The Critical Diversify Or Die: Move Into MPS
By Jay McCall
This office supply company’s foray into managed print services (MPS) brought in a new, multimillion-dollar, recurring revenue stream that’s offsetting its shrinking office products business and positioned it for growth.
A look at ImpactOffice Products’ (ImpactOffice) business profile reveals two facts: 1. This is a pretty big company (165 employees) and 2. This company is projecting some pretty big growth. What the profile doesn’t reveal is where the real story lies, however. Although the company’s original staple of selling office supplies — everything from coffee to toner — has been shrinking over the past few years, its start-up MPS business, which is just three years old and has only five employees, has been able to offset its flagging office product sales. In fact, within the first year of starting its MPS practice, ImpactOffice garnered 1.2 million clicks per month under MPS contracts, followed by 2.4 million clicks per month last year, and it’s projecting to once again double its MPS clicks per month (and revenue) by the end of 2014. I recently spoke with Kevin Hoverman, director of imaging and technology at ImpactOffice, to get his insights into his company’s MPS success.
Can’t Beat Your MPS Competitors? Hire Them.
For the first seven years of ImpactOffice’s business, toner was one of its most profitable line items. In 2008, however, the company began losing some of its most loyal customers to MPS firms that were locking customers into three-year contracts. The problem was compounded by the state of the economy and continued to worsen into 2011 when ImpactOffice’s owners made a decisive move to start selling managed print services. After evaluating their biggest MPS competitors, the company hired one of its competitors’ top MPS business development specialists (Kevin Hoverman) to start an MPS division at ImpactOffice.
Hoverman started with ImpactOffice in June 2011 with full knowledge of the mandate that awaited him: Start an MPS division and bring in new revenue ASAP. One of the first things he did was to reach out to all the leading value-added distributors to learn about their MPS offerings. “I knew it would be far too daunting and timeconsuming to put the internal infrastructure in place to manage the logistics of an MPS program,” he says. Hoverman’s due diligence led him to form a partnership with SYNNEX and to adopt the distributor’s PRINTSolv MPS program. “The PRINTSolv program allowed us to become an MPS provider almost overnight,” he says. “There were four elements in particular that this program offered that I felt were critical to ensuring the success of our new MPS program.”
1. Consultative Selling. Even though Hoverman had plenty of experience selling MPS, the PRINTSolv program gave ImpactOffice access to a team of consultative selling experts that were available for joint appointments — whether over the phone or in person. “Customers don’t just automatically want to pay a monthly fee to have a company manage their printers and copiers,” says Hoverman. “They first need to understand that managing these office machines themselves is costing them more money than turning it over to a trusted business partner, and that’s why the initial meeting and assessment are so important to earning their business.”
The initial assessment typically entails spending a couple of hours at a client’s facility talking with key stakeholders and running a program on the client’s network. That provides a quick assessment of the client’s networked printers and copiers. After gathering enough data about the client’s existing environment, plus related costs such as repair and maintenance contracts, the SYNNEX sales consultant plugs the data into a program. Once this process is completed, which normally takes between 30 to 60 days, the sales consultant revisits the client with the ImpactOffice sales rep. During the follow-up visit, the sales consultant provides the client with a report detailing the client’s current cost per page as well as the potential cost savings the client could realize by signing an MPS agreement with ImpactOffice. In most cases the reseller is able to receive a signed contract within 90 days.
2. Competitive SLA (service level agreement). While showing clients their potential savings is an important first step, backing up that promise with a reliable SLA is what makes MPS a long-term, sustainable business opportunity. “The MPS promise of automated toner fulfillment and office equipment uptime quickly loses its appeal if clients run out of toner or have to wait several hours [or days] for a repair technician to fix a broken printer,” says Hoverman. “By using the PRINTSolv program, we’re in partnership with a multibillion-dollar company that has 11 distribution centers and a nationwide team of vetted office equipment service professionals who guarantee that consumables will be replenished and repairs will be made within a specified timeframe that’s acceptable to our clients.”
3. Nationwide MPS Footprint. Many of ImpactOffice’s clients have satellite offices far away from the reseller’s Beltsville, MD, headquarters. Being able to accommodate the needs of these national clients sometimes means the difference between winning and losing the business, according to Hoverman. “Within four months of joining ImpactOffice, we signed an MPS agreement with a top-10 accounting firm that to this day is our largest MPS customer,” he says. “Had we not been able to address the printing needs of all their office facilities — and provide the same SLA across all their locations — we wouldn’t have them as a customer today. A second benefit of working with these office equipment resellers who act on our behalf through our distributor partner is that they’re all contractually obligated to not compete against us.”
4. Vendor-Agnostic RMM Tools And Support. Although Hoverman’s previous work experience entailed selling and promoting Xerox-specific products and services, one of the key features he looked for with the MPS program was support for multiple brands. “Even though Xerox is still a strong partner of ours (see sidebar for more info about ImpactOffice’s Xerox partnership), sometimes customers have other brands of copiers and printers that have a few years of life left, and they don’t want to replace those assets before it’s absolutely necessary,” he says. “Using a remote monitoring and management (RMM) tool that can automatically track paper and toner usage on multiple brands and models of printers and copiers gives us a clear advantage with our MPS offering.”
Another contributing factor to the solution provider’s success is paying attention to office equipment that requires excessive repairs. “Running a successful MPS program necessitates being able to quickly identify devices that are not profitable,” says Hoverman. “When you’re managing tens of thousands of machines, overlooking the two percent that are underperforming can have a significant negative impact on your P&L.”
Supplement MPS With Additional IT Services
As a result of the momentum ImpactOffice’s technology division has already experienced, the company is already looking ahead at the next set of changes that will lead to additional revenue streams. “When I started three years ago our division only sold the services wrapped around customers’ existing copiers and printers,” recalls Hoverman. “As customers’ office equipment reached the end of their life cycle, however, they started asking us if they could buy printers and copiers from us, so we began selling the hardware. Then, customers started asking us about selling and supporting their PCs, which led to our working with SYNNEX to become an authorized Lenovo PC, laptop, and tablet reseller. From there, a small portion of our customers asked us to manage their servers, so that’s the next step we’re working on. We currently have five employees within our MPS division dedicated to selling and supporting MPS and other IT solutions and services, and we’re in the process of hiring additional salespeople, technicians, and other team members so we can continue to support our explosive growth.”
As the IT service provider grows, Hoverman says that one goal it’s going to focus on is growing its internal product service team. “Selling MPS has allowed us to develop much stickier business relationships with our customers,” says Hoverman. “Having our own employees interacting with clients during routine and emergency maintenance visits makes it easier for us to capitalize on upsell opportunities. Even though contracted workers may do a fine job of fixing printers and copiers and of being courteous with clients, they simply lack the same incentive to look for upsell opportunities as an internal employee does.”
As ImpactOffice’s IT business continues to grow, it’s exploring the opportunity to expand its IT service offering into new areas. “Our customers are asking us about servicing their other IT assets, and we’re exploring new growth opportunities,” says Hoverman. “These will be important next steps in converting our commodity-driven transactional company into a contractual-driven service provider. Our goal is to derive 25 percent of our revenue from managed print and other IT services with monthly recurring revenue within the next three years. At the rate we’ve been growing [100 percent year-over-year growth within its MPS division] and with the help of our partners, this goal is well within our reach.”