A strong leadership team, tenured team members, and a growing managed IT business provides Modern Office Methods with a competitive edge.
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This month, we highlight Modern Office Methods and Donnellon McCarthy Enterprises, two of the three dealers we visited during our dealer tour of Cincinnati in April. We are presenting our tour in the order we visited each dealer and will conclude our coverage with an article on Prosource in our July/August issue. Each of these three dealers has a rich history, has achieved success in the Cincinnati market and beyond, and possess strong visions for positioning their dealerships to compete in the future.
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When we visit dealers, I am always most appreciative of their willingness to bring their entire senior team together to spend four to six hours with us in a boardroom, telling their stories and answering our many questions. They can’t sell many machines when doing this, and for the time they devote to us, we are grateful.
Modern Office Methods (MOM) was no different in this regard as Kevin McCarthy, MOM president and CEO; Rod Randall, vice president of sales, major accounts; Dave Mueller, vice president of sales; Julie Italiano, marketing director; and Steve Bandy, co-owner and senior vice president, spent the better part of a day with us during the first stop of our dealer tour through Cincinnati.
History Lesson
Robert J. McCarthy, Kevin’s father, founded MOM as a 3M Copy Products dealership in Evansville, Indiana, in 1957. (Bandy is Robert J. McCarthy’s son-in-law.) MOM sold 3M’s Thermo Fax, the only dry copier on the market. At the time, the primary competition for this technology was carbon paper. The widespread use and acceptance of carbon paper in offices was one of the main objections, heard by sales reps selling Thermo Fax machines, to purchasing a copying.
MOM has grown considerably since those Thermo Fax days, and in 2017, had annual revenues of $45 million with 200 employees in 10 locations in Ohio, including a distribution center in Cincinnati. The dealership represents Canon, Ricoh, and HP, and that cumulative product mix provides sufficient flexibility to compete effectively in all segments of the market from A4 MFPs to production print.
The company’s sales success has been recognized by its hardware manufacturers with Ricoh honoring MOM as a RFG Circle of Excellence Certified Dealership in 2017 and 2018. Ricoh also recognized MOM with a Ricoh Production Colors Sales Award. MOM is also a Canon Advanced Partner Dealer.
The dealership has been successful in hiring and retaining talent with much of that coming from referrals and LinkedIn. The average sales rep tenure with the company is 15 years.
“[MOM] kind of sells itself in terms of people wanting to work here, and we try to avoid recruiters,” said Mueller.
Success in IT
As more dealers look to broaden their products, solutions, and services offerings, one area that offers great promise, along with challenges, is managed IT. However, this is an area in which MOM excels and currently represents 11% of the company’s overall business. The commitment to success in IT services was made clear when MOM acquired FSN (Full Service Networking) in March 2017. FSN’s President and CEO Rick Maxwell has been a long-time subscriber to The Cannata Report from the days when he owned OfficeWare in Louisville, Kentucky, which he subsequently sold to Konica Minolta in October 2011. We were pleased to see him during our visit and we believe it was a smart move by MOM to acquire FSN and keep Maxwell, a proven leader, at the helm.
FSN, which operates as a separate company, provides full-service networking, and has delivered MOM a double-digit return on its investment since the acquisition. Overall, MOM’s IT services business has grown 10% annually, with the FSN business up 17% year over year, driven in part by the growing interest in security.
MOM initially got its start in managed IT by partnering with a third-party provider, but when that relationship didn’t work out as planned, the dealership made a switch to Continuum and continues to work with the company to this day.
FSN currently has about 185 clients and plans are to add 24 new clients a year. FSN has three dedicated sales reps and MOM’s traditional sales reps are encouraged to share managed IT leads with the FSN reps. If that lead turns into new business, the MOM rep earns a spiff. For example, on a $50 million managed IT deal, the MOM rep could receive as much as a $10,000 bonus.
Ongoing Growth
Growth has long been a constant at MOM, and the company continues to see an uptick in its Segment 3, 4, and 5 business, as well as in printers and software. In addition, production print now provides MOM with an excellent tool for countering MFP pricing deterioration, while simultaneously increasing the average unit selling price of the device. Today, hardware represents about 33% of MOM’s overall revenues, with 20% of that 33% coming from production print. MPS is responsible for another 13.33% of revenues and is included in the dealership’s service and supplies revenues, which are 53.3%.
When asked which segment of the business he’d like to see improve, McCarthy’s quipped, “Everything.” He pointed out that MOM is less focused on increasing the company’s Segment 1 business. However, they are currently leveraging the security features of the HP and Canon printers, particularly with healthcare clients and prospects.
“Our increased talk track around security has helped us well,” added McCarthy.
Program and Product Notes
McCarthy speaks highly of his manufacturers, which he says generally have strong programs to stimulate the business and motivate MOM’s sales reps. His one criticism is that sometimes a manufacturer’s dealer reps are not always as knowledgeable about these programs as McCarthy would like.
“They don’t know all the intricacies of the programs,” stated McCarthy. “That tends to minimize what the programs can do for us.”
As far as concerns go, McCarthy contemplated the impact of inkjet technology on the traditional imaging business and how it may affect the MFP market. It’s a concern that will likely become even greater throughout the channel, as the technology trickles down to the lower ends of the market.
As a multi-line dealer, McCarthy shared some interesting observations about his manufacturer’s product offerings and MOM’s go-to-market strategy for those products. He inferred that one manufacturer’s products may have an advantage over another, depending on where they are in the product lifecycle. As a result, MOM will sometimes focus more heavily on one manufacturer over another, shifting back and forth between each, based on the strength of the current offering. The challenge MOM sees, however, is the lack of consistency in product, which has created a peak-and-valley effect within the dealership.
Another challenge is sorting through the many emerging product opportunities, which can be confusing and costly.
When asked how else their manufacturers can help them, MOM’s leaders offered, help us grow our business, and just give us the price and make it easier for us to do business with you.
Looking Ahead
Over the next five years, McCarthy believes his dealership will become increasingly focused on services while staying close to clients, something the dealership excels at now. He expects the production print and MPS segments of the business to grow during the next five years as well.
As a successful dealer, McCarthy has advice for other dealers looking to remain solvent in an ever-changing business environment.
“Stay focused and hire great people,” he said. “Stay close to the street””rely on the input and ideas of your team. Empower your team. You don’t necessarily hire people to tell you what to do. You hire them so that they can advise you on what you should do.”
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Jump START Your Nonprofit
MOM has been running its Jump START Your Nonprofit contest for the past eight years to help benefit the nonprofit organizations in its three major markets. Local organizations apply for one of three $10,000 office technology makeovers. The MOM team narrows down the applicants to 10 finalists in Cincinnati, Dayton, and Columbus. The 30 finalists campaign for votes using social media, and the top vote getter in each city wins a $10,000 makeover. Giving back to our communities is an integral part of MOM’s culture.
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A Healthy Culture
Employee wellness and corporate culture is very important to the MOM team. The company employs a wellness coach who holds monthly seminars for the employees, as well as one-on-one coaching. At the corporate office, employees participate in yoga once a week in a large open area in the MOM sales department.
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What They’re Saying About MOM
“On behalf of all of us at Ricoh, congratulations to everyone at MOM in celebrating their 60th anniversary as an industry leading dealer. With all the changes in our business, it is a credit to the MOM team for maintaining a growing organization by providing outstanding customer satisfaction since 1957. We are proud to have such a quality company representing Lanier/Ricoh in the Ohio markets MOM serves and look forward to many more years of partnering and growth.” Jim Coriddi, vice president, dealer division, Ricoh USA
“Kevin McCarthy and the leadership team at Modern Office Methods do a great job of creating a culture that breeds success. Their genuine approach to business is refreshing and we’re proud to have them as a partner.” Josh Lane, CEO, ACDI