Jeff Gau
If you’re looking for a roadmap of how to evolve your dealership to thrive and survive in the 21st century, look no further than Marco (www.marconet.com), a Minnesota-based dealership that has transformed themselves into a provider of networked solutions.
The employee-owned company was established in 1973 and was named as one of the Best Places to Work by the Minneapolis/St. Paul Business Journal in 2010 and 2011 and one of the Star Tribune’s Top Workplaces in 2010, 2011, and 2012. Marco was also named among the Top 25 Best Companies to Work for in America by the Great Place to Work Institute and received the Minnesota Work-Life Champions Award.
Having started with office technology, Marco reinvented themselves as a solutions provider whose mission is to help organizations manage their information by applying network expertise to voice, data, video, and print solutions. It was a logical transition considering that most of the technology customers and prospects use in their organizations connects to the network. That’s something Marco realized way back in 1985 while their competitors were still selling boxes. Fast forward to today and many of their competitors are still selling boxes while Marco remains plugged in as ever to the network.
Last week I spoke with Marco CEO Jeff Gau about the company, its networked solutions focus, and the challenges they face today. I think you’ll find what he has to say interesting, very interesting.
How’s business?
Gau: Absolutely fabulous. We’re eight months into our fiscal year and up about 30 percent. Profits are up substantially as well, more significantly than the revenues. We’re on track to continue our double- digit growth. It’s mostly organic and the result of some acquisitions.
What segments of your business are doing well?
Gau: The growth drivers for us are managed print services of course and managed IT services—we just secured our largest monthly transaction and that was a big deal for us. Managed services are a significant piece of our business although it doesn’t scale quite as fast as project work business or large production print takedowns.
We’ve seen a lot of nice growth in production print which became a new offering for us four years ago. Another area of expansion has been our audio/video division where market adoption has accelerated. We’ve also had success with some significant IT projects this year (voice and data networks). Our business model isn’t dependent on project-based business, but they certainly augment our core
up-and-down-the-street business.
Where are you finding the best opportunities for managed print services, in your existing customer base?
Gau: We’ve done well in our customer base because it’s created a different talk track for demand generation. We’ve found business development actually comes through managed print because a high percentage of the time their printers aren’t currently under a contract. We serve a lot of secondary and tertiary markets in North and South Dakota, Minnesota, and Wisconsin and in a fair amount of those markets there isn’t a strong managed print services presence.
Why do they choose you to do that for them?
Gau: We have a track record going back five years in managed print so I consider it to be a more mature part of our business. We’ve paid the “dumb tax” and we know how to implement and understand the bring-on process. This experience differentiates us in the marketplace because in many cases it’s a new offering for our competitors and our customers value our demonstrated competence. Marco is a large dealer and has been their trusted advisor for IT and document solutions, so this becomes an extension of that existing relationship and another piece of the technology puzzle.
Your hardware vendors are Konica Minolta, Canon, Sharp, and HP. Why are those OEMs a good mix for you?
Gau: We’ve done a fair amount of acquisitions and when we bought a Canon dealer in South Dakota, we took on that product line and it’s proven to be a good line for us. Konica Minolta plays real well in the production print space and they’ve helped us get into the production print business. We like their color offerings and they share some of the business processes related to Managed IT services with us. We’ve been a Sharp dealer since the mid to late ‘70s and they’ve been a mid-size player for us for all of those years and provide us with a good workhorse product. And, of course, HP is our primary printer line because of the strong market adoption and base of clients using HP products.
You’re leveraging the Sharp OSA connector on the document management side of your business. Did you see the potential in Sharp OSA from the moment it was introduced?
Gau: Early on we saw it as an opportunity and added programmers to develop applications to enhance the Sharp OSA connector offering. Because we have an IT division—about 40 percent of our business is in that space—we understand software and applications. This was just a different device. Instead of the PC it was the copier, and that felt good to us.
You have a heavy document management focus. How did that come about?
Gau: When we started it wasn’t intended to be the million-dollar business it’s grown into. At first it was a differentiator to help us sell more hardware. Our IT business has presale engineers to help us sell so we were accustomed to using software as a way to differentiate ourselves from our competition when we introduced document management. What we found was if we were competent, well staffed, and could execute on our offerings, then our customers would consider Marco as a trusted advisor for their back-office operations.
The same concepts that helped us become successful with the earlier phases of our IT business played out here. That also helps us sell more traditional document solutions.
You have a thriving IT business. How has that grown?
Gau: We started in that business in 1985 and that’s grown to over $50 million in sales today and is growing substantially year over year. We’ve seen double digit growth over the past five years and we’re going to announce a couple recent acquisitions shortly. We have done that by applying our IT business model to our acquired copier markets and customer base which has worked quite well for us.
How do customers view you?
Gau: At this point in time, Marco is viewed as a technology company, not a copier dealer.
Why is that a good thing?
Gau: I think CIOs and IT professionals aren’t willing to turn over their network infrastructure and some of their critical network devices and services over to their copier vendor yet. We get a lot of interest from copier dealers who want to learn more about the IT industry and our business model.
The other thing I find interesting is that you offer video surveillance and gaming solutions. Not your typical office technology dealer offerings. What made you decide to get into those businesses?
Gau: Our core competency is networking. Of our 200 engineers and technicians a high percentage of those are competent on the networking side. Our strategy was always growing with the expansion of the network, especially as more devices began hanging off the network. We’ve been moving bits and bytes for a lot of years and whether it’s a copier, a telephone system, or in recent years surveillance or video equipment, it’s just another piece of hardware that goes with our core competency—the network component.
Any time a business solution begins to get networked, we’re going to look at that. If you evaluate how IT departments in companies have expanded during the past 25 years, that’s how we have expanded. We’ve had a long-standing relationship with our customers’ IT departments as a result of our networking business. Until recently, that wasn’t the decision maker for copiers, so it only stands to reason that is an advantage for Marco.
What’s the biggest challenge facing your business today?
Gau: Once companies know that you are in acquisition mode–and we’ve been acquiring companies for a number of years–you have what you could call a “crisis of opportunities.” Because we are a privately held, employee owned company, we need to prioritize these acquisitions and evaluate the right fit for our culture and growth strategies.
Hiring IT talent continues to be a challenge because we’re in so many smaller markets and finding the right talent in Rapid City or Aberdeen is different than Downtown Minneapolis.
Keeping our workplace contemporary continues to be a challenge. If you’re a good employer and want to attract good people long-term, you’ve got to work hard on personal development. These markets also require good leadership and it’s becoming increasingly more difficult to recruit for these positions in order to effectively grow the market and maintain our culture.
There are concerns about whether the print industry is growing, shrinking or flat and I think we’re all a little bit concerned about that. I think we can agree the black and white copier space is not a growth segment, so we have to be looking around those corners for other opportunities.
Marco has been selected as one of the top places to work by the Minneapolis/St. Paul Business Journal and the Star and Tribune, what makes Marco so special?
Gau: We understand the equation between work and life balance. We’ve created an element of flexibility that people like and selfishly I like it too. We’ve been very intentional in creating an environment that people are attracted to. The fact that we’re employee owned is a positive thing and people like that as long as the stock is going north which it has been. I think people like working for growth companies better than shrinking companies–it’s just more fun for all of us. People like working for companies that create opportunities so they see themselves in a career rather than just a job. We want to talk to them about wealth creation and career development and creating opportunities. Growing companies do that, shrinking companies don’t.
What kind of a person is a good fit for Marco?
Gau: A person with the discipline to work in a flexible environment, and a high performer who is in the top 25 percent of our industry. If they do that we’re going to leave well enough alone. I think people would be uncomfortable in this work environment if they were not high achievers. If we’re going to perform at the top of our industry, we’re going to ask the people who work here to do that too.
How do you see the company growing over the next three to five years?
Gau: We’re going to continue our blend of acquisitions and organic growth, which right now is about 50/50. We’ll be announcing several acquisitions in the near term so we’ll continue that strategy. We’re in the Midwest right now, North and South Dakota, Minnesota and Wisconsin and Iowa, and you’ll see us move farther into Iowa and North Dakota, and Nebraska is on the radar screen.
The other way we’re going to continue to grow, as I mentioned earlier, is by applying our IT business model to our acquired copier base. This model has been effective for us and we’re going to continue to do that. I see managed print and IT services continue to grow. The adoption rate is especially high in both of those categories.
After 28 years in the business are you still having fun?
Gau: I love it.
Could you imagine doing anything else?
Gau: I just got back from a 10-day trip in the Mediterranean and had a great time, but Monday morning came around and I was ready to rock and roll. I never have a bad Monday.
