POS Service Your Top Priority
AM/PM started as a POS service company in 1987. “When I joined the company in 1989, we had only two salespeople covering all of western Canada,” says Sapieha. “We knew that POS was [and is] a very competitive market, and in order to survive, it was necessary to add a stronger nationwide POS product sales presence.”
The theory was that by selling more POS hardware, AM/PM would produce more service revenue. Since 1989, AM/PM has grown its nationwide sales team to 20 — a team that works in conjunction with 110 POS service technicians. “We now have sales and service teams located in our major service hubs of Calgary, Alberta; Toronto; and Vancouver; and 35 other satellite service locations,” adds Sapieha. The VAR probably could have maintained its sales volume with a small sales team, but a business that is not growing is probably not healthy. It turns out that AM/PM was correct; the combination of POS products and services led to 10% sales growth last year and 15% projected sales growth this year.
AM/PM relies on revenue generated from service contracts to support all
38 locations. Sixty-five percent of AM/PM’s customers purchase service
contracts for their POS equipment. POS services account for 50% of
AM/PM’s total annual revenue, with the balance derived from POS
software and hardware. What about the other 35% of customers that don’t
buy service contracts? “It’s not realistic to expect to sell 100% of
your POS clients service contracts,” explains Sapieha. “There will
always be companies that don’t believe in service contracts. They are
willing to take chances with their POS equipment.” However, there is
still a service opportunity with noncontract customers. AM/PM provides
noncontract customers with POS services on a time-and-materials basis.
Based on individual service calls, time-and-materials services are more
expensive to the customer than contract-based services. After several
time-and-materials-based charges, some customers convert to a service
Use SLAs To Win POS Service Business
An SLA is a service-level agreement that ensures a level of service to the customer. It is a best-faith attempt to provide specific services within a specified time frame. In the case of AM/PM, SLAs are a critical component of the company’s service offerings. For instance, one of AM/PM’s agreements ensures a phone response to a customer within 15 minutes of the incoming call. If the problem can’t be resolved on the phone, a technician is promised to arrive at the customer’s site within four hours.
If AM/PM is not able to meet the terms of the SLA, it has to cover the
cost of the repair and must issue some type of credit to the customer.
The cost of an SLA is based on the type of POS equipment and the type
of service desired. “For instance, a PioneerPOS all-in-one unit costs
less to repair than many other brands, so it costs less to cover under
a service contract,” explains Sapieha. AM/PM sells service contracts on
an à la carte basis for each type of POS component or based on all POS
equipment at an entire location.
Partner With Third Party Service Providers
AM/PM faces a daunting challenge when it comes to adding service locations — specifically the geographic spread between cities in Canada. Sapieha used an example of Churchhill, Manitoba to illustrate just how remote these locations may be. Churchill is publicized as the polar bear capital of the world. The city is located in the northern part of Manitoba on the Hudson Bay.
When considering a new service location such as Churchhill, AM/PM’s national service manager performs a detailed market analysis of the region before AM/PM makes an investment. In cases where it is not feasible to operate a remote location, AM/PM contracts with third party service providers such as Techno 90 Ltd. to service its POS equipment. Farming out service to third party providers is not as profitable as performing the service in-house, but it does give AM/PM the reach into areas where an office cannot be justified. Sapieha advises VARs to look for CompTIA A+ certified technicians — for third party contractors or full-time hires.
Not many of you will face the challenge of putting an office in the polar bear capital of the world, but you may still have customers in remote locations. Knowing your options for supporting remote customers may help you to set an appropriate level of expectation for a service contract with the customer at the time of the sale. In case you’re wondering, Churchhill isn’t ready for an AM/PM remote location — yet.
One of the biggest struggles AM/PM faces is the hiring of employees. Sapieha says Canada is experiencing a nationwide labor shortage, so hiring qualified people is very difficult. When it’s time to hire, AM/PM uses many of the standard methods including Internet-based employment sites. “Most of our new hires come from outside the POS industry,” adds Sapieha. “It’s nearly impossible to find qualified people with POS experience. Once hired, we pay our people above-industry wages in order to keep them here.” Sapieha attributes much of AM/PM’s success to the experience of its senior management team. “We have 150 years of POS industry experience among the five most-senior executives in the company,” he says.
In 1989, AM/PM acquired Gold Medal Equipment, a POS VAR that had a strong presence in Alberta, Saskatchewan, and Manitoba. This acquisition brought AM/PM an additional 60 years of industry experience in the form of two top executives. The acquisition also added middle-Canada to AM/PM’s growing geographical reach. The lesson here is that the inorganic method of growth is sometimes the fastest way to cheat time and grow quickly. None of us has 150 years to gain experience, so it may be best to hire and/or acquire the experience needed to make you successful now.
There is no playbook for becoming a dominant POS VAR. However, some of the tips that AM/PM shared may help you to set realistic goals. Measure your success in achieving those goals, and then make appropriate adjustments to your plan to compensate for weak areas. Whether you refocus your POS business on service, add more service locations, begin offering SLAs, or acquire another POS VAR, AM/PM has demonstrated that POS is still a market in which you can thrive.