The mid-Atlantic has more than its share of office technology dealers, but none are growing as fast as Philadelphia-based KDI. Rick Salcedo, KDI’s CEO, founded the company in 1988 as a service organization, and service has remained at the core of the business as it has expanded.
Today, KDI is a diverse player in the office technology business, selling a wide range of hardware and software as well as professional services. It sells or services products from companies such as Ricoh, Canon, Lexmark, Toshiba, and DocuWare. The company has maintained a customer focus as it has grown and added new lines of business. Of its 142 employees, 53 are dedicated to service.
From Left to Right, Don Schatzman, President of Sales; Rick Salcedo,CEO; Vance Stewart, VP of Operations
ENX recently had a chance to speak with Rick Salcedo and two members of KDI’s management team: President of Sales, Don Schatzman, and VP of Operations, Vance Stewart.
Tell us a little bit about the history of your company. What are some of the milestones that have occurred over the years?
Salcedo: Prior to KDI’s launch in 1988, I was a technician for Savin. Back in those days, they were not really concerned about the service piece. It was an afterthought—and a necessary evil of the business.
I left to start my own service-only company. About a year and a half after doing that, Savin approached me to become a dealer. We picked up Canon in 2008 and grew the company from there. In the last six or seven years, we did acquisitions of one sort or another, including IT, MPS, and copier companies.
Stewart: This is the first organization I’ve ever worked for that originated from service. I really think that KDI stands apart from the competition in that sense—that we focus mostly on customer care and not the sale. It’s the post-sale where we know the revenue streams come from.
Schatzman: Back in 2008, Ricoh bought IKON, one of the primary Canon equipment distribution channels. We came on board with Canon USA—at a time when they were extremely aggressive to go out into the market. They provided us with a lot of financial tools—to retain those IKON accounts as Canon customers.
What kind of revenue growth have you seen since 2008?
Salcedo: In 2008, we may have been at $10 million a year. Last year, we finished at $31 million.
You’ve actually had a double-digit growth every year since 2008?
Salcedo: Last year, we had growth—but not double-digit. The prior year, during the recession, we were flat. Prior to that, year over year, we were experiencing double-digit growth in most cases.
In terms of what you’re doing now, can you give us a little bit of a breakdown about the percentage of revenue —of sales, service and your basic core areas?
Salcedo: The core revenue is the hardware. I would say it’s 80 to 85 percent equipment/hardware sales. That includes aftermarket revenues. The balance is between MPS and managed IT.
Can you talk about the makeup of your clients?
Salcedo: We have a really nice mix. When we first started the company, we had a substantial base of Fortune 500 and Fortune 200 companies. We had a plan that made us grow rapidly, but consolidation in a lot of industries hurt us. Since then, we’re probably 85 percent medium-size businesses. We do have large conglomerates, large hospitals and large school districts. Low end mom-and-pop businesses are maybe 1 or 2 percent of our business.
Are there any segments that are growing right now for you?
Salcedo: We’re growing in the color arena, specifically in the high-end and production color. We’ve been successful with the Canon imagePRESS and the Ricoh 7100 high end color.
We’re decreasing in the same areas that everybody else is. The mono component or mono black copiers or printers, whatever you want to call them. That area is being mostly replaced with the MFP color machines.
Does that change what you provide on the service side?
Salcedo: We don’t do a lot of it yet, but it seems to be growing. Our clients need 24-hour access to service. We haven’t jumped into that arena yet, but we are getting more and more requests for that. From an opportunity standpoint, it’s just the amount of clicks that we’re generating in that arena.
Stewart: Customers just love color. Their documents pop when you’re printing in color. Of course, we love that because every color-click gives us additional revenues.
Another avenue is the technical training that keeps our technicians up-to-par on providing proper service for color equipment.
What are you doing that’s making MPS and professional services successful for you?
Stewart: With MPS, you have to have a different mindset—a different methodology. KDI employs teams of MPS experts—from service to sales, and from pre- to post-support. We do a lot of encompass studies to ensure that our clients are getting the best bang for their buck, and to learn where KDI will reap the benefits.
Salcedo: We’ve been in MPS for at least 10 to15 years. We’ve been doing IT services, and now we are more focused on converting all those IT services to managed IT services. That’s one of the things that’s enabled us to continue to grow. We’re not your traditional box seller. Anywhere between 40 to 50 percent of the equipment that we sell has some sort of an IT or MPS piece to it.
Stewart: You surround yourself with the right people. You dedicate them to a team focused directly on MPS, as opposed to having your sales reps just speak to MPS. They look at where we can encompass all these prints into a finalized program, reduce CPCs, increase revenues, and increase traffic to the machines.
Give us an overview of what the culture’s like there. What do you look for in your support and sales staff?
Stewart: From a service standpoint, culture is important. Attitude’s important. How one presents oneself in front of a client, and expresses care, is so important to how customers deal with this organization, how they purchase from our organization. Our sales reps aren’t out selling equipment. They’re out selling KDI.
The culture starts with the management team, and starts right at the top with Rick. He is in working every single day, taking it to the max, and expects nothing less from everyone else. Rick has put his management team through training to identify personalities and good people, that we then teach the trade. We have to have the “who” in place first, in order to make this thing grow. We’re always focused on the proper personality—somebody who can speak to clients, both internal and external, and do it with intelligence.
Salcedo: The hardest part of any organization is finding people that want to work, that are dedicated at work, and have a desire. You’re sometimes hiring five, six, seven, eight, or ten people to get one person that potentially has those inherent qualities that you really can’t teach. Once you have that individual, it’s pretty easy to make that person successful. Their own drive pretty much does that on their own. We just give them the tools. Like I say to everybody, all we do here is give you an opportunity. For lack of a better word, we’re small enough to be family-oriented, but we’re big enough to do anything that any manufacturer can do. That’s who we compete with every day, Canon Direct, and Ricoh Direct.
Schatzman: We encourage participation by our employees. We give them a voice in what we do. From a sales standpoint, there’s always a lot of input from reps and managers. We’re not afraid to admit when we’re wrong. If we’re going down a bad road, we will analyze it, take input, think about it, and make some changes. If it requires a complete course change, we’ll do that, too.
As a company, we’re also very highly involved with the Philadelphia culture and civic activities. We get heavily involved in charitable causes. In the Philadelphia area, there’s a group by the name of Philabundance, which is raising food for the poor. There’s also Toys for Tots and various other food drives that come up. We reward employee participation in those programs. We play it out on social media.
We have an annual president’s club trip for sales. You have to attain a quota to qualify for the trip. We bring admin people on the trip, which is unique. They can qualify based on their outstanding performance and achievement. IT folks, service personnel, and even warehouse personnel are on that trip.
Admin, service, and warehouse personnel get to mingle with salespeople. They hear about each other’s problems and understand each other. Salespeople out in the field might not have much interaction with warehouse people, who are setting up machines, receiving goods, and so forth.
We also have quarterly meetings, where we bring the whole company in to talk about various, important things. We have a sales meeting, but at about 2 pm, we bring the whole company in. We have food and beverages. Again, it’s a chance for everyone to meet each other, see each other, get a feel, and put a name to a face type of thing.
What are some of the key challenges you see in the market?
Salcedo: If you talk to a hundred dealers, you’re going to get a hundred of them telling you the same thing: It’s the ability to attract, retain, and hire talented people. If you surround yourself with quality people, then good things happen. As the company continues to grow, it’s a bigger issue every day.
We’re building our own training center, where we’re bringing people in that are relatively green to this business. We put them through extensive training programs before we put them out into the field. People that have left other companies tend to come with their own baggage and their own way of doing things.
We have the normal business things—the continuing shrinking of the margins, especially in service. The click charges continue to drop. As I see it, our worst enemies are the manufacturers.
They’re not only dropping the rates extremely low, but they’re locking them for the term, which means they don’t have escalators year in and year out. That creates problems down the road.
One is that you’re fixed on what you can charge that customer now. Any cost that you incur, the company’s eating. When it comes time to renew that customer, it takes away the opportunity to say,
“I’m going to save you $300 to $400 a month because you’re paying two cents a page. I’m going to bring you back down, because it’s a new machine.” It makes upgrading your clients that much harder.
What are some of the biggest surprises that you’ve had as a business over the years?
Salcedo: The biggest surprise has been our ability to continue to grow. We’ve been through many recessions since I started this company. If you have a value proposition that is service-based or customer-oriented, you will continue to grow. That’s why we hone in on our customer relations or customer service aspect of the company. If we don’t keep improving that relationship, it goes away pretty quickly.
Looking ahead, do you see growth continuing at the company?
Salcedo: We’re already ahead of plan from last year. We’re not quite at the number that I was looking for, but I’m always looking for double-digit growth every year. We’re still looking for anywhere between, conservatively, 2 to 8 percent growth this year over last year. That is only limited by the amount of quality people that we can bring into the organization.
What was your biggest accomplishment for the past year?
Stewart: What we expect—what we really demand—is positivity in customer care. Oddly, in that respect, our greatest accomplishment was employee turnover. We had a diminishing culture within our dispatch center—the first line of defense for our clients, and our first contact with them.
When clients call in with a negative experience and they are met with a negative attitude, nothing good comes out of it. We recognized this and tried to correct behaviors through discipline, coaching, and counseling, you name it. Ultimately, we had to make the harsh decision and say, “We’re going to have to part ways. It’s not working out. You’re good at what you do, however, it’s not within the culture of KDI. You’re not caring for our clients.”
We revamped that entire dispatch center of four individuals. What we have today is the most respectful and courteous team to date with the fastest turnaround. I have never seen anything quite like what we have now—as far as the workflow and synergy. We get rave reviews on the responsiveness of our service dispatch center.
Which company product do you find the easiest to sell among your solutions partners?
Salcedo: The biggest one is now DocuWare, which used to be Fortis. We have a large, installed base of Fortis in the field. These are long-established customers that we’ve had for 10-15 years.
