2015 Survey Results July 2015 Chicago, IL JOHN HEY TODD JOHNSON

2015 Survey Results

July 2015Chicago, IL

JOHN HEY TODD JOHNSON

What To Do?

DEALERS AT THE CROSSROADS

© Strategic Business Associates 2015


WHERE IS YOUR BUSINESS GOING?


◦MFP◦Color◦Solutions◦Products◦Acquisitions◦Systems◦Talent/Staffing◦ IT Capability◦Productivity◦A4

◦ MPS◦ MNS◦ 3D Printing◦ Telephony◦ Mailing◦ Water◦ Three year plan◦ Profitability◦ Growth◦ Exit strategy

TODAY’S SUCCESSFUL IMAGING DEALERS

Preparing for change Know the numbers / Know what good looks

like Protect and leverage the profit engine Continue to develop/improve the MPS

strategy Prepare for the MNS/MSP environment


INDUSTRY TRENDS

Opportunity in Imaging◦One Trillion plus pages◦MFPs, Software, Solutions◦MPS – 72% of SMB don’t have it◦Acquisitions – Few strategic buyers/

Owners options limited◦Dealers buying dealers◦Few if any cold starts◦MNS – Lots of talk; Profits?


Client Service Focus Product Options Local Decision Making Adaptable/Agile Stable Team of People Longer Term Employees Focused on “Managed Imaging

Services” ◦ MFP◦ MPS◦ Imaging Software and Applications

IMAGING DEALER ADVANTAGE


2015 Survey ReviewPresented by


YOUR BRAIN BEFORE THE SURVEY

YOUR BRAIN AFTER THE SURVEY

THE 2015 SURVEY – WHAT’S DIFFERENT/WHAT’S NEW?

New (updated) Imaging benchmarks for

2015

Analyzed total results from all four peer

groups = “Universe”

Improved reporting for MNS/IT – SLI Format

Certification with CEO Juice is ongoing


Equipment GP Sales Expense Contribution

35% >40% 25% > 28.5% 10% > 11.5%

Supply GP – 45% > 44%

Admin Ex – 16.5% > 17%

Annual Eq Sales / Sales Rep - $420k > $450k

Annual Svc Sales / Dept. Empl - $175 > $185

Total Sales / Total Employee - $220k > $230k


2015 MODEL – CHANGES / UPDATES

Certification Update

1 - Signed Up 2-4 Various stages of software install 5 – GL account mapping started 6 – GL mapping completed 7 – Numbers reviewed

Fraser Advanced Information Systems CDA-4 Usherwood Offi ce Technology CDA-4 Business Copier Solutions CDA-5 Cobb Technologies, Inc. CDA-5 Copiers Northwest CDA-5 East Texas Copy Systems CDA-5 Image Solutions CDA-5 RJ Young Company CDA-5 Advanced Business Methods CDA-7 Advanced Systems Inc CDA-7 Boring Business Systems CDA-7 Repeat Business Systems CDA-7 Solution One CDA-7 Standard Offi ce Systems - SOS CDA-7

We show 62 CDA members with 45 on eAutomate. The 14 dealers below signed up with \6 completing.

2015 UNIVERSE DATA

127 Dealers Submitted Surveys - $2.1B

2015 Size Groups:◦27 - Group A Dealers (Rev below $5 Million)◦42 - Group B Dealers (Rev $5–$12 Million)◦38 - Group C Dealers (Rev $12–$25 Million)◦20 - Group D Dealers (Rev over $25 Million)

◦27 - High Profit Dealers Imaging Operating Income over

14%Strategic Business Associates

INDUSTRY DATA ORGANIZATION

Imaging – 91.3%◦ Traditional MFP business – 89.5%◦ Managed Print Services – 9.4%◦ Doc Solutions – Imaging Related – 1.0%

Managed Network Services – 5.5%◦ Hardware as a Service (HaaS)◦ Insourced / Outsourced Managed Services ◦ Traditional IT Service & Support

Other – Furniture, Water, Office Supplies, Internal Leasing, etc. – 3.2%

Benchmark Model Focuses Here

Strategic Business Associates

UNIVERSE MAKEUP


Based on number of companiesStrategic Business Associates

UNIVERSE TAKE-AWAYS

UNIVERSE TAKE-AWAYS

UNIVERSE TAKE-AWAYS

UNIVERSE TAKE-AWAYS

2015 CDA GROUP

56 CDA Dealers Submitted Surveys (7 did not)

2015 CDA Size Groups:◦7 - Group A Dealers (Rev $0–$5 Million)◦16 - Group B Dealers (Rev $5–$12 Million)◦19 - Group C Dealers (Rev $12–$25 Million)◦14 - Group D Dealers (Rev over $25 Million)

◦11 - High Profit Dealers Imaging Operating Income over

14%Strategic Business Associates

2015 CDA GROUP


Thanks to the following companies that submitted results ahead of the deadline:

Advance Business Systems - Md

Advanced Business Methods

Advanced Imaging Solutions, Inc

Advanced Systems, Inc

Applied Imaging

Blue Technologies Inc

Boring Business Systems Inc

Coastal Business Systems, Inc.

Coordinated Business Systems Ltd.

DATAMAX INC. - TEXAS

Documation

Electronic Office Systems

Fisher's Technology

Hilyard's Business Solutions

North American Office Solutions

Office Interiors

PERRY proTECH

SolutionOne

Stan's Office Technologies

Sumner Group Inc - KC

X-Tech Laser Printing, Inc.

CDA - All Company Revenue


Year # of Dealers Overall Revenue

2015 56 $1.23 B2014 62 1.252013 64 1.15 2012 68 1.122011 69 1.052010 73 1.012009 64 .962008 71 1.05



Universe was 21.3% of total

CDA Avg Total Rev per CompanyYear CDA A B C D 2014 $22.0$3.6 $7.9 $17.7$53.22013 $20.6$3.6 $7.6 $16.8$49.22012 $18.9$3.9 $7.0 $15.6$44.32011 $18.0$3.9 $6.7 $15.0$42.22010 $16.7$3.8 $6.7 $14.1$38.12009 $15.7$3.7 $6.7 $13.4$35.12008 $16.4$4.0 $7.0 $13.8$36.9


$’s in millions

Where is this Growth Coming From?Business 2015 2014 $Change

%Change

Imaging $1.14B $1.09B $49M 4.5%

MNS / IT $69M $59M $10M 17%

Misc $24M $3.9M $20M 513%

Total $1.23B $1.15 $80M 6.9%

(numbers in millions)

8 acquisitions reported in 2014

-Total $6M of growth (.5%)


All Company Operating Income

Year Oper Income2014 8.4%2013 8.1%2012 8.3%2011 8.4% 2010 7.8%2009 7.8%2008 7.7%


2015 UNIVERSE SURVEY MISC 17 dealers (13.4%) reported 19 acqs with $21M

rev

79% of dealers using eAutomate

1/3rd of dealers do internal leasing

◦ ½ of those via a separate entity

54% bump lease rates to field (avg 8.6%)

38% Track Net Promoter Score (Avg score 86.9) and (avg response rate 27.3%)

½ dealers have an imaging help desk (avoid 4.5 cpdpe)


2015 Survey ReviewImaging Results

Presented by


IMAGING REVENUES

Imaging still 92.4% of our business

Imaging rev increased $49 million or 4.5%

19 of 56 (34%) reported decreasing imaging revenue

14 (25%) dealers reported double digit increases

7 dealers reported double digit decreases


IMAGING REVENUES - GROWTH


Company YTDA02 45.7%C18 45.6%B16 42.4%D12 33.4%B14 29.1%UNIVERSE 8.9%CDA Group 5.2%MFP BENCHMARK 5.0%HP GROUP 0.7%B08 -21.6%C11 -23.1%B05 -30.2%A01 -38.5%D08 -49.5%

Equipment Revenue GrowthCompany YTD

B09 216.2%D05 197.5%B14 162.1%D04 71.3%C01 71.0%MFP BENCHMARK 5.0%HP GROUP -1.5%UNIVERSE -3.0%CDA Group -5.3%C18 -43.9%A05 -53.7%C13 -58.4%B07 -72.5%B11 -88.4%

Rental Revenue Growth



Company YTDC02 27.7%D07 26.3%D10 25.2%C13 22.1%C06 21.6%UNIVERSE 10.1%HP GROUP 5.8%CDA Group 5.3%MFP BENCHMARK 5.0%B13 -13.1%B14 -13.3%A05 -15.3%B06 -15.8%A04 -33.2%

Supplies Revenue GrowthCompany YTD

D07 24.0%B13 23.8%A03 21.9%D02 19.1%D09 18.6%MFP BENCHMARK 5.0%HP GROUP 4.0%CDA Group 3.9%UNIVERSE 3.6%A04 -9.7%C18 -10.4%C11 -15.3%A07 -15.7%C07 -19.3%

Service Revenue Growth



Universe = 7.0%

Company YTDD12 21.6%B16 21.6%A03 14.3%C18 13.7%C03 13.7%UNIVERSE 7.0%MFP BENCHMARK 5.0%CDA Group 4.5%HP GROUP 2.4%A07 -10.5%A04 -10.9%B05 -14.5%C11 -15.9%A01 -18.9%

Imaging Revenue Growth

IMAGING REVENUES


IMAGING REVENUES


2015 UNIVERSE SURVEY


2015 UNIVERSE SURVEY 25% of dealers reported dedicated MPS Sales

reps

60% of dealers use an annuity type comp plan

Collectively 9.4% of Imaging Revenue & OI = 9.3%

37% of HP Group reported dedicated MPS Sales reps

HP Group =12.8% of Imaging Rev & OI = 18.9%

Separate MPS Benchmark model with OI = 17%Strategic Business Associates

IMAGING REVENUES


IMAGING REVENUE MIX TRENDS

2011 2012 2013 2014

Eq 46.7 45.1 46.5 46.8

Supp 19.249.7

20.351.4

19.550.4

19.750.4

Svc 30.5 31.1 30.9 30.7

Rtl 3.6 3.5 3.2 2.9

Relatively stable and balanced growth compared to other groups.


AFTERMARKET PACING EQUIPMENT GROWTH?

MPS the Reason? (mostly aftermarket)• MPS % of imaging 2013 Survey – 4.9%• MPS % of imaging 2014 Survey – 4.9%• MPS % of Imaging 2015 Survey – 8.0%

Color Clicks Replacing B&W Clicks? (Higher CPP)• B&W to Color Ratio

o 2013 Survey ratio 8.5:1o 2014 Survey ratio 6.8:1o 2015 Survey ratio 5.8:1

What happens as the migration to color tapers off? Are there enough “net new” equipment sales to drive additional

clicks?


REVENUES - PRODUCTIVITY


Company YTD Company YTD Company YTDD02 344$ D02 689$ A07 1,569$ C18 313$ C18 674$ D02 1,096$ D03 281$ B12 563$ C09 1,019$ C06 276$ A07 523$ B12 939$ C17 270$ D03 482$ C18 898$ MFP BENCHMARK 230$ MFP BENCHMARK 350$ CDA Group 473$ CDA Group 223$ CDA Group 322$ UNIVERSE 456$ HP GROUP 221$ UNIVERSE 286$ MFP BENCHMARK 450$ UNIVERSE 217$ HP GROUP 269$ HP GROUP 441$ C05 169$ B08 179$ B08 308$ A03 161$ A01 177$ A03 300$ A02 160$ A05 176$ C03 296$ A05 139$ B10 169$ A05 221$ A01 139$ D08 39$ D08 67$

Total Sales / Employee Eqpt. Sales / Sales RepEqpt. Sales / Sales Dept. Employee

REVENUES - PRODUCTIVITY


Company YTD Company YTDC18 241$ D02 2,384$ C04 232$ B02 1,995$ C10 230$ C06 1,587$ C03 225$ C08 1,534$ C17 216$ D05 1,517$ MFP BENCHMARK 185$ CDA Group 1,123$ HP GROUP 167$ UNIVERSE 1,059$ UNIVERSE 164$ HP GROUP 956$ CDA Group 161$ MFP BENCHMARK 950$ D14 131$ C04 578$ B09 130$ B11 563$ D12 130$ A03 505$ C05 119$ A05 397$ B07 117$ A01 381$

Svc. Sales / Service Dept. Employee Total Sales / Admin Dept. Employee

IMAGING GROSS PROFIT


TOTAL GP – 44.7%


EQUIP GP – 40%


SALES EXPENSE – 28.5%


EQUIPMENT CONTRIBUTION – 11.5%


EQUIPMENT CONTRIBUTION – 11.5%


Company YTD Company YTD Company YTD

C04 66.4% B13 16.0% A04 35.1%D06 62.0% C11 19.5% C04 33.3%A04 56.5% B15 21.1% D06 26.9%A03 53.9% B05 21.2% B05 23.6%HP GROUP 51.5% B07 21.3% B13 21.3%D08 48.3% MFP BENCHMARK 28.5% HP GROUP 14.4%UNIVERSE 40.9% UNIVERSE 33.8% MFP BENCHMARK 11.5%CDA Group 40.8% CDA Group 34.0% UNIVERSE 7.2%MFP BENCHMARK 40.0% HP GROUP 37.1% CDA Group 6.8%B16 29.1% D11 44.1% D04 -11.5%A02 28.8% A01 44.3% B10 -17.6%D04 27.1% B08 45.3% C19 -18.4%C19 23.5% B10 47.5% A01 -25.4%A01 18.9% D08 393.5% D08 ######

Equipment Gross Profit Equipment ContributionSales Expense

SUPPLIES GP – 44%


SERVICE GP – 52%


SERVICE EXPENSE COMPONENTS


AFTERMARKET GP – 49.1%


AFTERMARKET GP – 49.1%


Company YTD Company YTD Company YTD

B11 79.2% C10 65.3% B11 59.6%B03 64.3% D06 60.8% B13 58.4%B13 56.3% D14 60.8% D08 57.6%D08 52.7% D08 60.3% D06 54.5%D01 52.6% A05 60.0% D11 54.5%HP GROUP 46.4% HP GROUP 56.5% HP GROUP 52.5%MFP BENCHMARK 44.0% MFP BENCHMARK 52.0% MFP BENCHMARK 49.1%CDA Group 38.8% CDA Group 47.9% CDA Group 44.3%UNIVERSE 38.7% UNIVERSE 47.3% UNIVERSE 44.0%C10 24.6% D03 34.1% C13 32.4%D03 21.2% D01 34.0% D03 29.9%B07 20.2% B07 31.9% A04 29.3%C13 17.6% B14 31.1% B07 27.8%C09 10.3% A04 29.6% C09 26.6%

Supplies Gross Profit Service Gross Profit Aftermarket Gross Profit

SERVICE PRODUCTIVITY


SERVICE PRODUCTIVITY-U


SERVICE CALL PRODUCTIVITY


Determining Workloads Lost (A.T.)◦ Tech Gross Calls X Avg Call Time = Fix Time◦ (Tech Gross Calls – 1) X Avg Drive time = Drive Time◦ Avg Daily Training/Other Allowance = Misc Time◦ Sums to productive time per day Productive

◦ Full day – Productive time = Unaccounted time

◦ Unaccounted time X # techs / Full day = Workloads Lost

◦ Accountable Time Benchmark 7.5 hpd or 450 mpd (not including training/misc allowance)



Workloads Lost Example (general) (A.T.)◦ GCPD 4.3 X Avg Call Time 70.7 min = 304m◦ Drives 3.3 X Avg Drive time 29.2 min = 96m◦ Avg Daily Training/Other Allowance = 43m◦ Sums to productive time per day 443m

◦ Full day – Productive time = Unaccounted time◦ 480m – 443m = 37m/day/tech

◦ Unaccounted time X # techs / Full day ◦ 37m x 1615 techs = 124 tech days (workloads) lost



Workloads Lost Example Benchmark Model (A.T.)◦ GCPD 4.3 X Avg Call Time 70.7 min = 304m◦ Drives 3.3 X Avg Drive time 29.2 min = 96m◦ Sums to productive time per day 400m

◦ Full day – Productive time – 30 mpd = Unaccounted time◦ 480m – 400m – 30m = 50m/day/tech

◦ Unaccounted time X # techs / Full day ◦ 50m x 1615 techs = 168 tech days (workloads) lost



Determining Workloads Lost (Breakage)◦ BM CDA Var◦ Gross CPD 5.0 4.3 (.7)◦ - Call Backs (10%) (.5) (.5) (0)◦ - Incompletes (8%) (.4) (.65) (.25)◦ = Net CPD (82%) 4.1 3.15 (.95)

◦ Callbacks Var + Incomplete Var = Excess Breakage◦ (0) + (.25) = (.25) cpd per tech or 5.8% of calls

◦ Excess Breakage % X # Techs = Workloads Lost◦ 5.8% X 1615 Techs = 94 tech (workloads) lost



Workloads Lost Final◦ Benchmark Accountable Time Workloads Lost = 168◦ Benchmark Excess Breakage Workloads Lost = 94◦ Total excess workloads 262◦ % of Total Techs as excess =16%

Service Productivity targets◦ Avg Tech should make 80-100 gross monthly calls (avg 90)◦ Avg 1.8M monthly MFP clicks billed per MFP Tech ◦ Avg 3.75M monthly Print clicks billed per Print Tech◦ CDA avg 1.64M clicks/tech combined

CDA ADMIN EXPENSE

The CDA has traditionally done a good job of controlling their admin expenses compared to the other trade associations

The CDA admin expense improved noticeably this year to 17.6%, down from 19.4% in 2013 and 19.6 in 2012.

Still a small opportunity here as the CDA average is over the model of 17.0% ($6.3m)


ADMIN BY SIZE GROUP – 17.0%


ADMIN COMPONENTS


IMAGING OPERATING INCOME




Company YTD Company YTD

C17 12.6% D06 22.3%D02 12.7% C04 21.8%C19 13.2% D10 18.8%D07 13.5% C06 18.7%D10 13.6% B11 18.7%MFP BENCHMARK 17.0% HP GROUP 18.6%HP GROUP 17.1% MFP BENCHMARK 14.0%CDA Group 17.6% CDA Group 9.4%UNIVERSE 17.9% UNIVERSE 9.3%A02 27.0% C13 1.1%B08 27.6% C12 0.9%A01 28.3% D04 0.4%A03 30.8% A01 0.2%A05 34.7% B08 -1.9%

Operating ProfitAdministrative Expenses



UNIVERSE IMAGING OI



UNIVERSE IMAGING OI

OPERATING INCOME

All dealers need to be focusing on their operating income

Operating income is imperative for dealers looking to sell their companies

Provides the cash to grow your business and enter into new business offerings

“Profits are the purchase of future employment!”


2015 Survey ReviewMNS / IT Results

Presented by


SLI MODEL FOR IT COMPANIES

Major division in Categories: Products/Services

Products further broken down into subcategories:

◦ Hardware/Software/Packaged Services/Real Services/White Label Services/SW licensing/Commissions

Services further broken down into subcategories:

◦ Infrastructure/Applications

◦ Tech Services/Project Services/Managed Services/Shared Infr

SG&A then a function of Total Revenues


MEASURING MANAGED SERVICES-U






MEASURING MANAGED SERVICES
























OPERATIONAL MATURITY LEVELS©

Beginning: Don’t know what you don’t know. Largely trial and error.1

Emerging: Basic understanding of profit levers but few controls or forward planning.

2

Scaling: Basic controls. Some forward budget planning, little attainment tracking.

3

Optimizing: Robust controls. Detailed forward budget planning & attainment tracking. Comp tied to attainment.

4

Innovating: Same as OML 4 but now extending to LOBs adjacent to IT.5

Ability to

Execute to

Best-i

n-Class

The S-L Index™ also measures the IT Solution Provider’s Operational Maturity Level (OML 1 through 5), a direct comparison of their functional methods as compared to Best-in-Class in their specific business model. This enables rapid identification of specific steps needed to adopt Best-in-Class methods.

2015 Survey ReviewFinal Thoughts

Presented by


FINANCIAL SKILLS, KNOWLEDGE AND LEADERSHIP

Upcoming Workshop Dates and Locations:• Oct. 8-9, 2015 - ProCopy Office Solutions Inc.,

Tempe, Ariz.


GOOD PERFORMANCE IS: Not Based on:

◦Size◦Product line◦Geography◦Location

Based on:◦Management skill◦Exceptional leadership◦High capacity teams and people


WHERE DO WE GO FROM HERE?

All of Business is about making changes -before they are shoved down your throat.

Use the model to drive profitable growth.

Proceed carefully into new business segments –

IF the core business is performing.

Insure service productivity is in place before the

benefit color revenues starts to wane or decline.


THANK YOUPresented by


Documents

2015 Survey Results July 2015 Chicago, IL JOHN HEY TODD JOHNSON