At times, the family-owned and operated office technology dealership gets pigeon-holed. It’s viewed as being so steeped in its traditions that it doesn’t have the wherewithal or perspective to advance as a business in an environment M&A mavens leverage to acquire them by the pound. Leadership succession flat-spots due to a lack of interest from the offspring (or a lack thereof), and the founding father (or mother) has little choice but to cash out to a well-heeled opportunist.
However, anyone who thinks Cleveland-based Meritech subscribes to the “live by the MFP, die by the MFP” philosophy embraced by many family-run companies will quickly be disavowed. Founder and CEO Dennis Bednar may have launched the business in 1978 out of the family garage courtesy of a $500 loan from his Aunt Jean, and used his station wagon to deliver copier equipment. But aside from the familial roots, there is little that is old-fashioned about this company.
Meritech is a firm that knows how to take care of its employees, and has made culture an essential ingredient to its hiring and M&A proclivities. The company indeed has a succession plan in place; in addition to Dennis Bednar and his wife/President Mary Ann, sons Eric and Brian maintain crucial roles within the organization. Mary Ann’s brother, Ken Vanden Haute, is executive vice president.
Wanting a solution to cater to every manner of client, the company carries an expansive range of OEM wares, including Kyocera, Ricoh, Konica Minolta, Sharp and Brother. Transformation is everywhere within the organization, from its budding center for innovation to its growing managed services platform and the practice of using a subscription-based selling model. Add in a robust marketing platform that proliferates brand awareness and a plan to grow from $30 million to $50 million on the strength of organic and M&A growth (as evidenced by its 2018 acquisition of ACE), and you have a poster child for the dealer of tomorrow, as opposed to a resource-challenged lifestyle business in search of an exit.
We spoke to Mary Ann Bednar and Vanden Haute to learn more about how empowering people, process and technology is enabling Meritech to dictate its own destiny.
How was business in 2019? What were the keys that dictated your success?
Bednar: It was a year of change for Meritech. The key to our success is leading with a cloud-first mindset. Embracing this mindset helped us increase revenue across all service offerings. With our strong hardware footprint in the market, we made a decision to refresh our mission and vision to reflect our growth strategy in the managed services space. Our mission is to embrace and drive change in order to gain growth and value for our clients. Our vision is to be the best managed services provider by empowering people, process and technology.
You reported that LED solutions increased by 180% and telecom solutions grew by 140%. What does this entail?
Vanden Haute: With our LED and energy solutions, we work with the top distributors and bring them in to do full energy audits with our clients. We look at the footprint of how they consume their energy and lighting layouts to upgrade and reduce costs. By doing this, we help showcase our green initiatives and help create budget allowances so our clients can invest in other high-end technology solutions.
On the telecom side, our consulting team uses the latest technology, carrier-methods and investigative techniques to collect and analyze each billing rate element and every line item. We review multiple years of billing and contracts to establish usage patterns, detect billing anomalies, verify that each service for each facility is accurate and ensure they have best-in-class pricing.
The result is a comprehensive set of actionable steps to help our clients recover monies from their providers due to billing errors, and clear recommendations to reduce ongoing communications expenses.
What sets Meritech apart from the competition?
Bednar: Our people. We succeed as a business through passion and commitment to developing our team. Everything we do, we do to create an environment conducive to performance that our people can thrive in. We’ve created a culture of consultative, solution-based selling, rather than being product driven. If the only tool you have is a hammer, everything else looks like a nail. We coach our field team to truly understand “why” our clients’ workflows exist. We actively work with our partners to keep a close eye on transformation opportunities. Having the right processes and infrastructure in place allows our team to perform at the highest level and deliver an exceptional customer experience. We also have our own in-house leasing company, which gives us a competitive advantage in serving our clients that other dealers may not have.
Brand recognition has always played a vital role in Meritech’s growth, from event sponsorship to trade shows, radio ads and signage. Can you talk about how this platform has evolved?
Bednar: Our marketing department takes a data-driven approach to identify opportunities for brand awareness. This mindset allows us to be descriptive rather than reactive in our marketing efforts. We use search engine optimization and search engine marketing to feature content that is relevant to the needs of our clients. We’ve expanded our branding efforts on social platforms, particularly with LinkedIn. Much of our event sponsorship ties in directly to our organizational commitment to plant seeds in our community.
One of the most significant initiatives Meritech has fostered is its relationship with the Cleveland Indians and its minor league affiliates in Akron and Lake County. Can you provide some insight into the growth of this partnership?
Bednar: The Cleveland Indians and Meritech have been winning together for 17 years. It’s been a long and strong partnership. Our advertising relationship is an important piece of our brand recognition strategy. The Tribe have consistently been one of the best franchises in Major League Baseball, and the Meritech brand runs parallel to the success and methodology of the Indians organization.
Tell us about your new high-tech office in Valley View. You have plans to expand beyond Ohio; do you have any specific markets targeted?
Bednar: Alongside the success of Valley View, the transformation that’s really happening is at our headquarters. It’s the most important piece of our growth strategy. Phase one is upgrading our internal IT infrastructure, and phase two is the design and reconstruction of our demo space as a center for innovation. We want to showcase our latest solutions in an interactive environment for our clients. With the infrastructure upgrade now complete, we expect the center for innovation project to be completed by Q4 of 2020.
To that end, will you be active in the M&A space in 2020? If so, what qualities of a dealership would fit well with your business?
Bednar: We’re looking across the Midwest, but any M&A has to fit our culture. We have multiple options on the table for 2020. It’s truly about the fit. We feel many mergers and acquisitions never reach their full potential because the cultures were not aligned. ACE joining the Meritech family is a great example of shared vision. It made the transition that much easier. We aim to scale our business so that we can achieve truly sustainable growth. Our ideal acquisition would build on our existing technology stack to extend and strengthen our current market position. I think the people who also come with that vision are really important. If you’re buying a book of business, you also want to add the people who are supporting it. We want to make sure the cultures align and the people who really run the organization, make the organization. We’d look for a healthy group that we could align and develop with to add to the Meritech family.
Vanden Haute: Based on years of M&A experience, I think it’s important to make sure that the company you’re targeting has clients that are set up for the vision and future of your company. You want to make sure there are opportunities to grow outside of the copier, particularly with managed services—make sure that it’s the right account to fit your model. Or, at least, you want the dealer to have a good book of business that sustains a client base. Some acquisitions we made were built on a smaller client base that made it difficult to go to market on the additional services we offer.
In an age when finding and maintaining quality employees has become one of the top challenges for dealers, Meritech has implemented an employee-recognition program that includes monthly and annual MVP awards. Can you discuss your philosophy around recognition?
Bednar: Our people are an important asset. It’s my personal belief that it’s all about the “who.” Who we hire, how we lead, in order to build a culture. Exceptional customer service can be achieved by strong teams that support each other. There’s a strong link between our customer service and our culture. Only great people are going to provide great customer service.
Our culture is made up of an attitude of gratitude. We love to celebrate all the creative ways our team goes above and beyond to do right by the customer and our fellow employees. The MVP program that Meritech established years ago was created to acknowledge members who exemplify our foundational values of integrity, honesty and accountability. This acknowledgement continues to grow in 2020 with the launch of a new monthly GEM award, which stands for “going the extra mile.” In addition to that, we have a new Founder’s Award, which is going to be an annual honor named after our founder, CEO Dennis Bednar. This award is given to the team member who upholds the values and beliefs that Dennis founded the company upon 43 years ago. We’re very proud to do that.
Provide some insight into the development of your IT infrastructure solutions and how you’ve been able to grow the offering.
Bednar: We hired and developed the right people to build an IT infrastructure and managed service division that we’re extremely proud of. Secondly, we designed and implemented the investment into our own internal IT infrastructure. In 2019 alone, we devoted over $200,000 to various hardware and software upgrades, ranging from a highly redundant SD-WAN network, fully flash failover clusters, desktops and laptops to improve the employee user experience, and data analytics software to help them understand our customer base. This way, we truly practice what we preach, and we empower our efficiency and effectiveness in-house. Combining those two factors with the technology stack we’ve assembled to take to market makes up our formula for sustained growth.
Vanden Haute: I think today’s success is changing ever so rapidly because years ago, as we built our managed service practice, our goal was to pick up all the devices we could manage from a client, and really focusing on the contract and not the client. Today, we present a five-year technology plan that would basically replace their entire switching, routing, network, workstations, servers, PCs, security and licensing, while also eliminating as much hardware as possible and moving applications and servers to the cloud. Really selling that strategy to the clients separates us from our competition and helps us partner with the right clients.
What was your dealership’s greatest accomplishment in 2019?
Bednar: Evolving our company culture is truly a great accomplishment. By embracing a solutions-first selling model, we were able to facilitate our largest recurring revenue contract to date. This contract is a national account for which we implemented an unlimited subscription-based managed print agreement. Using the same methodology, we acquired our largest new business opportunity in the health care vertical. This deal included 300 MFPs—all application driven—followed by a subscription-based MPS contract of over 1,000 printers.
What was the biggest challenge you faced in the past year?
Bednar: Although the culture change was a success, it was definitely a challenge to get there. We worked diligently to change the internal mindset from copiers to solutions. And now our entire staff is tasked with bringing that vision to the marketplace. Netflix commoditized the way we view entertainment, and Amazon commoditized the way we shop. The same thing is happening in our industry. As printing hardware becomes commoditized, we have no choice but to evolve. We’ve incentivized our sales staff to pursue solutions-based recurring revenue opportunities.
Did you have to incorporate any new training programs to emphasize this movement?
Bednar: We have, and we will continue to do so, but it is still a challenge to get there. In the past, training consisted of learning the hardware; MFP and speeds and feeds, specs, etc. Today, the sales rep of the future is being trained on business process management and office automation applications. We are teaching our clients how they can be more efficient and streamline processes.
Vanden Haute: You also must redevelop and redesign your comp plan to match your model. This year, we actually based our president’s club on subscription-based selling, not the hardware number. So we’re really putting a focus on moving in that direction. During the last year through this process, we watched our hardware numbers grow by leading with a different format compared to other companies.
What are your goals for the next 12-18 months?
Bednar: Financially, our goal in the next 12 months is to achieve $35 million in revenue. Beyond that, through organic growth and M&A, our long-term goal is to reach $50 million in revenue. Culturally, our goal is to continue to grow and develop our leadership team. We want to drive the success of our managed services division by living out our mission, vision and values. We will continue to be actively involved in M&A based on fit, and we need to establish ourselves as the premier managed services provider in the market. It is also important to continue building trust and loyalty with our clients.
As the industry continues to contract and evolve, what will be the keys to success for the dealer community?
Bednar: Meeting the needs and exceeding the expectations of our clients. With our foundation as a copier company, we have thousands of networks in which we already operate. Our goal is to not only retain those relationships, but also to expand into managed services and really grow the recurring stream of revenue. It’s imperative to keep focus on the growth of business process optimization efforts, both client-facing and internally, to increase effectiveness. Regardless of how long you’ve been in the market, if you don’t put digital transformation at the top of your priority list, you’ll get left behind.
What do you like most about your job?
Bednar: I love to serve others; that’s true happiness for me. In order to serve businesses and provide the best products and services, we must first start by having the best people. I am honored to be part of a company that has such strong organizational commitment. We have tenured employees who have been here as long as 40 years. Ultimately, it’s not only our commitment to our customers, but also our community. We strive to serve our community through volunteer opportunities and donations throughout the year. At the end of the day, it feels good to know that our customers and community can count on us. For me, the dreams of achieving worthy goals have made every day a privilege.
Outside of work, what do you do for fun?
Bednar: Spending time with my husband Dennis and my family. We’ve been blessed with three children, and two amazing and beautiful 5-year-old twin grandchildren. Secondly, making time for my faith and community involvement, which are both top priorities in my life. Over the years, we’ve enjoyed traveling around the world, experiencing memories beyond belief. From skiing to beaching and visiting our most favorite destination, Italy, it’s been an adventure. We still live in the home that Dennis started the business in 42 years ago; he actually grew up in that home and we enjoy sharing it with our family and friends more than ever.
