There is no denying that John Lowery had enjoyed much success in the years since 1984, when he founded Applied Imaging with his wife, Sandy. Theirs was the traditional from-the-ground-up story—they borrowed $5,000 from Lowery’s father and used a line of credit from the equity in their home to finance their dream. By 2003, the company had grown to a $9 million business, serving the Grand Rapids, Michigan, market by selling Ricoh fax machines before gravitating toward copiers, MFPs, production print and managed services.
There were setbacks along the way. A move into Kalamazoo did not fare well, and Lowery ended up selling the branch to another dealer. While Lowery would eventually return to that city, he couldn’t shake the feeling that Applied Imaging had become “stuck.”
In 2003, Applied Imaging turned the corner. Lowery enlisted the services of John Hey and John Hanson of Strategic Business Associates, who helped shed light on understanding metrics and best practices. He joined the Copier Dealers Association, and began to leverage his resources by putting the best people in positions in which they could thrive and help drive growth. In 2009, Lowery made his first acquisition, and revenues jumped from $17 million to $22 million.
In all, Applied Imaging has done 10 acquisitions that have played an instrumental role in the company’s growth, but perhaps none more so than the 2011 deal that onboarded a foundering business in Brighton, Michigan. Lowery relocated it into the Detroit marketplace, and in a seven-year stretch, that branch alone grew to $40 million. The 2018 acquisition of Hasselbring-Clark of Lansing also helped the company realize its dream of eclipsing the $100 million plateau, which it did in 2019.
During the height of Applied Imaging’s ascension, it was growing 25-30% per year, most of which was organic. While the Ricoh line has been pivotal to Lowery’s success, the company has also flourished with Canon and Kyocera. Aside from copiers and MFPs, managed IT has grown to $8 million, with the potential of reaching $40 million in five years. Document management yields about $3 million per year and continues to thrive.
How was business in 2019? What were the keys that dictated your success?
Lowery: When we were at $58 million three years ago, Ricoh came to us and said they were thinking about selling their customer base in Michigan—the SMBs, not the major accounts—and wanted to know if we were interested. In acquiring them, we were able to pick up 6,500 contracts worth an estimated $18 million. That same year, we acquired Hasselbring-Clark in Michigan, and they were a $7 million dealer. We also expanded our sales force in the Detroit area and took advantage of an opportunity to move into Toledo, Ohio, a year later. Between those and adding $9 million in business from 2018 to 2019, it catapulted us to a little over $100 million. So the wheels were set in motion earlier.
Hitting such a monumental sales mark obviously called for a party.
Lowery: We rolled the dice on hitting our number and rented out the entire Grand Traverse Resort & Spa, taking up all 420 rooms for the weekend. We booked it before hitting the number. We invited all of our employees and their spouses, 750 people in all. On Friday night, we had a mega-1980s band and everyone dressed in period costumes. There were musicians from the bands Asia, Foreigner and the ex-Journey singer. We had a company meeting Saturday morning, then everyone went out on excursions—wine tours, zip-lining, bike riding, brewery tours and the casino. In the evening, everyone came back for cocktail hour and dinner, with entertainment from comedian Tom Papa. We had a ridiculously fun time, and it was a great way to say thanks to the employees. We’d been working on this for a long time, and we wouldn’t have been able to do it without our people. It cost us a lot of money, but our employees got us to where we are now. It was just a great way to build team unity.
Won’t it be tough to top that celebration when you hit $200 million?
Lowery: That’s what they always say. Every year we hold a meeting around July, called ImagePalooza. We always wonder how we’re going to top it, but the next year is always better. It seems the more employees we get, the more excitement and energy that we have. We usually add in a little something to make it more fun. The first year our theme was, “The Far-Out Affair.” Everyone dressed as hippies, an artist did henna tattoos and we even had VW buses, one of which was made to look like a coffee shop with coffee and brownies. Honestly, they were normal brownies. We had a Crosby, Stills and Nash-type band and served beach burritos. Last year, we had a Motown theme. When we get to $200 million, we’ll have to come up with something big.
We work hard to create an environment in which people feel energized, engaged and enabled. In doing so, we make it fun, which is one of our elements of Applied Chemistry. If people are having fun, they’re a lot more productive. I would put our productivity up against any dealership out there.
What sets Applied Imaging apart from the competition?
Lowery: It’s not any one thing—it’s everything. At the heart of it is the level of service that we deliver. A brand-new customer left a voicemail the other day, raving about how our delivery person was so friendly and helpful, and showed them how to use the machine. The delivery people from the customer’s previous two vendors never said a word to them or showed them how to use the equipment. Ours showed them everything they needed to know about the copier. The customer concluded, “You’ve got a great company and your people are unbelievable.” The real key to who we are is built by the culture we have in the organization. When our people get out in front of the client, their love and passion for the job just permeates everything they do. Delivering great service comes naturally.
You’ve had much success with traditional marketing, especially radio advertising. What other methods of marketing have worked well for you
Lowery: Advertising drive-time radio in the morning has been huge. Ian Crockett goes out with our marketing team to interview people for the radio spots. It’s not us talking about how good we are, it is customers talking about what we’ve done for them. That’s really been instrumental to our success.
We also do a lot of events that help promote our brand and culture. One of the most popular is our tailgate party for the annual Michigan-Michigan State college football showdown, which we’ve done for 11 years now. This year, we held it a day before the game, with 750 clients visiting us in the western Michigan and Detroit offices. It’s really grown from the first year, when we had about 180 guests. Over the years, we’ve had cheerleaders and former players from both schools show up. Longtime Michigan broadcaster Frank Beckman has attended. It’s like any other tailgate party, where you can drop in, have a sandwich, chili dog and a beer, talk trash and have a really fun time. We do a great job of promoting it.
We’ve also done some Hubspot campaigns that have turned into great lead-generating opportunities. We have 60 service vehicles on the road, all wrapped with our logo, which helps with branding. People often mention how they’ve seen our vehicles everywhere.
You’ve opened three branch offices in the last two years. What has been the reason behind your success in Michigan?
Lowery: We do a lot of business through our website, and we work hard to make sure it’s effective. That’s important, because 65-75% of the time, people visit our site before calling. The site is easy to navigate and contains case studies, which paints a picture of who we are as a company and what it’s like to be a client.
We built a world-class facility three years ago that has a Google-like feel to it, which has been a great marketing tool. We just purchased a 65,000-square-foot building in Detroit that has the same feel. On the second floor, we have a customer loyalty center, with a 100×200 video wall. You can see every call that comes in and what the average wait time is on the call. About eight years ago, we did a study that found about 75-80% of the calls that come in are for either service or supplies. So, we combined our dispatch people and supply folks. That helped them cross-functionally learn each other’s jobs. We wanted to make sure that when someone calls into Applied Imaging, they never get transferred. We don’t want to leave anyone hanging on hold; we take ownership of that call. We receive about 11,600 service, supply or sales call requests per month, and every single one of those is satisfied when they call in. To me, that is an impressive stat. People like the human touch.
Applied Imaging made the Inc. 5000 list of fastest-growing companies. What have been your keys to organic growth?
Lowery: We had not planned to be in Detroit, but we hired technicians and, for about four years, we serviced accounts in the area. We felt it was a pretty good market for us, and decided to move into the Detroit area. That Brighton branch was doing about $1.5 million when we started, but now we’re at $40 million. We have about 4% market share and believe we can get to 10%, because there are some great organic opportunities in that city. At 10% share, we can get to around $110 million just in the Detroit area alone. Toledo, Ohio, is another market that offers great potential. Some people think it’s an old community, but there are a lot of companies and manufacturing in the automotive space. We think we can grow it from $4 million to about $10 million.
In some of these markets we’ve entered, dealers either weren’t doing a good job with production print, or they hadn’t sold it at all. We have a really robust production print group, our Pro Team that does a fantastic job. Michigan and northern Ohio holds great opportunities for us.
What was the impetus behind launching ShredHub? How has it fared so far?
Lowery: It’s important to encourage those people within your organization who are entrepreneurial; otherwise, they will look elsewhere. We have a sales rep who fits that description, so I asked him and one of my sons to start a division that sells wide-format to serve the AEC marketplace. We researched it and thought it was an OK idea, but they came back and said, “John, we think your idea stinks.” They thought we should be in the shredding business. I told them to put together a pro forma to determine what they think they can do, what the ROI would be and when we could expect to break even. They were a little aggressive in their projections, but (last December) we broke even. We bought a truck, got certified and have been doing it for a year and a half. We thought it was a natural addition to our business—we’ll help you create the document, then we’ll help you successfully destroy and recycle it. Now we have two trucks for on-site shredding. It’s been a nice business with recurring revenue. We think it’s something we can scale to a pretty good size here in Michigan and the other markets that we serve.
Will you be active in the M&A space in 2020? If so, what qualities of a dealership would fit well with your business?
Lowery: We’ve worked on deals in which the firm was losing money or the environment was bad. If our gut feeling tells us that it’s going to be good or we think we can turn it around, we’ll pull the trigger. We bought some companies that weren’t making money at all and we were able to turn them around, which was the case in Brighton. We’re looking for dealers that will get us into a new market and either carry our product or another good product line. The cultural fit is really important; their values should overlap with ours, which makes the assimilation process easier. We feel like we speak Midwest pretty well, so the opportunities for us could be beneficial in a lot of markets. We have teed up about $50 million in acquisitions, and there’s a lot of work to do to make it happen. We think we will add about $20 million in acquisitions this year. Our goal is to get to $112 million without any acquisitions, and the acquisitions will push it close to $135 million. Based on what we know about those companies, we can add another $20 million in the years that follow. Suddenly, $200 million is not that far away.
What was your dealership’s greatest accomplishment in 2019?
Lowery: Hitting $100 million was a huge milestone for us, and something we’d been talking about since 1997. Also, we have a couple of people who are departing from our leadership team, and I am looking to transition the business to my boys, Casey and Kyle, who are active in the business. We recently put the finishing touches on a six-year plan that outlines how that’s going to happen. We’re starting to execute on the plan now.
What was the biggest challenge you faced in the past year?
Lowery: Prior to reaching the $100 million mark, we’d committed to doing the party. It came down to the wire; we reached it about a week before the Sept. 30 end of our fiscal year. It would’ve been crazy to have the party without hitting the mark. We had a big celebration that day with champagne. I did a video, during which I actually hid the computer to do the billing on the last hours that put us over $100 million. It was very intense in the second half of the year. We were focused on what our total pipeline was and how we were going to achieve those results. A year ago, we added Salesforce, and that really helped us in terms of being able to have vision into what the pipeline had with all the deals taking place. It’s really been a great tool for forecasting and helping us move our business forward.
What are your goals for the next 12 months?
Lowery: Our financial goal is $112 million, and integrating our acquisitions is really critical. We have the changes coming to our leadership team, and the transition is taking place now, with the new people taking part in our leadership meetings. It took us 32 years to get to $100 million, but I think we can get to $200 million within five years. Looking out 10 years from now, I can see us being a $400 million dealership.
What do you like most about your job?
Lowery: I love the people and can’t think of a single day I didn’t enjoy coming in to work. We believe that either you’re an aging company or a growing company. Our foot is on the gas pedal all the time. We’ve got a great group of people who love to dig in and compete. The business is much more interesting now than at any point in the past. There are so many opportunities for growth, solutions and other streams of revenue.
Outside of work, what do you do for fun?
Lowery: Sandy and I have 10 grandchildren between our three kids, and we love spending time with the family. Last weekend, we attended seven games—either basketball or hockey. Outside of golfing and skiing, fly fishing is a great hobby. We fish for trout in rivers and big lakes in Montana, Idaho, Wyoming and all over Michigan. Fly fishing is difficult; it gets your mind off of work because you have to concentrate on what you’re doing. Community service is also important to me. Whether it’s going out and doing something for a charity or being on the board of directors of an organization, it’s all about doing things to help the community move forward. We try to give back as much as possible.
