So You Want to Grow?23 Jan, 2012 By: Tom Callinan, Strategy Development imageSource
In the past few months, you probably made some type of resolution to “grow your business in 2012.” You may have decided to add some sales professionals, change your sales manager, make an acquisition, or open a branch in a new territory. For some, you’ve decided to expand your product and or service portfolio. Each of these could be a sound approach to growth; each of these initiatives could also cost you a lot of money, where by the end of the year you could end up at the same revenue or lower than 2011, with lower operating income. Let me start by stating the obvious: growth is hard work!
Growth doesn’t occur just because you wish it, dream it, or throw some poorly planned money at it. Growth doesn’t come from attending some industry event and/or after hearing some fairytale story on how one company launched a “widget division,” assuming the world rushes back if you launch your own widget division. Therefore, the first question you need to ask yourself is, “Am I truly committed to establishing real growth?”
It is hard to answer “No” to the growth question posed, isn’t it? My next question is, “Have you achieved your growth targets over the last two years?” Realizing that the financial mess caused by the recession of 2008/2009, I specifically chose the last two years because the industry did grow by approximately 5% over this two-year period, after a 25% drop in the recession.
Did you grow above industry average in 2010 and 2011? It is critical to be competent at your “core” before you move into new areas. If you did not grow at or above industry averages, you really need to reflect on your commitment to growth.
Your recent history demonstrates your commitment to growth and now you want to accelerate the rate of growth: What should you do?
For six years our company (Strategy Development, Inc.) has been extolling the benefits of MPS so that you’d clearly expect me to recommend MPS; and I will not disappoint. Managed Print Services is the greatest growth opportunity ever presented to our industry.
Check the Numbers
In the office space, segments II – IV, printer aftermarket (service and supplies) is between 500% and 600% of office copier aftermarket. Therefore, if your office copier aftermarket is $3,000,000 annually, and you had the exact same market share in printers, your printer aftermarket revenue would be $15,000,000 to $18,000,000 per year.
It is sad that more companies don’t spend time to understand the size of a market. Understanding that printers should contribute 5X – 6X the aftermarket of copiers, I am not sure anybody in the industry would look for any additional growth areas until they had good market share in the MPS space.
The market share litmus test is one we constantly see companies ignoring, however. We see dealers with 2% market share in one market opening new branches in another market, stretching their management talent and financial resources. Why not focus on driving market share gains in your “home town” without the financial investment and management distraction of a remote branch? Why look for additional growth areas if you have 0.05% of the MPS market?
Competency and Workflow
Core competency is another area we see ignored when making decisions on what to sell. I know all businesses buy paper and pens, and we sell to businesses, but I would not say that selling to businesses is the core competency that differentiates our industry. If it were, why not sell rolled steel to the auto manufacturers? You have to understand your core competencies when deciding what business to get in to and once you understand that, you need to understand the market attractiveness of the industry you are considering. Finally, you have to understand competitive strengths.
If you have good market share in the copier space and your MPS market share is at least equal but hopefully exceeds your copier market share, where should you look next? I’d suggest workflow.
The IKON’s and Danka’s of the early 2000 era have been talking about workflow since the turn of the millennium; they could even execute on it in certain instances. But the problem in year 2000 was that buying workflow solutions was very expensive, and really only an option for enterprise-type accounts. You had to buy expensive enterprise software solutions and $3,000 laptops for many of your employees. Today, you buy iPads (at least until Windows 8) and SaaS-based software, one user at a time. The age of workflow is upon us and whoever controls the workflow will control the account. At some point in time, in the not-to-distant future, output will be designed into the business process.
MPS, MS, & Mid-Sized Accounts
MPS especially, and workflow if sold correctly, have the ability to get your company into mid-sized accounts. Moving into midsized accounts should be a goal for all companies because it provides you with significantly more revenue opportunity with less margin pressure than small accounts. I raise this point because of the next growth area you may pursue; Managed Services (MS) or managed network services. Many small companies, those with fewer than 100 employees, do not have internal IT departments. With today’s remote monitoring and management software (RMM) and remote back-up options, you can sell a service (RMM and helpdesk) to these small companies; small companies are the primary focus for MS. That doesn’t make it a bad option it simply commits you to a certain segment of the market.
For a more detailed study of choosing your growth strategy, consider attending the ITEX Expo this April in Las Vegas, where my associate Ed Carroll and I will present the P10 Power Hour session “Want to Grow Yet Unsure Where to Invest? Copier Market, MPS, MNS?” We’ll provide in depth information to walk away with.