The Swenson Group stands out in one of the top markets in the country with a commitment to adjacent opportunities.
Pictured above: The Swenson Group has been serving the Bay Area since 2003. While this photo was taken while celebrating its 25th anniversary in 2018, the team’s enthusiasm still runs high today even during a pandemic.
“We’re very fortunate that the decisions we made in good times have really helped us in tough times,” observed Dean Swenson, president of The Swenson Group in Livermore, CA, responding to our initial interview question about the state of his dealership during the past seven months.
The Swenson Group was coming off its best year in 2019 and had an aggressive and achievable 2020 business plan entering 2020. Then came March, and as Swenson lamented, “all hell broke loose.”
“We’re doing tremendously better than many of my peers and I don’t wish bad things on them, but it does give me perspective,” he observed.
X Marks the Start
At age 52, Swenson represents a younger generation of dealers who entered the business in the 1990’s. After graduating from UC Santa Barbara in 1991, he went to work for Xerox. By 1993, Xerox was incenting its salespeople to start their own agencies, and Swenson jumped at the opportunity, launching The Swenson Group in 1996 as a Xerox sales agency, serving the San Francisco Bay area.
“It was an easy way to get into the business as there weren’t many barriers to entry,” recalled Swenson. “Financially, we didn’t need warehouses, trucks, e-automate, whatever.”
Swenson grew the business to $30 million and one of Xerox’s largest sales agencies in the U.S. The problem for Swenson was that despite having a booming business, there was no backend revenue. After MCI/WorldCom, the company that had been providing domestic local services for Xerox since 1999, was fined $500 million for accounting fraud in 2003 on top of the $10 million Xerox was fined for similar irregularities, Xerox laid off some 40,000 customer service reps and technicians. Agents like The Swenson Group, who relied on Xerox for service, found themselves caught in the middle.
“If the support mechanism behind us is crumbling, it’s an awkward position to be in,” said Swenson.
Above: The Swenson Group’s owners Jeff Swenson (left) and Dean Swenson (right) with the dealership’s operations manager, Lindsay Keller in the middle.
With Xerox unable to provide Swenson with any sort of vision for the future, Swenson left Xerox and started his own independent copier dealership. He was joined in this new endeavor by his brother Jeff who now serves as vice president, client experience, and his father, X, who had been retired after selling his business, VeloBind, to GBC in 1991.
“We literally went from $30 million to almost zero overnight,” said Swenson.
The Real Dealer
With a management team in place, The Swenson Group needed a product line and found one in Konica prior to its merger with Minolta. One hurdle was that The Swenson Group did not have the service infrastructure or service expertise because when they were a Xerox agent, Xerox handled service. The problem was solved when Swenson arranged a unique deal with Konica where service was provided by Konica’s direct service operations, albeit relabeled as The Swenson Group and with a dedicated 800 number. It was a temporary fix until The Swenson Group could build their own service team and expertise.
“This was in complete conflict with the typical dealer-direct relationship,” acknowledged Swenson. “It hasn’t haunted us. We took back that service as fast as we could and built the dealer business as a single-line Konica Minolta dealer.”
Above: Despite running with a “lean” team, The Swenson Group excels at providing customers with top-notch customer service.
If Swenson has any regrets, it is that he would have taken the independent dealer route sooner than later. The relationship with Konica Minolta has been a positive one for both Swenson and Konica Minolta.
“We liked the people, we liked the technology,” said Swenson about his initial reason for partnering with Konica. “It turned out to be a blessing because the people are still great, the technology’s still great, the merger with Minolta actually made sense, and our relationship is excellent as a single-line dealer.”
The love fest goes both ways and Swenson was just named president of the Konica Minolta Dealer Council.
“That’s really going to help my résumé,” he quipped.
Better Bundled
One reason for The Swenson’s Group ongoing success is bundled contracts. Swenson credits his finance rep at the time from U.S. Bank, for the advice. He asked him, “If you were me starting this business, what would you do?” The response: “I would bundle every contract, period.”
“Coming from Xerox, I didn’t know what that meant back then, but that became our culture,” said Swenson. “We are consistently 99.4% bundled contracts.”
In good times and in bad times, that model provides predictable service revenue. The dealership escalates its service to ensure customers receive the same level of service in the fourth year as in year one, which helps with retention.
“It’s a defensive posture so people can’t buy us out easily,” observed Swenson.
Because of the pandemic, service revenue is down, but only a fraction compared to its competitors, according to Swenson. One of The Swenson Group’s core values is customer first, and since March it has restructured some of those contracts and defered payments to assist customers through these challenging times.
“This year, we’re seeing volume going down across the board, but because of these bundled contracts, we’re still receiving revenue,” noted Swenson.
Gaining with Traction
The Swenson Group has always run a lean organization. It has 24 employees and did $9.4 million last year.
Another asset that has helped grow the business is Traction, a business strategy model based on the book, Traction: Get a Grip on Your Business by Gino Wickman, which offers a plan for increasing efficiency and profits.
“If you’re a struggling organization, you need structure, discipline, and process,” said Swenson. “We invested in Traction because we hit the ceiling. We said with this number of people, no matter how good we are and how hard we work, we’re never going to take it from A to Z.”
As Swenson explained, everything revolves around the company’s core values and everybody has quarterly goals, which they report on every week, so they understand what’s expected of them.
“What it helps you do is be more disciplined, push accountability, and get buy in from the whole company, not only your leadership staff,” said Swenson.
The Traction model made a difference when the company had to adjust to current events back in March.
“While we had some hiccups, it was like having a rudder,” said Swenson. “We had to make some adjustments, but it has been a good foundation for us in tough times.”
As business slowed down, employees had time to identify what they wanted to accomplish so that when things picked up again, they would be better trained. The team examined internal processes, pinpointing areas that could be improved upon and streamlined. Through this process they identified and eliminated redundancies, invested in new automation tools, and hired some people that might have been harder to find in the Bay area job market prior to the pandemic.
Lovin’ IT
About 10 years ago, The Swenson Group started offering IT services in response to changing customer expectations. It started with what Swenson described as “cost-effective programs” to remotely change a print driver or an IP address, or helping customers when they called because their screen had turned blue.
“We made a decision in the concept of buy, build, or partner, to run a parallel program of building and partnering at the same time,” revealed Swenson.
Being aligned with Konica Minolta, All Covered was a natural IT partner and The Swenson Group has been one of All Covered’s top dealers for the past five years.
The benefit of partnering with All Covered is its infrastructure and comprehensive offerings that a dealership with 24 employees can’t provide on its own. Swenson cites All Covered’s application development team, its legal and healthcare vertical expertise, and its SharePoint practice as examples.
“If we uncover SharePoint initiatives, we engage All Covered, and we can help solve that problem fairly cost effectively because that expertise is not on my payroll,” said Swenson. “The goal obviously is to get the recurring revenue and/or placement of hardware after we solve the problem.”
The dealership’s IT business has helped it navigate the COVID-related bumps of the past few months. As customers’ employees began working from home, The Swenson Group created a program to accommodate those employees. This was mostly handled by The Swenson Group’s internal IT staff who set up virtual private networks (VPNs).
“You don’t generate tons of revenue doing that, but you solidify relationships,” said Swenson. “Now, we’re doing [cybersecurity] penetration testing and more things for their business network with All Covered’s security practice.”
All sales reps are responsible for uncovering IT opportunities.
“I don’t want two sales forces, it’s expensive,” said Swenson. “If you ask 10 companies, what their IT initiatives are for the next 12 to 18 months, if they say nothing, your jaw should drop, or they should be in trouble, so you always get something. Obviously, you can’t be all things to all people, but with that comprehensive All Covered offering, we can be more things to more people.”
It hasn’t been difficult encouraging sales reps to focus on more than just the box. It could be a document management system, a workflow solution, or a hosted phone system.
“I present them as the world is your oyster right now,” said Swenson. “If you don’t ask the questions, you’ll walk by all those things. What we preach is you’ll get to the copiers. If you lead with the copiers, sometimes it’s harder to transition to IT. People might accuse me of forcing those changes, but as a general statement, if it benefits the client and it benefits the company, then it will benefit the rep.”
The dealership’s core business is still MFPs, which can still lead to adjacent opportunities.
“If your hosted phone system is on the network, that’s adjacent,” said Swenson. “If you are scanning, printing, using document management, and workflow, that’s all adjacent. We want to get really good at these types of programs and focused on recurring revenue.”
Managed voice is one of The Swenson’s Group IT offerings. It added that after All Covered acquired a TLS.NET, a managed voice company.
As The Swenson Group’s clients are getting hit with tidal waves of electronic information, the concept of managing electronic information has become another prime adjacent offering. It represents Square 9, Prism, and Hyland Software.
“I tell my team don’t name the product because a lot of them do similar things,” said Swenson.
Instead, he encourages them to ask customers how they are managing documents and where do they keep them?
Growth Initiatives
Going back to the start of the year, Swenson and his team were optimistic and ready to build on its best year ever, including investments in talent, which it did. Looking long term, sights were set on becoming a $15 million dealership. But things have gone backward year over year.
“If we finish 15% off last year, that’s a tremendous win,” said Swenson. “We’ve been able to keep all our people because they’re really good and we know we need them. Adding new talent as we come out of this in the right situation is the right thing to do as we’re talking to different individuals, but obviously it’s still murky. Things could get better pretty quick or we could be having this conversation 12 months from now.”
The Swenson Group has been fortunate that it is in a decent cash position.
“We’ve had the right people on the bus in the right seats, and we doubled our marketing budget instead of cutting it,” said Swenson. “We’ve invested in people instead of letting people go. I tell my team, time will tell. Either we’re really smart again or we’re really not. Ultimately, I take responsibility for those decisions, but it’s up to all of us to make us look like we’re smart the best we can.”
Since the beginning, most growth has been organic. Acquisitions are an option and Swenson would much rather focus on acquiring IT companies than copier dealers where the pickings are slim.
“There are plenty of mom and pop IT companies, smart people who like fixing stuff that aren’t great business folks and don’t like dealing with workers comp and employees,” said Swenson.
One benefit of doing business in the Bay Area is that there are no dominant players. Most of the big dealers are out of Sacramento and most have sold to private equity. Swenson estimates that two years ago there might have been 15 independent dealers serving the Bay area, today there are maybe four or five.
“I believe the independent dealer—and we get some mileage out of this—there’s fewer of us, which means our value prop resonates,” said Swenson. “They key is to find out if the client values that or not.”
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