The day was March 29, 1998. Chip Crunk stood perched on a forklift and addressed his employees on the sad reality of what lay before them. RJ Young’s building was a pile of smoldering ashes, having burned to the ground the previous day. The president and CEO of the Nashville, Tennessee-based company—with all of six months logged in the top executive’s chair—didn’t have any idea at that moment what he would do.
But he knew what to say.
“I said, we’ve had a situation happen here, but we have to make sure it’s an internal issue and not an external one,” Crunk related. “I told them, go out, take care of the customers, and when you come back this afternoon, I’ll have a plan.”
Crunk ensured the internal chaos would be opaque to the customer. He obtained five temporary offices throughout Nashville to house RJ Young’s operations, and it would be a year and a half before the company was reunited under one roof. Regardless, the dealer’s employees pulled together and ended up having a growth year in 1998.
Fast forward 21 years, and the fire is just a memory and a testament to what the dealer can accomplish. RJ Young, founded as a printing company in 1955, has flourished as an office technology dealership, registering sales of $127 million, backed by 30 locations. The company’s sales reach covers Tennessee, Mississippi, Alabama and portions of North Carolina, Florida, Louisiana, Kentucky, Virginia and Georgia.
The business has been buffered by a trio of acquisitions in 2019: Business Electronics of Birmingham, Alabama; Automated Imaging Systems of Monroe, Louisiana; and Digitec of Jackson, Mississippi. RJ Young carries the Canon, Ricoh, Lexmark and HP lines, and it provides IT services, production printing, outsourced printing and promotional products. The dealer also furnishes document management workflow solutions, interactive white boards, digital signage and phone systems, among other ancillary products and services.
RJ Young’s growth is such that it is preparing to move into a new 400,000-square-foot facility (it is renting out half of the space) in the coming months. We spoke to Crunk to learn about how RJ Young’s acquisition strategy and depth of offerings beyond the MFP box are enabling it to garner a growing stronghold in the southeast.
How is business so far in 2019?
Crunk: It’s been very strong; in fact, March was the biggest sales month we’ve had in our history. Our managed IT division is growing and we’re still seeing consistent growth in our MFP business. Managed print and production printing have been our biggest growth areas. We’re enjoying 50 percent year-over-year growth for production. We’ve won a lot of large institutional contracts, which have been a growth key. We instituted a bid desk to handle bids throughout all of our locations to ensure they’re being handled in a proper fashion, and we’re seeing lot of success with it.
What does RJ Young pride itself on?
Crunk: We offer unparalleled customer service. Even though we are in a commoditized industry, we focus on providing additional opportunities in our space, products and services that a lot other dealers are not doing. One example is we’re the internal leasing arm for everything that we sell, which creates another value-add point for us to use.
During 2019, you have acquired dealers in Alabama, Louisiana and Mississippi. How do these companies advance your growth strategy?
Crunk: We like to strengthen the existing markets we compete in. We acquired in Jackson, Mississippi, and we are the number-one player there, so the deal increases our market share. We also feel that if we can acquire a company that’s in a market we’re already in, we likely can eliminate 20 percent of the cost structure from that business, and make the return on investment a lot earlier. Alabama was another opportunity where we were among the top players before the deal, and now we’re close to becoming the dominant player in the Birmingham area. Louisiana represented a brand-new location for us, our first entry into that state. We cover about the northern third or half of it and we’re trying to go deeper and wider into that space.
What do each of these dealers bring to the table for RJ Young? Is there a common denominator among them?
Crunk: The common thread is they have a good sales pace and a strong service team. I think our business is changing to a point where it’s making it more difficult for the smaller, under $10 million dealers to compete, when you consider the infrastructure it takes to support the products today. It enables us to integrate them into our systems and bring additional services such as software, production print and managed print to really grow those businesses even further.
Given the strong competition for acquiring top-performing dealers, particularly from the likes of Visual Edge Technology and the Flex Technology Group, how do you communicate a unique and superior value proposition to prospective acquisitions?
Crunk: The acquisition front has really changed over the years. There are only a few companies aggressively going out and trying to acquire new market share. I used to spend a lot of time focused on companies we could acquire, but not as much now because they’re actually coming to us. They’re familiar with our company, what we’ve done and how we’ve been able to grow in other markets we’ve acquired in. We have a good reputation in the industry of taking care of them once we do integrate a dealer into our system. Many of these small companies have come to a point where they cannot grow the business because they do not have the resources it takes to really go into the peripheral products and expand customer share.
Given the additions you have made in 2019 alone, what has been the key to harmonizing the integration process? Are there any challenges in this regard?
Crunk: We used to have challenges, but once you get the process down, it’s really not that complicated. It took several years to get to that point. In fact, the first acquisition we did, a company in Chattanooga, Tennessee, frankly didn’t go all that well. We didn’t do a good job at it, mainly because we didn’t know how to do it. The second deal we did was in Hattiesburg, Mississippi, and I basically lived down there for a year to figure out the process and make sure we didn’t make the same mistakes again. Now that we have the system in place, it’s pretty much a seamless program. Each individual department of our company knows what areas they’ve got to focus on, and they just take care of it.
One thing we’ve learned is that it’s essential to have an RJ Young person on site so they can understand how we do business. Also, integrating their culture into our organization is a challenge. Another one of the things we find is a lot of the companies we acquire are not used to the path or rapid growth pace that we’re expecting. That creates a lot of challenges for people.
What does your M&A pipeline look like at the moment? Are there geographic or product-driven markets you are currently pursuing?
Crunk: The pipeline is strong. In fact, I’ve got a lot more opportunities than I’ve got time to implement. In some ways, it’s a good problem to have. I think a lot of the smaller dealers out there are looking to get out. They realize the business is changing and it’s going to be more difficult as time goes on for them to compete in this industry.
From production printing machines to wide-format and interactive whiteboards, RJ Young has a strong menu of offerings. Can you talk about the role these have played in fostering organic growth and providing that point of differentiation?
Crunk: We want to be a one-stop shop for our customers, so they can look at us as a partner that can handle whatever opportunity may be there for them and help them be more efficient in their business. If all you’re selling is just the MFP on price, eventually your business is going to start going down. If we’re going to continue to grow, we need to find a way to go deeper and wider with our customers.
For production printing, we’re focusing a lot on CRDs and in-plants. What makes production so strong is that it is a sophisticated product and sale. It limits who can actually do that. You have to be a certain size to have the capacity to handle a product like that, just from the mere cost it requires to get into that business.
What was your dealership’s biggest win last year?
Crunk: The entire campus of Florida State University, which translated into a $4 million contract. It was a true solutions sale and entailed integrating software, production print and hardware. We were looking at how we could optimize the efficiency within the entire university to deliver a true solution, which is more than just quoting a box and being the low-cost provider. The whole process took about a year. There were a lot of opportunities there, but it was a long and slow sale. It’s an expensive endeavor because you’ve got to invest a lot of time and resources to make it happen. But there’s the risk that if you don’t get the deal, you’ve spent a lot of money and you don’t have anything to show for it.
What was your biggest challenge in the past year?
Crunk: Finding quality employee candidates. Different markets are easier than others, so it depends on how strong a given marketplace is. When you’re growing really fast, it requires a lot of new talent and you’ve got to make sure that you don’t grow faster than your talent does. Otherwise, it will have a negative impact on your customers.
Talk about how the We Make It Right guarantee strengthens RJ Young’s value proposition.
Crunk: You have to do the right thing, and that holds true in life. I really don’t think customers mind when you make mistakes, but they mind when you don’t do anything about it. One of the things we do is monitor our equipment and the reliability of it. We probably replace 50 to 75 units every month. Not because the customer asks us to, but because the gear is not living up to our performance standards.
We never want to be in a situation where the customer deems we need to do something about an issue. If we’re doing our job right, we’ll do something about it before the customer knows anything. We extend that philosophy across the board—a technician can make a call to do the right thing, and we make sure our sales people have the ability and the authority to do the right thing. As long as we’re hiring quality people, I have no concern with them making the right call.
What are your goals for the next 12-18 months?
Crunk: Our general goal is to have 10% internal growth annually, and 5% through acquisitions. This year we’ll exceed that 5% acquisitions mark, and it will probably be 16% by the end of this year, just because there happens to be a lot of opportunities.
We want to continue on the acquisition trail. I would like to do three more in the second half of this year. Ideally, we would like to go into one new market every year. I suspect we’ll probably have two new markets this year, and continue to shore up some of our existing markets where I’d like to have more share. Our plan is to stay in the southeast. I don’t like cold weather, so I stay in the south. It’s probably not a good business approach, but it’s what I follow. There are too many opportunities in the south to be looking somewhere else.
How do you view the industry changing in the future, and what are you doing to adapt?
Crunk: Consolidation is continuing to happen and I think we’re going to see even more of that. In the long term, you’re going to have large, regional players and the direct operations. It’s going to be tougher for the smaller guys to compete, just because of how the business is changing. I’m making sure we’re positioning our company to be one of those large regional players. We’ll continue to see the venture capital firms, but the type of acquisitions they’re looking at are different than ours—only some overlap. They’re looking at the $40-$50 million dollar dealers, and we’re looking at opportunities up to $20 million. Most of these dealers are mature businesses that have been around a long time, working in lifestyle businesses. But they realize if they don’t do something eventually, the business is probably not going to be there. The times have changed. You don’t see many startups anymore. That’s just the way it is.
What do you enjoy the most about your job?
Crunk: The favorite part to me is seeing other people grow and meet their potential. It’s like being a coach—you’re there to develop and mentor people, and give them the tools and the resources they need to maximize their potential. All individuals want is to have an opportunity. If you get the right people in there who want to take those opportunities and run with it, then we’ve done the right thing. Watching people develop is my passion.
How are you faring with bringing aboard younger employees?
Crunk: I think we’re doing well. We have a huge amount of millennials, the 30-and-under set, that account for at least half of our sales force. I’m excited about this workforce. They work differently than my generation does, but they get the job done. A lot of us have been in business 40-50 years, and we have to change with the times. If we do business today like we did yesterday, we’ll be out of business in the future.
Outside of work, what do you do for fun?
Crunk: I keep a boat in the Bahamas and I like to go there once a month for a few days. We do a little diving, fishing and island hopping. I stay in touch with my business, but I can usually take care of everything in about an hour a day. I used to play a lot of golf, but then I had kids and decided I wanted a hobby that the family could do. So I decided to get into boating.
