As the traditional copier business continues to evolve and competitive challenges reduce the revenue and profit, dealers are starting to move toward non-traditional sources of revenue.
This process started with the expansion of networking and managed-network services, and now networking support is becoming a traditional part of a dealer’s service revenue.
I’m confident that this process will continue. Manufacturers are continually expanding the products they offer and encouraging dealers to expand their horizons as well. Current examples include Sharp video displays and water products, and Konica Minolta’s label printers and media finishing equipment. These products bring new revenue opportunities, but they also bring their challenges.
Understand the Business Model
Success in non-traditional service begins with a thorough understanding of the business model for the products you choose to offer. I know two dealers who invested in 3D printers and purchasing equipment, as well as training for the service department. To my knowledge, the equipment is still sitting where it was installed for demo use. One of the dealers passed up a chance to sell equipment to a client because they were not sure how to price service.
The starting point is researching the product and its service needs. Where possible, talk to non-competing dealers about their experience with the product. Also, talk to the manufacturer and try to acquire an understanding of how they see the service model working.
I recommend searching for competitive products and service information, and where possible, shopping the competition to see if they offer a similar product and how they price support. Understanding the amount of competition within that product category will also allow you to gauge the probable pricing pressure in the market.
Business Plan for Service
Once you understand the business model for the product in question, the next step is to work with the sales manager to develop a business plan. There are multiple factors you need to consider before beginning to sell the product.
FIrst is the projected number of units that sales think they can place in the field and the pace at which they believe they can sell the product. For the new product to be beneficial, the sales team will need to have a high degree of confidence that they can sell a significant quantity. In most cases, the potential should be more than 25 units to justify the investment in training and inventory costs.
The next factor is the training requirements for the product, as well as the number of technicians needed to service the expected sales. For products that require a significant investment in time and cost of training, it may be that projected sales will justify a single technician. The risk with that is if the trained technician leaves, you may have an issue supporting the equipment while a second technician gets the needed training.
It is important to evaluate the parts and supply inventory needed to support the new product. Will the technician(s) need to carry car stock for the equipment? If so, is there enough space for the additional parts in their vehicles? How much investment in car stock is required? If the equipment placements are in concentrated areas, the issue is more easily managed than if the equipment is scattered across a company’s geographic footprint.
Once you understand the factors, you can start creating the budget for the project. It is important to manage expenses during the start-up phase since service expenses will accrue before the service revenue starts to compensate. An accurate budget will help you measure your progress.
Ideally, you will complete the planning process before making the decision about offering the product. Once you complete the business plan, you know what the return on investment (ROI) will be. And when ROI is calculated and the risks analyzed, then the company can make an informed decision.
Other Areas for Growth
In many dealerships, additional revenue for service comes from products or brands that the dealership may not sell. In the past, companies I worked for would service equipment even if they did not sell either the product or the brand. In some cases we serviced competitive equipment, and in other cases, we serviced related products that our customers used. In my career, I have serviced non-traditional equipment including ATMs, impact printers and paper shredders.
There are additional challenges when you do not have a direct relationship with the manufacturers. Many MPS contract fit into this arena. The client may have printers that you do not sell. Before expanding into these areas, your business plan needs to address the additional issue of training and parts availability.
Success is Possible in Non-Traditional Areas
There will be challenges in moving beyond traditional products and services, but you can be successful. The keys to success are proper planning and careful implementation of your plan. The rewards are worth the effort.
