Page 1

VOLUME 23 NO. 11

Connecting People, Ideas and Products in the Document Imaging Industry since 1994 Connecting People, Ideas and Products in the Document Imaging Industry since 1994

NOVEMBER 2016

BEYOND TRADITIONAL PRINT: Three Product Lines to Consider

engage ‘n ‘n exchange engage exchange Waltz Business Solutions— Celebrating 125 Years of Family, Fun, and Success The Value Speak Of MPS! Understanding Tolerance Stack to Maximize MPS Profitability

ADJACENCY - THE NEW BUZZ WORD

3D Printing Presents Several Business Opportunities

PLATINUM LEVEL

Multiple Mania: Current Market Multiples & What Your Banker Won’t Tell You

inner • dW

rvice Exc Se

Office Technology Service Excellence Award

m Awar inu

ence Plat ell

The Product Specialist Business Profile

ENX Magazine ENX Magazine PO Box 2240 Suite 729 PO Box 2240 Suite 729 Toluca Lake,CA CA 91610-0240 USA Toluca Lake, 91610-0240 USA tel: 818-505-0022 tel: 818-505-0022 / fax: 818-505-9972 fax: 818-505-9972 email: enx@pacbell.net www.enxmag.com email: enx@pacbell.net

www.enxmag.com

We would like to thank those of you who have sent us address change information. HELP US CONSERVE NATURAL RESOURCES To correct or delete your address from our subscription list, please call, fax or email us.


YOUR SOLUTION for CanonÂŽ dongle gear patents

SafeDrive Technology TM

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ONLINE SALES TRAINING NEW HIRE MANAGED PRINT

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LMI Solutions is an R2 certified manufacturer, distributor and recycler of premium replacement toner cartridges, related imaging supplies, remanufactured printers and turnkey Managed Print Infrastructure services. LMI distributes more than 5,000 SKUs, including the most popular OEM products, and is a recognized global leader for empowering dealers with Managed Print Services & Support. Recently, BTA channel member voting selected LMI as the Winner of "Best Remanufactured Cartridges" following recognition from the MPSA and the coveted Readers’ Choice Award for the industries "Best MPS Program" and "MPS Infrastructure Provider".

602.278.5234 602.278.5234 602.278.5234

lmisolutions.com lmisolutions.com lmisolutions.com


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Clover Imaging Group and its logo are a trademark owned by Clover Technologies Group, LLC, and may be registered in the United States and other countries. 499916A


In This Issue

16

STATE OF THE INDUSTRY

Beyond Traditional Print: Three Product Lines to Consider By Michael Nadeau

26 30

36

40 44

30

48

50 54

36

56 57 62

44 6

58 •

www.enxmag.com | November 2016

MARKET INTELLIGENCE Adjacency - The New Buzz Word By Ed McLaughlin DEALER SPOTLIGHT Waltz Business Solutions—Celebrating 125 Years of Family, Fun, and Success By Christina Kim BUSINESS PROFILE Frontier Imaging Succeeds with Reliability, Price, and Responsiveness By Editorial Staff MPS SALES The Value Speak Of MPS! By Charles Lamb SERVICE EXCELLENCE PLATINUM AWARD WINNER Culture Change at California Business Machines Drives Service to New Heights By Michael Nadeau MPS MANAGEMENT Understanding Tolerance Stack to Maximize MPS Profitability By Doug Johnson 3D PRINTING 3D Printing Presents Several Business Opportunities By Cary Sherburne EXIT STRATEGY Multiple Mania: Current Market Multiples & What Your Banker Won’t Tell You By Jim Zipursky SERVICE MANAGEMENT The Product Specialist By Ken Edmonds PRINTER TECH TIP By LaserPros TECHNICAL TIPS Differences in the Xerox® C123 Style and Introducing the WC-5335 Family By Britt Horvat DISPLAY ADVERTISERS INDEX We Saw It In ENX Magazine


OPPORTUNIT Y

Expect More

Grow Your Business & Profits with OKI Data Ground-Breaking Technology Leadership Outstanding color output on a widerange of media.

Comprehensive Sales & Marketing Support Providing the necessary tools— including eMail Marketing, TCO calculator, proposal generator— to help you engage end-users & drive profitability.

Channel Loyalty

Smart MFP Open API to embed solutions directly in the MFP.

Other OEMs may look to sell directly to your end-users, not OKI. For over 40 years, we have been focused on our channel partners and keeping them profitable.

Product Line Recognition 2015

24x7x365 Customer Support OKI is on your side 24 hours a day, every day, with a US-based customer service center. We provide a dedicate BTA hot-line to keep your customers up & running.

A full line of printing & MFP solutions to meet all of your customers' needs.

Partner with the only manufacturer that delivers a full-line of printing technologies & solutions - Call Today (856) 222-7083 © 2015 OKI Data Americas, Inc. OKI, Reg. T.M. OKI Electric Industry Co., Ltd., Reg. T.M. OKI Data Corporation.


Contributors

Staff

KEN EDMONDS is currently employed as a District Service Manager for a major copier manufacturer. He has an extensive background in the imaging business, having owned a successful dealership, serving as service manager for multiple dealerships, and as a Document Solutions Specialist for Sharp Electronics. He has more than 40 years of experience in the electronics and computer fields. For further information email him at Ken.Edmonds@CKE-Enterprises.biz

Susan Neimes Publisher & Managing Editor

DOUG JOHNSON is the Chief Strategy Officer of LMI Solutions and has more than 30 years of senior level Management and Marketing experience in the Document Imaging Industry. A noted industry speaker and futurist, Doug is responsible for shaping LMI’s strategic direction and ensuring the company builds upon its 20 year growth trajectory and continues to deliver profitable, cutting edge solutions to LMI’s partner network.

Michael Nadeau Editorial Director

CHARLES LAMB is the President and CEO of Mps&it Sales Consulting. His firm delivers proven methodologies and processes that assist dealer principals seeking a successful transformation into the managed services space. He’s created complementary solutions including Funnelmaker, Gatekeeper, and Shield IT services. For more info, call 888.823.0006, e-mail him at clamb@mpsandit.com, or visit www. mpsandit.com.

Todd Turner Contributing Editor

ED MCLAUGHLIN has more than 40 years of experience in the information and imaging industries. He was President of Sharp Imaging & Information Company of America for more than nine years and Executive Advisor at Sharp Electronics for nearly two years. Ed was recently appointed Vice-Chairman of Innovolt, Inc., a provider of powerprotection solutions and analytics. He is currently President and CEO at Valderus and serves on the Board of Advisors for Continuum Managed Services.

Ronelle Ingram Contributing Editor

CARY SHERBURNE is a well-known author, journalist and marketing consultant for the printing and publishing industries. She was inducted into the Soderstrom Society in 2015 and awarded the 2009 Thomas McMillan Award for excellence in journalism. Sherburne has written six books, including Digital Paths to Profit, and most recently, No-Nonsense Innovation: Practical Strategies for Success, written with the late Bill Lowe, the Father of the IBM PC. Prior to launching her consulting practice in 2002, Ms. Sherburne was the VP of Marketing and Outsourcing Solutions at IKON Office Solutions. She can be reached at cary@ SherburneAssociates.com.

Christina Kim Associate Editor

JIM ZIPURSKY is the Managing Director of CFA-MidWest, an investment bank serving the middle market. Jim is a registered representative of Silver Oak Securities, Inc., and a member of FINRA/SIPC. For more information, visit www.cfaw.com/omaha. Follow Jim on Twitter (@ jazcfane) for articles and information about M&A. For more information about Exit Strategies or Selling Your Business, feel free to contact him at (402) 330-2160 or jaz@cfaomaha.com. TECHNICAL ARTICLE CONTRIBUTOR BRITT HORVAT works for The Parts Drop, a company whose primary business is providing parts, supplies and information for Xerox brand copiers, printers and fax machines. You can find more information, including many of Britt’s past ENX articles on their website www. partsdrop.com.

8

www.enxmag.com | November 2016

engage ‘n ex engage ‘n exchange engage ‘n exchange

México & Latin America

La Revista del Distribuidor Dealer Source

engage ‘n exchange

Corporate Office

Susan Neimes - susan@enxmag.com Michael Nadeau - Michael@enxmag.com 10153 1/2 Riverside Drive, Suite 729 Toluca Lake, CA 91602 tel. 818-505-0022 • fax. 818-505-9972 ENX Magazine is published monthly by Affinity Business Communications, Inc. Any inquiries should be sent to: enx@pacbell.net or mailed to the corporate office. Copyright ©2016 by ENX Magazine printed in the U.S.A. All reproduction in whole or part is prohibited without written permission. Cover photo from depositphotos.com

We Saw It In ENX Magazine


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All supplies & Parts available for prompt delivery! ENX Magazine | www.enxmag.com

All prices, rebates, and availability are subject to change without notice. Please call us to confirm.

Nuworld is not responsible for typographical errors or inaccurate specifications. Registered trademarks are properties of their respective owners.


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Image shown: SD375

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$

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SD375......80-100-130 sheets per minute SD440..............60-130 sheets per minute SD710..............60-135 sheets per minute

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110

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CT-S801

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Copiers, Faxes, MFPs, Printers, Scanners

300mm/s / 256K Mem.

CT-S601 Image shown: CT-S801

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MS315DN | 37PPM MONO LASER MFP.......................$90 REBATE PLEASE CALL FOR MARCH REBATES INFORMATION!

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Parts Order Hotline: 562.977.4949

All prices, rebates, and availability are subject to change without notice. Please call us to confirm.

Nuworld is not responsible for typographical errors or inaccurate specifications. Registered trademarks are properties of their respective owners.

NBS / ENX | November 2016


Since 1985

Your Prime Source T EL: 800. 729. 8320

FAX: 800. 829. 0292

INSTANT REBATE SALE! ALL INSTANT REBATE PROMOS ARE VALID THROUGH SEPTEMBER 30, 2016 TO CANON PREMIER PARTNERS OR WHILE SUPPLIES LAST!

D1520 / D1550

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200 150 $REBATE

$

REBATE D1520

Both models can only be sold to 3P Authorized Dealers!

D1550

125 75 $REBATE

$

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MF419DW

MF515DW

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$

MF820CDN can only be sold to 3P Authorized Dealers!

REBATE 810CDN

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65

$

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85

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NEW INTRO

Image Shown: MF628CW

Color Digital Copy/Print/ Fax/Scan MFPs w/ Duplex & W-Ntwrk • 21/21ppm (BW/Color) MF729CDW can only be sold to 3P Authorized Dealers!

135

175 $105

$

115

REBATE

Image Shown: MF729CDW

$

REBATE

REBATE REBATE

MF628CW

MF726CDW MF729CDW

LBP251DW / 253DW LBP351DN / 352DN

LBP6780DN

B&W Laser Duplex Printers w/ W-Network

B&W Laser Duplex Printers w/ Network

B&W Laser Printer with Duplex and Network

Color Laser Duplex Printers with Network

• 30ppm (LBP251DW) • 35ppm (LBP253DW) • 64MB Memory

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• 42ppm • 500-Sheets + 100-Sheet MPT • 768MB Memory • USB 2.0 Hi-Speed, Ethernet

• 21/10ppm Color/B&W (LBP7660CDN) • 33/33ppm Color/B&W (LBP7780CDN)

LBP253DW can only be sold to 3P Authorized Dealers!

$

75

REBATE

Image Shown: LBP253DW

$

60

REBATE

LBP251DW LBP253DW

Both models can only be sold to 3P Authorized Dealers!

175 $210

$

REBATE

REBATE

351DN

352DN

325

$

REBATE

LBP7660CDN / 7780CDN

Image Shown: LBP6780DN

Image Shown: LBP7780CDN

200 $275

$

REBATE

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7660CDN

7780CDN

All supplies & Parts available for prompt delivery! ENX Magazine | www.enxmag.com

All prices, rebates, and availability are subject to change without notice. Please call us to confirm.

Nuworld is not responsible for typographical errors or inaccurate specifications. Registered trademarks are properties of their respective owners.


Copiers • Printers • MFPs • Faxes • Scanners E m a i l : i n fo @ n u w o r ld in c.co m

O r der O nl i ne! w w w. n u w o rl d i n c. co m

Blind Drop Shipping

Same Day Shipping

BIG SALE! FAXES

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UF-4500

UF-5500

Laser Fax w/ PC Print, Color Scan

319

10

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Michael Nadeau

State of the Industry News Briefing

Beyond Traditional Print: Three Product Lines to Consider

W

ith traditional printer/ copier sales flat, what dealer isn’t looking to expand its business? Ideally, any new product line should provide good margins and profitable recurring revenue. It should also mesh well with the needs of the dealer’s customer base and inhouse capabilities. Those options exist, and ENX Magazine this month looks at three of them: label and barcode printers, digital signage/professional displays, and 3D printers. They all won’t be a good fit for every dealer, and none of them will be a seamless addition to your offerings. Expect to make investments in training and equipment, and to prepare for a different type of conversation with your customers. Dealers who have made the investment in research, staff, and training, however, report success and foresee good growth.

Label Printers Find a Surprising Niche Among Dealers

Think about everything you see each day that has a printed label. Food product labels show ingredients or health benefits. Product labels grab attention or show government-mandated information. You have a similar scenario with the label printer’s close cousin, the barcode printer. “Anyone who ships materials and puts a label on the box will 16

www.enxmag.com | November 2016

buy a thermal barcode printer,” said Bill Melo, chief marketing executive at Toshiba America Business Solutions. He cites logistics, manufacturing, and retail as key verticals for barcode printers. Estimates for overall growth in the digital label printing market run as high as 40 percent per year. “Every dealer has customers that can benefit from [label printing] technology,” Dino Pagliarello, said Dino Konica Minolta. Pagliarello, VP of product management and planning at Konica Minolta. He sees a growing global trend from print to digital, where printing technology is integrated with information technology. That’s a trend he believes dealers can exploit. Most label production is outsourced to printing companies with large label converters, but that’s a problem for companies that need short runs. “Label converters require volumes of at least 50,000 to 100,000 [to be cost effective],” said Lou Stricklin, director of marketing and sales support at Muratec America. “Short runs of 500 to 5,000 are wasteful or very expensive.” This gives channel partners the option of providing label printing services of their own. We Saw It In ENX Magazine

A dealer with a label printer can do a run of that size in a couple of hours and generate a little revenue. “And it keeps them fresh on the equipment,” said Stricklin. Eventually, those small customers might grow to where they want a system in-house, he added. Muratec recently launched its line of label printers, the PLS2112 and PLS-5150, designed for those shorter runs. Stricklin said these printers are finding traction in micro-breweries, wineries, light manufacturing, and even the emerging cannabis industry in Washington and Colorado. “We have an emergency lighting manufacturer that has 16 labels on one product, and they change [the labels] throughout the year,” he said. Stricklin sees label printers as a good fit for printer/ copier dealers. In fact, Muratec is Lou Stricklin, leveraging Muratec America its printer channel partners to sell the label printers. “Printer/copier dealers understand toner technology and the need for a two-hour service time,” he said. “They have full service teams on staff and know how to support. And they can wrap their heads around the [label printing] applications easily.” continued on page 18


Beyond Traditional Print: Three Product Lines to Consider Muratec’s channel partners are finding success within their existing customer bases for the label printers. Stricklin believes there’s plenty of net-new business potential as well. “There’s a set of varied prospects to go out to. It’s the best of both worlds for us.” About 20 of Muratec’s channel partners are fully on-boarded to sell its label printers with another six or seven in the queue, according to Stricklin. The goal is to have 40 by the end of the company’s fiscal year in March. “Partners with experience selling production or wide-format printers are well set up to succeed,” said Stricklin. “They really get it and know how to aggressively attack a market.” Some customers won’t have the volume to justify the purchase of a label printer, but some of Muratec’s partners are using that to their advantage. “Not every prospect will be a solid customer for an in-house system,” said Stricklin. “A lot of small businesses need runs of only 200, 300 labels.” Muratec requires its label printer channel partners to purchase a printer and finisher so that they become familiar with it and can demonstrate it. They also go through a three-day on-boarding process. At the end of on-boarding, the company helps the partner set up an open house where prospects can bring in sample label files to run on the system. They leave with professionally developed labels. The on-boarding process is included in the price of the equipment. The MSRP of a Muratec label printer system can run as high as $65,000. The good news is that margins are much higher on the hardware, which is typically leased. The better news is that not only do label printers consume a lot of toner, dealers also get a second recurring revenue stream in media sales. “You can die cut to any design,” said Stricklin. “Customers can create unique, powerful labels.” To assist its channel partners, Muratec has a media specialist who can help negotiate with providers to source media for their customers. Konica Minolta’s laser-based label printer, the C71cf, also targets smaller

runs that are not efficiently produced by converters, but in the 8,000 to 15,000 range. According to Pagliarello, some label converters are buying Konica Minolta label printers to handle those shorter runs more cost-effectively. With both label and barcode printers, the decision maker is probably not the same person as for office equipment. It might be someone in operations, logistics, or a shop foreman. The OEM onboarding programs recognize this and show resellers how to identify the decision maker and frame the conversation. “Konica Minolta has a core team focused on label printers,” said Pagliarello. “We work with dealers to build appropriate business plans and help them make the right moves.” Pagliarello said that margins on Konica Minolta’s label printers are similar to or slightly better than selling a color MFP product. Service can also be a good recurring revenue stream if a dealer chooses to handle it in-house. The biggest differences in the technology are the roller-based feeding mechanism and the lack of a sheet feeder. There are actually fewer moving parts on Konica Minolta’s label printers than an MFP. Konica Minolta will handle servicing if the dealer wishes it. Dealers can also expect higher toner consumption due to the high volume of printing and higher toner coverage. Media for the Konica Minolta label printers is sourced through a third party, but dealers can work with customers to recommend and order substrates, earning another recurring revenue stream in the process. Epson America offers production digital label presses and commercial color label printers. The SurePress digital label presses are intended to replace analog presses and can handle high volumes and do color matching. Models such as the L-4033 are easy to use for a production system, according to Andy Scherz, Epson’s senior product manager. They start as low as $185,000, and Scherz said that sales rate for these systems doubled last year. “Analog is a black art,” said Scherz. They produce high quality labels, but are

difficult to use and expensive. Digital options like the Epson’s commercial label line allow companies to match analog quality without the overhead Andy Scherz, Epson of an analog press. For companies with print runs not quite big enough to get the best pricing from a print shop, a digital press offers real value. It gives businesses more control and eliminates lead times associated with print shops. Epson’s ColorWorks color label printer models are compact and produce high-quality inkjet output for smaller runs. The media comes on a roll and labels are produced quickly, in just the right quantity needed at the time. What’s driving demand for label printers are trends toward smaller production batches and customization, said Scherz. “The demand is to be nimble with label printing,” he said. “Shorter runs, more customization. [For example,] a micro brewery can do community marketing on the label that says, ‘Go Tigers’ or ‘Go Rodeo Days.’” For its high-end printers, Epson prefers a channel partner who takes a VAR approach. “VARs figure out the whole solution,” said Scherz. That solution includes integration services, software, and understanding what a customer needs for the types of jobs it wants to do. For example, what kind of label stock is needed? How do you do die cut labels? A customer might need additional hardware that Epson does not sell, such as an unwinder. “We want the channel to compete on value, not on price,” said Scherz. Epson has taken steps to help channel partners to stay within that policy and maintain margin. It sells ink only to its partners, and partners have little room to deviate from Epson’s retail price. “The installed base can be quite lucrative on follow-on ink sales,” said Scherz. “The label market is extremely dynamic,” said Scherz. “This label must not tear, or must tear easily, or it must be permanent or easy to remove.” Epson continued on page 20

18

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Beyond Traditional Print: Three Product Lines to Consider does not expect its partners to understand all the possible media qualities and different adhesives, so it has qualified run stock for use on Epson printers. Dealers can match the requirements to the specifications of a particular stock and place an order on behalf of its customers, earning margin in the process. “It’s probably the biggest revenue stream of the business,” said Scherz. Toshiba offers a wide range of thermal barcode printers in different widths, resolutions, and speeds. About 10 percent of Toshiba’s barcode products sales go through BTA dealers, according to Melo. The rest are sold direct to enterprise accounts or VARs. That split does not mean the opportunity is small for dealers— think about how many barcode printers a Fedex or UPS uses. A regional dealer is not equipped to handle those large accounts, but it can serve many smaller companies that depend on barcode printers better than the OEM. Melo says that barcode sales within the dealer channel are growing at “double-digit” rates. Margins on barcode printers can be good, especially if you lease them in quantity. “The margin on our first leasing deal was $20,000 on a Jim Shambre, Mid $30,000 sale,” said Ohio Strategic Jim Shambre, corTechnologies porate sales manager at Mid Ohio Strategic Technologies, which resells Toshiba barcode printers. However, recurring revenue opportunities for barcode printers are smaller. Since many barcode printers use thermal transfer technology, there is some consumables revenue in ribbon sales. They typically are sold with service contracts, but thermal barcode printers are relatively simple machines with low service needs. Mid Ohio Strategic Technologies got into the barcode printer business by accident, according to Shambre. “One of our reps said that every time he went into a client site, they had bar-code printers all over the place. There had to be an oppor-

tunity there.” The rep got an appointment with the client to talk about its barcode printer business, and Shambre enlisted the help of a Toshiba barcode rep for the meeting. Eventually, they won that client’s barcode business. “The language we speak [for barcode printers] is a little different, but it’s not earth shattering. It’s not a complex product,” said Shambre. “It’s a longer sales cycle in some cases,” he said. “If a client has thermals in place, they’re going to run them until the wheels fall off.” Barcode customers tend to order their own labels through third-party sources. Toshiba does offer a program to dealers where they can work with those sources to resell labels, taking the order and having the third-party provider fulfill it for a percentage of the sale. Shambre has not taken advantage of that program, but hopes to in the future. Nonetheless, Shambre sees value beyond the margins in hardware for barcode printers. “Barcode gives us an opportunity to go into a prospect where we have no traction and talk about a new product and build excitement around it,” he said. A key goal for Mid Ohio Strategic Technologies in the coming year is to get the printer/copier business from customers who currently buy only barcode printers from them.

Demand for Digital Signage Growing

You see digital signage, also referred to as professional displays, everywhere. Why use a static sign, point-of-sale (POS) display, or bulletin board when you can have a video display that you can change on a whim and show video or animation? You’d think there’s an opportunity for the printer/copier channel, and there is. However, it might not be what you expect. Copier dealers represent a “significant and growing” portion of Sharp’s $250 million in annual digital signage sales, said Mike Marusic, senior VP marketing, operations, and technical services at Sharp Imaging and Information Company of Americas. The traditional A/V channel makes up the bulk of the sales,

but Marusic sees opportunities for office equipment/digital imaging dealers where digital signage applications are integrated into the document workflow process. “Start with what you know,” said Marusic. He noted that some Sharp dealers have had success selling turnkey document workflow systems that incorporate digital signage. The BTA channel accounts for about 20 percent of Toshiba’s digital signage sales, according to Melo. He says that declining page prints Bill Melo, Toshiba are encouraging America Business dealers to look at Solutions digital signage, and he noted that Toshiba is seeing 100 percent growth in channel sales revenue for digital signage. “What is replacing printed pages?” he said. “People are consuming information on screens more than ever before. Screen time is replacing pages.” Margins on the hardware are about 30 percent, and service contract margins can be as high as 50 percent according to Melo. However, the dollar amounts for hardware sales into SMBs are typically smaller than for MFPs or copiers, and digital signage requires relatively little service. A good recurring revenue stream is possible for dealers selling digital signage if they are willing to try something new: digital content management and development. Like a website or blog, the effectiveness of digital signage depends on the quality, freshness, and presentation of that information. Many businesses don’t have the inclination or in-house resources to develop that content and then design how it appears on the screen. Some applications also require management of a content schedule, where different content appears depending on the time or context. Offering a turnkey solution of hardware, network, software, and content is key. “A company that helps organizations do it all would be a really valuable asset,” said Melo. Taking a managed continued on page 22

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Beyond Traditional Print: Three Product Lines to Consider services approach will resonate with customers, he added. Toshiba provides help here by providing content services that dealers can resell. That’s a big plus for dealers who don’t want to develop that expertise in house. Acquiring the skillsets needed to provide a turnkey solution represents a significant investment to the dealer. Beyond training and acquiring in-house skills, the investment to sell digital signage is small. “You might want a couple of units—a nominal cost. It’s a lot less than for MFPs,” said Melo. Those not ready to take the risk of that investment can partner with someone who can help them deliver a complete solution. “[Digital Mike Marusic, Sharp signage] is a very Imaging and Inforlarge market with mation Company of a lot of players in Americas terms of content and information,” said Marusic. “It can be a surprise to dealers once they get in it. [Digital signage] is not as simple as some would like it to be.” Marusic recommends that dealers target specific verticals and seek out partners who can fill in the gaps around content and other services. There are a lot of partners to choose from. Sharp has created its Strategic Technology Alliance Resource (STAR), which lists hundreds of companies that offer complementary products and services to its digital signage line. It includes software developers, content providers, kiosk/enclosure makers, collaboration tools, and much more. “Some dealers open a content arm,” said Marusic. “That’s where the residuals are. It’s a great opportunity if you are willing to make the commitment.” A content group would create templates for the content and then manage the content updates for the client. The client might already have all or some of the content in some cases, so the dealer needs to adapt it for the template. With other clients, the dealer might have to work with

a third-party content source or develop original content. One dealer that’s embraced the content side of digital signage is INNOVEX. Christopher Parisi, director of marketing and digital sales, had Christopher Parisi, already launched INNOVEX a digital marketing practice at INNOVEX as a way to diversify the business. “I’ve always had a passion for marketing in addition to technology,” he said. Adding Sharp’s digital signage products to the marketing practice was a natural fit. He said hardware margins are slim, but customers will pay a premium for services. “[The sale] is not about technology as much as it is about providing a marketing solution,” said Parisi. There is high margin in managing cyclical data, designing ads, or creating apps that encourage an impulse buy. Digital signage and marketing accounts for about 20 percent of INNOVEX’s revenue. Digital signage revenue is growing at a steady clip, but Parisi sees more potential in the digital marketing and IT services. INNOVEX was recently ranked the tenth-fastest growing company in Rhode Island according to Providence Business News, and that is due to the diversification in addition to growth and acquisitions of the core business of copiers. That kind of sale is hard for the average copier rep. “The typical sales person does not understand all the factors.” Those factors might be where the signage will be placed (POS, office, or waiting room), who the target audience is for the content (retail customer, employee, patient), and whether the application is static or interactive. All can have a significant impact on how a solution is generated. INNOVEX has two other recurring revenue streams from digital signage in addition to content services: software as a service (SaaS) for providing access to a content management system (CMS) and service contracts. Margins for the latter

are similar to those for copiers. Parisi says that SaaS margins are important, but the tools are becoming so user friendly that they could be managed in-house by the client. “Do your homework,” advises Parisi. “Digital signage is not a simple operation. There are a lot of variables including A/V, IT, and marketing. You need to consider all three aspects.” Marusic cites the education market, including corporate education, as a good target for digital signage. Here, an application might involve courseware and a learning management system like Blackboard. “A copier can upload content to Blackboard, where it can be integrated with the courseware for video display,” he said. “That’s right up the alley of a dealer.” He adds that building applications like this is difficult for the customer to recreate. Selling digital signage can also open doors for a dealer’s core printer/copier business. Dealers can use digital signage to start relationships with customers. “When the lease comes up [on the customer’s contract with the competition], a dealer can get into the core business quicker,” said Marusic. Staffing requirements for digital signage are minimal. “A copier guy can lead, because he plays well with the end user,” said Marusic. “You also need a specialist who truly understands the space, a dedicated digital signage person.” He said that your copier sales person can identify digital signage prospects and make an introduction with the expert to assess the prospect’s needs and close the sale. All the digital signage OEMs we spoke with offer training programs that cover the products, the market, and other resources including third-party products and services. Another reason you want a specialist is that the decision maker for digital signage might not be the same person as for digital imaging. “For small businesses, it’s often the same decision maker,” said Marusic. “For larger companies, it’s never the same person.” The department responsible for digital signage might depend on the application. It could be continued on page 24

22

www.enxmag.com | November 2016

We Saw It In ENX Magazine


Beyond Traditional Print: Three Product Lines to Consider someone in IT for internal applications, or marketing for customer-facing applications. “A specialist understands the pain points of all the different stakeholders,” said Marusic. On the technical side, dealers who already provide managed network services likely won’t need to add staff for basic setup of a digital signage system.

3D Printing Has High Upside, but a Tough Market to Crack

It’s been a roller-coaster ride for the 3D printing industry for the past couple of years, especially at the lower end of the professional Jonathan Jaglom, market. There are MakerBot too many OEMs fighting for market share, which drives down prices and margins for dealers. The technology is evolving rapidly, so today’s hot model might be obsolete next year. That said, the impact 3D printing will have on the way businesses design, test, and produce products will be enormous. Jonathan Jaglom, CEO of market leader MakerBot, believes that eventually every engineer and designer will have a personal 3D printer at work, and that every engineering/design classroom will have three to five 3D printers. With only about 250,000 3D printers sold last year, current market penetration is nowhere near that level. This creates a dilemma for dealers considering the 3D printer market. The opportunity is clear, but the market is unpredictable. Will you earn back your investment in two years, or five? Will the horse you bet on be around in three years? It’s hard to know. Dealers have two options in the way they approach the 3D printing market: Target the low end (primarily education and prototyping applications in SMBs), or try the mid-range, which targets both prototyping and end-use parts production in manufacturing. Almost all high-end 3D printing sales are sold directly by the OEM. The low-end is an easier entry, but much lower margin. The mid-range offers 24

good margins, but requires a bigger investment and a much longer sales cycle. HP’s recent introduction of its Jet Fusion 3D printer line is targeted at the mid-range, and the company will rely on channel partners for sales Alex Monino, HP and service. Alex Monino, worldwide marketing and sales strategy director for 3D printers at HP, outlined what HP is looking for in a channel partner. “We want to see the ability to do a consultative sale with a sales force that is fully dedicated [to 3D printers]. [Dealers] also need the capability to service and support the products.” HP is also asking its dealers to invest in a demo unit that’s set up at a demo site. “It’s important that customers can see the product and what it can do,” said Monino. Prospects will also want to do benchmarks that will show what to expect in terms of performance for the type of work they plan to do. To support its channel partners, HP has established a formal onboarding process. During that process, the channel partners’ sales people will get training on how to conduct a consultative sale and make the right value proposition for the HP printers. Service technicians can become certified on the HP products at this time. Although the Jet Fusion products use familiar inkjet technology, much of the mechanics will be new to a printer/ copier service tech. HP will also work with each channel partner to build out a business plan that looks at opportunities three to four years out. This not only shows the partner what to expect in terms of investment and return, but it also allows HP to make sure the partners’ plans align with its own expectations for the market. The HP 3D printing solutions will start at about $165,000 for the HP Jet Fusion 3D Printer and HP Jet Fusion 3D Processing Station, with different models and accessories available at a variety of price points. Monino said dealers can expect margins similar to those for its 2D printers. “Aftermarket sales will be big,”

www.enxmag.com | November 2016

he added. These printers are designed for high volume, and HP is working with a number of suppliers to develop a line of HP-certified materials. This has the potential to be a significant and highly profitable recurring revenue stream, although there is no data yet to quantify it. As with digital signage and label printers, expect a different decision maker. “3D printers are not an IT sale,” said Monino. It might be an engineer or a product manager. This is why the consultative approach to sales is important. Sales need to understand the use cases of the prospect, the types of materials needed, which software is being used, and the finish qualities desired. At the low end of the professional market, it’s hard to find an OEM that can provide the kind of support that dealers have come to expect from digital imaging vendors. There are really only a handful of OEMs that have the resources to grow and support the channel. Some Konica Minolta dealers, for example, have taken advantage of that OEM’s partnership with 3D Systems to enter the 3D printer market. MakerBot, which is owned by market leader Stratasys, is another option. Its MakerBot Mini and Replicator lines are popular in the education and professional markets, the latter as a rapid prototyping and iterative design tool. The company depends on the channel and has put significant resources into supporting it. That support includes a sales enablement team, business intelligence, and an online training resource called MakerBot University. It offers videos and other resources that provide talking points for the MakerBot products, sample sales scenarios, and advice for overcoming objections—all professionally produced. A partner portal provides access to a large set of marketing assets. Education is an important market for MakerBot. “We look for partners with strong relationships with local educational bodies,” said Jaglom. Already having an educational institution’s IT services business would give dealers an added advantage. On the professional side, relationships with businesses that employ engineers or

We Saw It In ENX Magazine

continued on page 25


Beyond Traditional Print: Three Product Lines to Consider industrial designers might provide an opportunity for dealers to sell 3D printers. MakerBot prefers partners who already sell software or hardware that engineers and designers use—CAD software, plotters, or scanners for example—because these items support the use of 3D printers and the dealer is already talking to the decision maker. “It’s very complementary when a partner can showcase all [these components] in a demo,” said Jaglom. MakerBot uses a tiered system for partners, where the most successful of them have the option of selling some higher-priced Stratasys models. The company also provides marketing development funds depending on the partner’s performance and its tier level. “[The tier system] motivates partners to hit or exceed targets,” said Jaglom. The more commitment and success a partner has, the more support MakerBot provides. If a partner lacks commitment and doesn’t

perform, “We don’t feel obliged to go the extra mile,” said Jaglom. MakerBot has its own line of materials that give partners a recurring revenue stream, and it offers products such as extruders and 3D scanners that dealers can sell as add-ons. Another revenue stream is training. MakerBot certifies partners to training, and it has developed a curriculum. “We want partners to provide training, because it makes [the customer’s] journey the most positive,” said Jaglom.

Different Lines of Business, but Same Approach and Attitude

Whether it’s selling label/barcode printers, digital signage, or 3D printers, the key dealer success indicator for every OEM was commitment. OEMs want to see management buy-in and participation, and adherence to the training and best practices set out for their channel partners. They also want to see an invest-

We Saw It In ENX Magazine

ment in infrastructure. “Some dealers will go get a guy [to sell the new line], but the guy fails because there is no infrastructure,” said Melo. “When building a new business, you’re not just adding a new product,” said Pagliarello. “It’s important to understand the risk, investment required, and the opportunity for growth. You need to invest in service and sales personnel, and you need to know the type of customer to go after.” Although he was referring to selling label printers, this summary applies equally well to any new product line. Dealers considering adding a new product line should treat it like starting a new business and build a real business plan. Leverage the assets you have, but invest where necessary. Look for an OEM that is prepared to work with you and support you as you build that business. ♦

November 2016 | www.enxmag.com

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Ed McLaughlin

Market Intelligence News Briefing

Adjacency – The New Buzz Word

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he newest conversation taking front stage today is that if we expect to grow we must pursue adjacent business opportunities. Is this really the path to growth? I suspect the answer is more complicated than the question suggests. Regardless to whom I speak with these days the word “adjacency” finds its way into the conversation. I guess I’m not surprised. After all, the past few years have been spent looking for relevant ways to invigorate growth, as all intelligent life realizes that staying the course of traditional copy is not sustainable. But, what really is an adjacent business? Some say that if the recurring revenue business model is core to the business model, it’s adjacent. Others say that similar technology is the clear sign the business is a natural for us to just enter and succeed with. I’ll suggest that these are both just too simplistic to adopt. I’m persuaded that we need to consider all the nuances of the business we are considering. What is the sales process like? What knowledge is necessary? What levels of support is required? Can your infra-

structure support the diversion? Does your business systems support the financial requirements? Will you need a new staff? Will this be a distraction for your sales, service and administrative team? Frankly I could go on, but you get the picture. Let’s explore some of the popular areas of opportunity and see if that adjacency is a real fit for our existing core business.

Managed Network Services

The opportunity getting the most attention today is that of Managed Network Services, and who could argue its adjacency. Let’s however look at the accounts that make up your base. What percentage of our accounts are 250 employees or less? If the answer is a substantial percentage then this could be a good fit. That said, the chances are that the sales process you have in place for these accounts is the most transactional. Managed services is account centric. This alteration to our organization is not insignificant. The existing sales force handling these accounts is likely the least qualified to support this business process. It’s not that they are poor sales people; it is just that the methods of account development are very much a team process as opposed to the “my account” mentality of this sales group. So it is likely that you must consider a specialized sales force. This is far from an insurmountable problem but if we fail to address it from the outset it could create a path to distraction and failure. Infrastructure may however be a hill that keeps growing as the business does.

The IT services business is one that requires a significant amount of investment capital. Consider that the value proposition for this vertical is that the customer does not have to make the constantly changing investments in an ever-changing business, and can focus on their core business. This means that they expect you to make those investments and stay ahead of that ever-changing curve. For this reason I recommend teaming up with a company such as Continuum. It is important to hold the investments down while you are learning a new business, and keeping up with the most current “cloud” technology can be all consuming. Amazon is putting out over 300 new “cloud” products per year. Staying on top of this is an almost impossible task, and it is only one aspect of what you would need to do. There are those that suggest that acquiring an MSP is the answer, but acquisitions where the disciplines are not native to your core can be difficult to integrate. I believe that acquiring should wait until well after you have established yourself in the new market. Even if you have already started down the managed services path, reaching out to a partner can help lubricate the mechanisms and reduce the investments. In the very near term most companies under 100 employees will be utilizing the cloud as their network and you need a partner that is already there. This is a fast moving business and going it alone can be a course to frustration and capital drain. Finding the right partner is the key to success in this fast continued on page 28

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We Saw It In ENX Magazine


Adjacency The New Buzz Word paced business. It can allow you to learn while you develop and support customers…profitably.

3D Printing

This so-called adjacency is anything but. The only thing 3D has in common with traditional print is the word Print—everything else is different. The sales process is different, the justifications are different, the language is different, and the sales cycle can be extremely elongated, especially by copy standards. There are those that will tell you that 3D will change the world. I agree. I do not, however, agree that everyone is properly positioned to participate in that transformation. If you’re thinking about heading into this market make sure you are fully committed and have the money, prospects, and resources to weather the road ahead. Don’t even try to utilize your existing sales structure.

Labeling

The technology is identical but the sales process and justification for acquisition are not. This is another step into the world of manufacturing. It may not be as dramatic as 3D, but it has nothing to do with the office. So there is a legitimate question as to whether it is an adjacent business. The first step should be to review your account base. Do they use labels and is that use critical to their business? Breweries, wineries, and medical centers fit the profile. Almost everyone has some of

28

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these types of accounts, but is it enough to be a sustainable business? If so, you might want to consider the move. The sales process is transactional so there is little change to your existing sales process. Most of your infrastructure will be compatible but you will absolutely require sales specialization.

Production Print

I really question if this is more of an extension of our core business as opposed to an adjacency. Every dealer can and should move into this area. If they haven’t done so they should speak with their OEM today. This is not to say that you don’t need to make investments and the knowledge necessary to compete is more demanding than the office, but the customers may very well be the same. Most importantly the support is there from your OEM supplier. One of the mega trends in our industry has been the ability to process more complex jobs closer to the point of need, and this is creating more opportunity for production print. The best place to turn for help is our OEM. They have specialists on staff and can support your actions to ensure that your investments make sense. Can you use your existing sales force? Maybe, but that will depend on their skill sets and willingness to change some practices. It can definitely create a new step in their career path.

Managed Print Services

Most dealers have abandoned this golden opportunity, or do it only defensively. It is a shame. The problem with this adjacency is that we got off on the wrong foot. In the early days of MPS we were told this is a natural for all of us, just a different approach. Nothing could have been further from the truth. This is a large account opportunity with a lot of moving parts. Like Managed Network Services, MPS is an account based sales process. The major difference in this area is that it is not about the machines, but about the base. One of the huge benefits of MPS, if done correctly, is the decline in the help desk traffic. Nearly 50 percent of all help desk calls are printer related. Bringing the right level of support and knowledge to an account offers a much smoother running operation, and a huge relief for the CIO. The number of resources to turn to for help in this market is dwindling, but a great place to start is with the MPSA. This organization has the most complete line of condensed knowledge for this vertical, and is reasonable to join. There are more adjacent market opportunities but regardless of the area there is no substitute for knowing your organization and customer base and making sure they’re compatible with the new business structure. The most important advice I can muster is, don’t be sold. Understand what you know and what you don’t know, be honest with yourself. Are you looking for something new because you can’t make your existing situation work? If so, get back to basics first before you consider anything new. Whatever new thing you are considering will require investment, and if your exiting business isn’t sound, strengthen it first. Then enter the adjacency with your eyes wide open, not because someone has a new machine to sell you. We’ve been down this road before. ♦ We Saw It In ENX Magazine


Dealer Spotlight

Waltz Business Solutions— Celebrating 125 Years of Family, Fun, and Success

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altz Business Solutions has been around for a century and a quarter, so you know it must be doing something right. Frank Waltz founded the business back in 1892 selling primitive adding machines and typewriters, until James Jehn bought the business from Mr. Waltz’s daughters in 1961. Today it is primarily a Kyocera dealer with $7 million in yearly revenue, servicing the Greater Cincinnati and Northern Kentucky regions. Family businesses, especially those that have been around for so long, can acquire a stigma of not being the most progressive or modern, but nothing could be further from the truth. With 36 employees, a state of the art facility and 10 percent year over year growth for the past two fis-

cal years, business is looking up, even as the company undergoes internal restructuring. Besides the obvious scenario of longevity, Waltz Business Solutions prides itself on legendary relationships, with both its clients and employees. In fact, it still has one employee that’s been on the payroll since 1939. He was the lead typewriter technician and service manager of the company at one point, but as the company moved into different products, his role diminished and he officially retired in 1999. Since it was the only job he’d ever known, the company kept him on as a courier as long as he wanted to come in. He’s 94 years old now, and even though he cannot come into the office any longer, a paycheck from the company keeps him connected.

Front L to R: John Jehn, Senior Service Technician; Jeff Jehn, President; Jerry Jehn, Vice President Rear L to R: Matt Jehn, Senior Account Manager, Josh Jehn, CFO/controller 30

www.enxmag.com | November 2016

We Saw It In ENX Magazine

We spoke at length with Jeff Jehn, president of Waltz Business Solutions, about what it’s like working with family, the pressures of running a company that’s been in business for nearly 125 years, and his plans for the future. How is business this year? Where do you see your greatest opportunities for growth? JEHN: Business is very good this year. We have achieved 10 percent year over year growth for the past two years. Some of our greatest opportunities are not only in our traditional imaging side, but also our document management side. We say document management encompasses our ability to cover our client’s document needs from document creation to document destruction. In the last year to year and a half, we not only enhanced our document management software offerings but we also include document scanning, document storage, and document destruction. How was the transition from the traditional imaging side of your business to document management? JEHN: We are budgeting 100 percent growth in that segment for this coming year. We hired someone to champion the program for us last year and we’ve hired a second employee this year. We even purchased an extra delivery truck to pick up the destruction bins. We started modest and were happy with what we did, and we’re going to double that growth this year. continued on page 32


Waltz Business Solutions—Celebrating 125 Years of Family, Fun, and Success

How do you view the industry changing in the future and what are you doing to adapt? JEHN: Well, today, my assessment is that 85 percent of our business is output related and only 15 percent of it is services. In the next five to ten years, I expect that to flip flop, with services becoming the major portion of our revenue and the hardware side becoming a smaller percentage. That doesn’t mean it’s going to go down, per se, it just means we’re going to continue to grow the software-as-a-service side of things. I predict that long after I’m gone, a significant portion of our revenue may not come from hardware. What was your dealership’s most significant accomplishment this year? JEHN: One of our goals was to get our inventory and finances in order. We set a goal to be debt free and mortgage free, and this past March we achieved that goal. I don’t know if that’s something the typical reader wants to hear, but I can remember many years ago when our business was much smaller, it was tough to manage the finances, pay the bills, meet payroll, and keep the vendors happy. Today we’re dealing from strength in that we have no long-term debt. We don’t owe anything on our building, and we don’t owe any money to any banks. What was one of the biggest challenges of this year? JEHN: We’ve added 25 percent to our revenue bottom line and we’ve added 20 percent more employees in the last two years, and quite frankly we’re bursting

at the seams in our current building. We built the building in 1998 and it was a state-of-the-art facility—15,000 square feet—and we’re running out of room. What was one of your biggest wins this year? JEHN: We had one that stands out to me. It was a large pharmaceutical company that has its headquarters here in the Cincinnati area. We bid on their business six years ago and were not successful. Three years ago we bid again, with persistence, and won a small percentage of that business, knowing there was a bigger chunk of business, both here in Cincinnati and other parts of the country. This past year, we scored a complete hit with them, and not only renewed their program, but also added other cities for a significant win that was around a quarter of a million dollars. For us that was a big deal. We also found out the customer loved the products from Kyocera so well, they are planning to implement them in their European operations. So from a satisfaction standpoint, that was a big win. We were talking to a European account rep from Kyocera who was very pleased. No check from them yet, though. Who do you see as your biggest competition, and how do you differentiate your company from the rest? JEHN: We’re probably not unlike most dealerships in mid-sized to large metropolitan areas. We have several large, high profile dealers in our back yard. We compete fairly well with them. We’re not as

big as they are, but our client base knows we take good care of our clients and that we have longevity. We differentiate ourselves because we’re smaller, so we’re nimble, and we can respond quicker than some of the larger dealers, and certainly the larger branch manufacturers. What is the smartest thing your company’s ever done? JEHN: Absolutely, unequivocally, hands-down the best thing our company has ever done is joining the Select Dealer Group (SDG). I can’t put a value on the things that I’ve learned and getting to rub elbows with very successful dealers has been immeasurable. It’s just a natural extension of what BTA has been about, where I served as a national BTA president in 1994 for one year. I’ve met many good people and learned so many things from our participation in that group. What is one exemplary business marketing innovation of your company? JEHN: To get down to the nitty-gritty, about 20 years ago, we started to have an open house, where we invited customers to a hotel to see some of the newest equipment. That’s evolved into what we call BTE, Business Technology Expos, held annually in the spring. We pick up our customers in limos and bring them to our facility. We have food, door prizes, and usually four to five stations we move them around in an hour. Our goal is to have 75 percent of the attendees to be net new clients, and 25 percent of the attendees to either be customers who we want to thank, or customers we want to continued on page 34

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Waltz Business Solutions—Celebrating 125 Years of Family, Fun, and Success employee we hire, we assume they’re going to be with us for life and when that doesn’t work out, it’s disappointing.

Waltz Business Technology Expo

introduce to new facets of our offerings. We average about 35 to 40 clients in a seven-hour BTE event. Is there a product or solution that you are looking to provide in the future? JEHN: Our goal is to expand our document management program to include scanning as service. We have a manager of our scanning group, and she has a couple of contract employees that she’ll call upon when a scanning job comes up. Believe it or not we had a local client with a facility in Mississippi, who asked us if we could do the same thing for them down there, so our team picked up all their stuff and drove to Mississippi and spent a week doing a fairly large onsite scanning job. We do it all in house; we don’t contract anything out. What do you look for in your employees? How do you recruit and retain good ones? JEHN: A couple of years ago, we embarked on a management program to improve the direction, communication, and management of our company. Out of that program came five core values that our company operates on, which are leadership, honor, accountability, reputation, and family. We look for employees that exemplify those five core values, and we hire, evaluate, and ultimately separate from our employees based on nothing but those five core values. With leadership, we say we bring excellence to our employees, customers and our community. With honor, we treat our clients and co-workers with respect, 34

integrity, and a positive attitude. With accountability, we listen and we do the right thing. Reputation is huge for me. We say that we are recognized for our character and our morals. Finally, family: we work together as family, and we treat our clients as such. What keeps you motivated and excited about the work that you do? JEHN: I personally enjoy being involved in our community. We have several non-profits that we help. One of them that are near and dear to my heart is the local pregnancy care center. I was at one of their dinners and I heard that a portion of them was getting kicked out of one of their locations. At the time I had a couple of vacant sales offices so we donated the use of those offices for two and a half years until they could find another location for their people to work. There’s also a local non-profit that does healthcare for inner city and homeless people. One of the coolest things is they have a Hope Box Derby every year. The last one was just two weeks ago, where they run a soapbox style race derby and get 30 to 40 companies to race in that, including us, and that’s just a blast. We sponsor that event, and it’s great for our business, and for us too.

Outside of work, what do you do for fun? JEHN: Family is big to me. I grew up with nine children in my family and we still vacation together every year. My wife tells me the ideal vacation spot is: House, Pool, Beach. The last seven or eight years we’ve gone somewhere warm and where there’s a house, a pool, and a beach. Gulf shores, Alabama near the Florida panhandle, the outer banks of North Carolina… Personally, I enjoy a good round of golf from time to time as well. What are you looking forward to the most for the rest of the year and beyond? JEHN: I’m retiring next June 30, 2017, at 2PM. I’m going to go home early that day. I have a brother, Jerry Jehn, who is currently serving as the VP and integrator/manager, who’s perfect for the job, who will take over my role as the visionary and leader of this company. I have another brother, Josh, who’s our CFO and very capable, and my son, Matt, has been in the business 16 years with me, and he’s doing extremely well in sales. They are all vested here and the company will be in very good hands with them. We have now hired a new director of sales to prepare my brother to take over the reigns of this company. So for the rest of this fiscal year, my primary job, besides overseeing company culture, company communication, company vision, growth and acquisitions, is planning a big 125-year celebration. Really big. I mean, going to the city, blocking off the street, and having a big block party and inviting clients, friends, family, dignitaries, vendors…everybody. Can’t wait. ♦

What is your least favorite thing about your job? JEHN: My least favorite thing is to see someone go. We treat our employees as family, and once in a while you have to separate from an employee for one reason or another. With every single

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730 Centre View Boulevard Crestview Hills, KY 41017-5434 Tel: (859) 814-2162 www.waltzbusiness.com


Business Profile News Briefing

Frontier Imaging Succeeds with Reliability, Price, and Responsiveness

S

tarted in 1999 in sunny Southern California by its CEO, Boon Leo, Frontier Imaging, Inc, has quickly become a reliable distributor of copier supplies and parts for major brands such as Canon, Ricoh, Konica Minolta, Kyocera Mita, Sharp, and Toshiba. Over the years, it has added Brother, HP, Samsung, Xerox, Risograph, and other brands to its product line. “In this day and age where information is so readily available, trade secrets are non-existent. Every customer can find our vendor, and vice versa. The key to success in the OEM supplies business is to relentlessly develop very reliable procurement pipelines, such that we can consistently deliver very large volumes at very deep discounts.” says Leo. “Why should a dealer come to us if we cannot beat, but only match? “We need to deliver the products quicker, cheaper and with better customer service than the competition, especially the manufacturers!” he added. Frontier distributes OEM toners and parts to over 40 countries around the world. Its sales force is divided into three divisions,

International Sales Team 36

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Domestic Sales Department, Latin America Department and Asia Pacific Department. “We have an excellent reputation globally for authentic OEM products at very competitive pricing,” says Joycelin Lin, newly appointed vice president, who has been with the company almost eight years. “Our export philosophy emphasizes high efficiency to deliver products. We work hard and we work fast. We communicate with customers around the clock to attend to their needs.” While Frontier has always been better known for its ability to supply a wide variety of OEM products at great prices, it has also developed a very strong line of aftermarket products. For years, Frontier has been distributing a high-end line of compatible copier toner products that is produced locally in California, which allows additional pricing and delivery advantages over the competition. Sandra Sopa, assistant manager of the Latin America Sales Department, has enjoyed a lot of success selling the above-mentioned compatible toners. “Give our compatible copier toner a try,” she tells customers, “and you’ll realize that our product truly meets or exceeds OEM specifications and yield. We carry a lot of copier models, from Canon to Xerox, monochrome, color--you name it, we have it.” Frontier’s Revolution brand of compatible all-in-one printer toner cartridge is manufactured at state of the art facilities with the best R&D and top grade materials possible. We Saw It In ENX Magazine

Oliver Roan, marketing manager in charge of the Revolution brand and other imports, explains “In theory, a brand new cartridge made from top quality materials should have a zero percent failure rate, and will cost significantly less than a remanufactured product. We will continue to work with the best manufacturers to provide customers with the very best quality at the lowest possible prices.” To tackle a fast-changing industry, Frontier has undertaken drastic operational changes in recent years. “Our industry is undergoing very challenging times, and print volumes aren’t exactly growing, and could very well be declining,” Leo states. “To succeed, every operation must streamline accordingly, while maintaining a very strong focus to continue to expand its footprint. In other words, one must become leaner and meaner, yet be more aggressive and tenacious in its business approach.” Today, Frontier’s group of companies has just over 30 staff in total. However, it boasts four shipping locations covering the USA and Canada. While Frontier ships across the USA out of its Los Angeles headquarters and a third-party logistics location in New Jersey, its sister company, Capstone Imaging Supplies, Inc, operates out of Vancouver, BC, and Mississauga, ON, covering Canada. Leo feels he is blessed with a very good staff, with a vast majority having been with the company over 8 years. Frontier has a very good reputation continued on page 38


Frontier Imaging Succeeds with Reliability, Price, and Responsiveness

Warehouse

for being friendly, knowledgeable, efficient and professional. Assistant Vice-President Juan Salamanca, for example, has been with the company since 1999. He started in the warehouse at 19 years old, and has grown steadily into the current role of head of the sales department. “We have a very unique culture of promoting warehouse personnel into sales,” Salamanca explains. “Not always the easiest transition, but this system has allowed ordinary people like me to evolve into very knowledgeable and effective sales personnel.” “Our crew in the warehouse works hard to impress because they know they will be given a chance to advance,” adds Salamanca. “And those of us that eventually get in here tend to be very knowledgeable because they touched the products daily. They are very hungry for success, because we’ve worked hard to earn this opportunity. Also, the system trains us to live and breathe the Frontier way; that is, top-class attitude and topclass work ethics!”

“We’d attend to every small detail to make you happy. It is all about attitude. Absolute tip top professionalism when it comes to customer service!” boasts Botonis. Assisting Botonis is Jacob Chilton, who had also started in the warehouse as an 18-year-old in 2005 and has since worked his way up to become assistant manager of the domestic sales department. “Our morale can’t be better since Steve (Botonis) took over a year ago,” says Chilton. “He has injected an incredible amount of energy into this department, and we’re loving it!” “Steve is super demanding and he really keeps us on our toes. But we know

• Our Will Call is under 8 minutes per customer! • Ship same day if you order by 7pm EST/4pm PST. • 12 months workmanship and performance warranty on all compatible products Headed by Steve Botonis, its Domestic Sales Department has recently enjoyed an up-turn in success. “We will go out of our way for you,” says Botonis. “Everyone can advertise great prices, availability, etc, but it is outstanding customer service that brings the satisfied customer back!” 38

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he believes in us and wants the best from us” says Christopher Dones, another who has risen through the ranks from the warehouse, where he joined in 2010. German Baquero, who has been a sales rep at Frontier since 2012, said, “Steve has taught me a lot -- cold calling, overcoming objections, closing, and so on. It is his passion that has gotten us all pumped up like never before!” Botonis goes on to say, “Creativity and fun are two important elements every successful sales department must have. It takes a very passionate salesperson to be able to continuously exude an attitude that brings about fun, brighten your day, and yet do so creatively enough to satisfy your most demanding needs!”

Guess the Rep and Get a Discount

Here’s a little fun that will win you a chance to save on your next order. Above is a picture of Frontier’s domestic sales department wearing masks of famous ex-Presidents of the United States of America. Make a guess which one of our following domestic sales personnel is under each mask, from left to right – Richard Nixon, John F Kennedy, Theodore Roosevelt, and Ronald Reagan. 1. Steve Botonis a. Domestic Sales Manager b. Over 30 years of experience in the toner and parts industry 2. Jacob Chilton a. Assistant Domestic Sales Manager b. Over 11 years at Frontier Imaging c. Started as a warehouse assistant at 18 years of age 3. Christopher Dones a. Sales Executive b. Over 6 years at Frontier Imaging c. Climbed through the ranks from a position in the warehouse

4. German Baquero a. Sales Executive b. Over 4 years at Frontier Imaging c. Almost 10 years of related sales experience Here’s how to win: Call (888)530-8811 or e-mail your answers to sales@frontierimaging.com. Stay tuned for ENX Magazine’s December 2016 issue for the reveal. Answer ALL 4 correct: Free Shipping on EVERY ORDER in December 2016, plus 10% off December’s advertized pricing. Answer 3 correct: Free Shipping on EVERY ORDER in December (2016). Answer 2 correct: 10% off December’s advertised pricing. Answer 1 or less correct: We’ll wish you a Merry Christmas! ♦

We Saw It In ENX Magazine


Charles Lamb

MPS Sales News Briefing

The Value Speak Of MPS!

I

n a recent review of over 35 dealerships that had engaged my team over some time, we analyzed the strengths and weaknesses in association to their ability to drive successful MPS sales. We see this requirement as paramount in their ability to transform their business to the future. In almost every case, their websites clearly displayed MPS capabilities and yet in almost every case few were actually closing real MPS deals. I still see this issue everywhere, so transforming to the future may be a big challenge for some. What do I mean by a “real” MPS deal? Not many dealers actually understand the strategic values of their own MPS program and thus haven’t driven those values into his or her sales organization. There are all kinds of opinions regarding the life cycle of MPS, some say it’s a commodity, others say it’s past its prime, but mostly from hardware people who haven’t found their value speak for non-tangible deliverables. And yet, they’ll tell you, they’re looking for their next big “idea” with the hopes that they’ll be first to market. If you can’t sell MPS when you’re in the industry, what big “idea” would possibly be out there that you COULD sell? MPS is often looked upon as just a large hardware lease with maintenance and I guess it could be explained that way if you were telling someone’s grandmother what you did for a living; it’s way more than that. If you’ve read my articles in ENX magazine over the years, you surely know that I’ve written many times on selling and presenting MPS to the right target and while

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it is harder to get there it can most certainly deliver a much larger sales funnel. But that’s not what we’re talking about today. When we started to look at all of the things that were right or wrong in these dealerships it became clear how important the value speak was. If you’re going to sell to C-Level, you have to understand strategic level business concerns. That was it; even if they got a C-Level appointment they didn’t tell their story well. What’s more, some dealers use their manufacturer’s presentations and videos, which deliver a completely different set of values typically to a non-strategic target. Most manufacturer videos offer hardware centric values, like getting the competitive equipment out and getting yours in. They speak of “optimization” and “standardization” and they sound strategic, but in almost every case it puts the highest value on replacing competitive hardware with your hardware or older hardware with newer hardware. What business owners want is to STOP SPENDING MONEY and with a rock solid strategy, help the devices and technology they’ve already purchased last a very long time! Now you might say, “But I am in the hardware business and if MPS is all about helping clients maximize their current technology spend, how do I get them to buy my MPS program and thus my hardware?” Welcome to Marketing Strategies 101! The fact that you just asked that question is one of the greatest things you can do! MPS isn’t a hardware play; it’s a financial deliverable that may include hardware in some We Saw It In ENX Magazine

fashion. If you deliver a pertinent strategic high value message to a strategic leader looking for their next best idea, odds are you’ll have a great opportunity to move forward with your services. So what is the value of MPS and is it still a viable product? Let me answer the second half of that question, first. On the Internet, it’s not hard to find the top five or 10 reasons as to why companies outsource. When an economy is flat, weak or wavering, outsourcing becomes extremely valuable. Being able to buy expertise, especially when you don’t have those skills within your company, can provide a great stop-loss safety net for strategic leaders. The good news is, acquiring that expertise through an outsource model almost always costs less than building it in-house. But notice I didn’t jump on cost savings as the greatest value. I remember in an article I read not too long ago that stated the C-Suite’s job was to increase the value and performance capabilities of their company. Helping them DO THAT is the value of your MPS program! Company performance, organizational productivity, risk mitigation, and visibility are key concerns for today’s strategic leader. If you want to test your sales reps, ask them to share the values of your MPS program as if you were a prospect and simply compare their language to that above. If they don’t use that level of conversation, fix it! So to answer the first part of the question, what is the value of MPS, let’s take a look at it from the C-Level point of view. The highest level of management in any company doesn’t necessarily continued on page 42


The Value Speak Of MPS! dance to the same music that all of the other employees do. They are the music makers. They create the rules and corporate policies; they drive the “dream” and the culture of the business. They’re team builders, they have to be. They recruit, hopefully, other strong leaders to fill key positions in the company. Simply put, they drive the success of the company and if nothing else their reputation is on the line. They not only CARE more than anyone else about the success of the company, they don’t have to ask anyone if they can do something about it, should they hear a great idea! That’s where you come in. The industry has told you that it’s ok to deliver your MPS values to an IT guy or share your idea with middle management and then help them help you sponsor it up to the top! I say hogwash! If you develop your value speak and begin an effort to only tell the music makers, you’ll grow your company exponentially! Get good at sharing your story to the right people. These guys juggle many things to drive success in their company, so help them. The top issues you want to address with your values are: bottom-line results (it amazes me how many sales reps don’t know what that means), risk mitigation, organizational productivity, and, yes, cost savings or cost improvement. The bottom-line is simply reviewing if each period or each year the company is making money. It reflects on their management capabilities to drive successful bottom-line results. Can MPS help bottom-line results? Absolutely, when you do your assessment and you find that the company has no real visibility or control over what they spend for print, how could they possibly be controlling it? Your MPS program eliminates wayward spending and thus directly improves bottom-line results. 42

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We Saw It In ENX Magazine

Most C-Levels would do anything to eliminate over-spending if they could just see it. It’s classified in the risk category and although it’s not as scary as someone hacking your company’s network, it can be as devastating. Your MPS program creates amazing visibility around the cost of image on paper, where they had no visibility before. You can completely eliminate erratic or surprise spending associated with their printing requirements. Hey, dollars are dollars and saving them and eliminating the uncontrolled, invisible waste of money, or risk, has great value. Productivity is on everyone’s white board for improvement. As payroll represents 80% of most companies’ cost structure, anything they can do to eliminate more payroll has great value. When they implement your MPS program and find that your entire program functions within the cost of their current spend or expense, they LOVE it and the indirect but very important benefit to their company is that they get to point their IT team back to mission critical responsibilities. That increases the productivity and ultimate performance of their company and in itself has amazing value to senior management. And then there is cost savings, the infamous phrase everyone jumps to the moment they get the microphone. Cost savings is only one objective among many. What’s most important is that your C-Level prospect is the only one who can define which values you should share. Don’t be a parrot and just repeat things that someone told you to say. Dig deep, study C-Level concerns and share the appropriate values from your MPS program that match their concerns. If you learn your value speak and you spend most of your time talking with the music makers, you might be surprised how easy success is. ♦


Service Excellence Platinum Award Winner News Briefing

Office Technology Service Excellence Award

PLATINUM LEVEL

Culture Change at California Business Machines Drives Service to New Heights

A

s any seasoned manager will tell you, getting staff buy-in on a new idea or way of doing work is tough. Sometimes to get your people to change, you as a manager have to change. That’s the challenge that California Business Machines (CBM) in Fresno, California, faced four years ago when it decided that its service department needed to change the way it worked. “That goes back to family and taking care of the customer and also being local, because no company is perfect, and you make mistakes, whatever those mistakes may be or are perceived by the customer,” said company president Teri Brymer. When a customer calls with a problem now, the response is, “How do we make this right?” CBM currently has 22 employees, including six service techs plus an IT tech. A customer support person does training, supports an MPS program, and

Teri Brymer with IT tech Dave Clayton with friend Darth Vader at Tulare County's 2016 Annual Tech Fair 44

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manages the FMAudit tracking. Those six service techs service 35 percent more machines than the average tech. How it achieved that efficiency has earned CBM the BEI/ENX Platinum Office Technology Service Excellence Award. To get to the level of service excellence that CBM has today, the company began a big cultural change four years ago. At that time, Brymer had taken over management of the company from her mother. “My parents started California Business Machines back in 1953, so we will be 63 years old this December,” said Teri Brymer, CBM president. “Our main mission of providing office technology, services and support to our customers has stayed consistent over the years. We’re a mid‑sized dealer. I think not too small, not too big.” CBM started out selling and servicing manual typewriters and adding machines, and started selling Mita copiers in the 1970’s through the transition to Kyocera and still today. “It’s been a great partnership. We do right by them, and they do right by us,” said Brymer. What drove the cultural change was employees’ perceived priority on profit. Brymer wanted a customer-centric attitude. For example, service techs should be making decisions based on what’s right for the customer, not necessarily what’s most profitable for CBM. Most of the companies that CBM serves are family and locally owned small- to mid-sized We Saw It In ENX Magazine

businesses, much like CBM. “We also do a lot with local government, a lot of county, cities, churches, schools, and we have local large companies that we deal with as well,” said Brymer. “They really feel like a part of the California Business Machines family.” Business is good for CBM, with double-digit growth. “With Kyocera alone we did 20 percent over the prior year, so that’s good. [Growth is] tied in with service excellence,” said Dick Elixman, owner of Business Systems Consulting. “The better we take care of our customers, the easier it is to get both the growth and sales volume. [Prospects] call our customers and find out that we have a good reputation for service.” Equipment sales are growing a little faster than service sales, due in part to a marketing focus on new accounts. About 45 percent of CBM’s equipment sales come from new opportunities, either businesses that have not been customers or customers returning after leaving CBM for at least 12 months. 60 percent of CBM’s revenue growth comes from equipment sales and 40 percent from services and supplies. Brymer is confident that the improvement in its service delivery is helping build customer loyalty. It’s also having an indirect positive effect on new sales, including a big government account in the Superior Court of Fresno County. “They weren’t happy with their current situation, and they were very continued on page 46


Culture Change at California Business Machines Drives Service to New Heights

CBM Showroom

focused on getting the right product and mostly getting the right service and response time,” she said. “You can imagine that the Court needs everything up and running all the time, so they need us to respond quickly when it isn’t.” After CBM put in a bid, the Superior Court started calling into its account base, including its two largest customers – Fresno and Tulare Counties. “They got excellent testimonials about us and they felt very good about going with us,” said Brymer. “We’ve had them now since last spring, so not quite a year. We meet with them quarterly, and they love us, so we’ve done everything right. I think it’s apparent that our support at every level has been good before, but improved.”

Keeping the Momentum Going

To maintain growth and adapt as the marketplace changes, CBM needs good data on how its service department is performing. Access to data not only helps identify problems, but also helps to develop and coach service techs once they are hired. “BEI is the tool that allows us to have a base of information that hits all the key spots that we want service technicians to perform,” said Elixman. He said it’s not necessarily about overall performance, but knowing on which areas to focus a tech’s coaching—for example, noting that one tech has a high recall rate. “By 46

using a coaching approach, we get one to improve then move ahead. Every day, every month, we’re looking for an individual we want to become better,” he said. To encourage buy-in and create incentive, CBM uses a metric-based pay system. “We don’t employ a merit‑based type of pay solution where we pay them for staying,” said Elixman. “A metric-based pay system defines what they’ll be paid in six months in their semiannual review for performing and getting better at what they do. They have to not only do their base job, but they have to meet three objectives. One is a workgroup objective, one is a personal development objective, and another that is specific in their job that they need to change.” “BEI is the basis for everything we move forward with in the next five years to attain certain metrics or certain outcomes,” said Elixman. One of those outcomes is first‑call efficiency. “What is that percentage of calls that they actually fixed on the first call?” BEI can identify the drivers of first call efficiency, such as whether the tech had the right parts or did not troubleshoot correctly. The cultural change and access to service data through BEI has changed the way CBM manages its service department. “We coach instead of dictate,” said Elixman. One of Elixman’s respon-

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sibilities at CBM is to coach the service manager to properly operate a service department. CBM’s service manager, Bill Cooper, had been a field manager, not a service manager. “His skill set is absolutely second to none in working with the people, but you see in terms of really managing a service department, that was not first nature to him,” said Elixman. Using the data from BEI, Elixman has shown Cooper to tie it together with productivity goals, so he in turn can coach the service techs. “He’s learning how to move the numbers that are in a trend line— keep that trend line so that first-call efficiency number keeps improving every month or every quarter,” said Elixman. Another key to maintaining growth is creating career paths and hiring younger people into the industry. “We employ what we call a customer service representative who touches base with the customers, helps them solve problems, and makes sure that everybody gets everything that they need,” said Elixman. This is an entry-level position, but very important. Elixman said that because this person wants to build a career, he responds well to being challenged to constantly do better.

Overcoming Resistance

When CBM first rolled out the BEI program, the service techs were skeptical about the information. “If I’m a service tech, I prefer not to have anyone talking to me about my activity,” said Elixman. “We’re getting into a very personal neighborhood when you start showing someone their report card. As a matter of fact, before we have all this dialed in, I never show the report cards to the technician because it would be too startling to them.” CBM started with “little bits and basics” such as first-call efficiency. A tech might think he has 70 percent efficiency, but the data says 26 percent. That provides the opportunity to show how BEI arrived at that percentage. “BEI does a great job of presenting it in a simple enough manner that with three or four

We Saw It In ENX Magazine

continued on page 47


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Culture Change at California Business Machines Drives Service to New Heights

About the Dealership: 1. Owner/President: Teri Brymer 2. Service Manager: Bill Cooper 3. Number of Techs: 7 including an IT tech 4. Number of Devices Serviced: 6795

sessions you can do that, but it’s always about that data,” said Elixman. “Until we reach a buy in of 80 percent and preferably 90 percent of the technicians, you cannot move on to coaching with this,” said Elixman. “If they disregard the information, then why would that help us, why would they believe it?” CBM has shown that a family focus and customer-centric culture make for engaged employees and loyal customers. An environment like that makes tools like BEI that much more effective. ♦ We Saw It In ENX Magazine

Information provided by BEI 1. First-Call Effectiveness: 56-59% 2. Hold for Parts Rate: 9-15% 3. Ranking: 16th overall of the 170 dealers OTSEA Platinum award winners rank in the top 25 of all dealers evaluated. The evaluations are based on Call Back percentage, Hold for Parts percentage, MCBV (Mean Copies Between Visits) and Technician Grading. Tech Grading encompasses Time Accountability and Time Management along with individual HP, CB and MCBV rates as well as parts expense as it relates to parts CPC compared to world stats.

November 2016 | www.enxmag.com

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Doug Johnson

MPS Management News Briefing

Understanding Tolerance Stack to Maximize MPS Profitability

T

he “noise” of Managed Print Services (MPS) as a key, maybe even necessary, strategy to most of this readership has certainly been turned up over the last decade or so. Trade publications, OEMs, legions of MPS “experts,” and innumerous third parties with solutions to help dealers build and execute their MPS programs have all created quite a few terabytes of information and opinion on the topic. It seems anyone willing to invest in learning about MPS can access all of the content necessary for market success. Large numbers of dealers have added MPS solutions to their offering in the past decade. Most websites proudly describe the value proposition of MPS to their customers. Sales reps have been trained by the thousands. As a result, most dealers must own their own Brinks trucks to deliver all the cash to their banks on a weekly basis, right? Sadly, no. As I talk with resellers around the U.S., most discuss “re-launching” their MPS program in their local markets. “Why?” I ask. “MPS is not as profitable as we believe it should be,” they reply. “If we re-launch with new (fill in the blank—partners, training, resources, etc.), we are sure it will be more profitable this time around.” Why has MPS not been the nirvana of high revenue growth and higher profits promised by the pundits? Is it true that simply “re-teeing up the ball” and whacking it with a new club will—this time—put the ball straight down the fairway? For some, new clubs might just be the trick to make the difference. For most, however, the answer is much more complex. To play golf at the top level, you can’t just hit off the tee well

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and win. You can’t just chip well and win. You can’t just putt well to win. You have to be great at all aspects of the game. And, more importantly, there are many variables within each swing type. Stance, hips, shoulders, arms, wrists, etc. Those of you who play know what I’m talking about. Just like golf, executing MPS at a world-class level has many variables that all have to be managed well and synchronized to produce the best possible results. However, most dealers oversimplify the complexities of efficiently managing the care and feeding of their MPS fleets. Not closely managing the variables within the cost of “care” (break/fix service) and “feeding” (consumables) is the primary reason most dealers don’t reap the expected financial benefits of their MPS model. Often, the discussion centers on just the costs of the consumables and break/fix service calls. However, it is in the details of these variables where profit is lost. Let’s start with the “feeding” of your MPS fleet. While the cost of the consumable itself is important, like the swing of your driver, there are many more variables. Shipments (in pages) versus consumption on a rolling 3-month basis is a key variable. Within this metric, there are other variables that can cause dealers to overspend on consumables shipments. For example, how many consumables are failing and not being returned? Is there any shrinkage (product going to the site, but leaving out the back door)? What is the “effective” yield of each consumable? Effective yield is the real number of pages (nominalized to 5 percent page coverage) between replenishments. This takes into account user behavior We Saw It In ENX Magazine

in addition to the stated yield of the consumable. Also, are there unidentified assets in the environment using these consumables that are not being seen via your data collection software? In addition to evaluating shipments versus consumption and all of its related variables, a shift in device output mix can greatly affect profitability. For example, a shift from lower cost, centralized output to workgroup or personal printers can dramatically lower profits. Finally, a change in page coverage can result in a dramatic increase in consumption of toner in your customer’s environment. A change from 5 percent to 7 percent page coverage isn’t 2 percent—it’s a 40 percent increase in consumables consumption. On the “care” side of the equation, understanding the key variables is equally important to improving profitability. Many dealers are now tracking pages per month per technician (PMT) as a key variable to understanding the cost of “care.” This metric can give a high level understanding of the profitability of service in an MPS fleet. (Side note: although it varies based on dealer, their customer verticals, geography, etc., the typical goal is 2.4 to 2.8 million pages per tech per month). Like consumables shipments versus consumption, PMT has many variables within the metric. What are the average labor hours per repair? How many calls per technician per day are completed? What is the first time fix rate? What is the average drive time between calls? How much time is spent on non-repair activities— equipment installation/de-installation, moves, training, paperwork, etc.? Beyond PMT and its related variables, device failure rate is a continued on page 49


Understanding Tolerance Stack to Maximize MPS Profitability key variable. Device repair cost is another key variable, and includes additional variables such as class issues (known failures on a given model or engine), misuse (label printing, anyone?), and aging technology in the field. As you can see from the above care and feeding variables, the list is a long one. And, to really understand where the true profitability drains are in your MPS business, you need to understand each variable within each customer, and at the device level within that environment. Only then can you understand where the profit drains are within your MPS environments. Maybe some (or many) of you have been tracking at least the major variables at an aggregate level and have determined you are okay. Each one may be off by a little, so you are okay, right? You can be off by a little on all of your major variables and still have a big profitability problem overall. The issue is called a tolerance stack. What is a tolerance

stack? A tolerance stack is “an accumulation of individual tolerance variances (each within the acceptable range for that variable) that cause the overall system to be out of tolerance.”

Back to your golf game. When teeing up your drive, your stance may be just a little off, shoulders just a little off square, your hips rotate just a little too much, and your wrists break just a little too soon. Is the resulting shot just a little off? I didn’t think so. In MPS, it is the tolerance stack that leads to low or unprofitable MPS engagements. Each variable might be just a little

We Saw It In ENX Magazine

off, but in total, the “system” is out of whack. For example, small variations in each consumables variable, all just a little worse than expected, can drop profitability of an MPS engagement by over 20 percent. That means if you are expecting 15 percent net profit, you are underwater by 5 percent, and we haven’t even gotten to the break/fix service side of the equation. If you are re-evaluating your MPS business model and looking to improve profitability, or are looking to “re-launch” your MPS program in the near future, look beyond your sales strategy to your operational management of your MPS fleets. Tracking each key cost variable to see if it is within the acceptable range of tolerance isn’t enough. You have to look at the overall impact to the system to see if you have a tolerance stack problem. The profit of your MPS business is in managing the variables—just like managing the variables in your golf swing. Off to the driving range… ♦

November 2016 | www.enxmag.com

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Cary Sherburne

3D Printing News Briefing

3D Printing Presents Several Business Opportunities

O

ver the last couple of years, there has been a lot of hype – and new developments – in the field of 3D printing. It’s also called additive manufacturing because most 3D printing processes lay down layers of material – typically plastic, but also metals, ceramics, and more – to build a product or part. 3D printing is even used to produce artificial body parts – think teeth, joints, and even soft organs. It is a means of affordably creating small lots of parts or items, mock-ups, or iterative design models. It can also be used to create complex parts that would be difficult, expensive, or impossible to create any other way. For example, GE’s CFM LEAP aircraft engines will have 19 3D-printed fuel nozzles in the combustion system that could not be made any other way. They will be 25 percent lighter than predecessor parts and comprised of one part instead of 18; they will also feature more intricate cooling pathways and support

Mini Me Poolside 50

www.enxmag.com | November 2016

ligaments that are expected to result in five-times higher durability versus conventional manufacturing. If you’ve read this far, you are probably asking yourself: What does this have to do with me? The truth is, you are not likely to be manufacturing airplane parts. But there are already many opportunities for 3D printing in the graphic arts, engineering, design, and related industries, with more to come. Konica Minolta has seen this opportunity. The company has partnered with 3D Systems, and some of Konica Minolta’s dealers are having success in selling 3D printers into industries such as manufacturing and education. For the latter, 3D printing at even the primary and secondary levels is making its way into the curriculum. The other interesting thing that Konica Minolta has done is to partner with ZVerse, a 3D printing service bureau. For someone who has used only a 2D printer, it can be complex moving into 3D printing. It requires a whole new skill set including, at a minimum, 3D design. But what if you could just send someone a file of your 2D image and have a 3D piece produced? That’s exactly what ZVerse does. In fact, my friends at Konica Minolta used this service to create Mini-Me from a photo. Here, you can see my Mini-Me relaxing poolside – since I never have enough time to do that myself! While ZVerse serves a variety of industries, including retail and architecture, the company also services 2D printing service operations as well, including some We Saw It In ENX Magazine

Sir Speedy shops. These print service providers are producing all kinds of things for customers, who in turn are using them to generate new revenue streams as they learn about 3D printing. For example, a Florida boat dealer offers 3D boat models featuring the dealer’s name and the name of the boat the customer just purchased. Another great opportunity lies in producing 3D objects for education that are too complex to produce in the classroom. The deal with ZVerse gives Konica Minolta and its dealers the option of bundling ZVerse’s LAYR software with the 3D printers it sells, making the transition to 3D printing easier for the customer. Or, Konica Minolta dealers can resell ZVerse’s services to customers not yet ready to buy a 3D printer of their own. At drupa 2016 last spring, 3D printing had its own pavilion. Canon, Ricoh, HP, Kodak and others were featuring their own 3D printing solutions or those developed in partnership with others. For me, three other companies were very interesting, and had solutions (or were showing technology demonstrations) directed specifically at the graphic arts industry.

MASSIVit 3D

I thought this was the star of the 3D show. The CEO of this Israeli company, Avner Israeli, came out of Scitex Vision, so he understands our industry, and then spent time at 3D market leader Stratasys. The printer, which has the option of having two print heads, uses a gel that is instantly cured as each layer is applied; meaning that for most objects, there is no need for sup-

continued on page 52


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3D Printing Presents Several Business Opportunities ports that have to be removed after the object is printed. It can also print quite large objects that are hollow, making them lightweight for shipping or other purposes. The base is white, so the objects do need to be painted. Carisma Large Format Printing in New York is an example of how this technology presents opportunities for a graphic arts service provider. The company produces bus and truck wraps and needed an innovative bus wrap idea to help Sony promote the Angry Birds movie. Carisma integrated 3D and 2D printing, making the bird and the movie title in 3D with lights behind them. Sony loved the result! You can see a brief video here. [https://www.youtube.com/ watch?v=1ekgcID_Rhc] Carisma’s CEO, Moshe Gil, told me that since installing the printer, he has been so busy he doesn’t even have time to make samples! While he was waiting for delivery, he purchased a smaller 3D printer and hired a 3D designer to get a head start on better understanding 3D printing, file requirements, etc. I was told that the printer with two print heads sells for less than $500,000. Consumables must be purchased from MASSIVit. In North America, the company is represented by Prisco Digital.

Mimaki Brings a Unique 3D Printing Approach

Mimaki is in the development stage with its 3D offering but was talking it up at the show. Mike Horsten, Mimaki’s general manager of marketing in EMEA, explained that the company, as a manufacturer of 2D printers, has chosen to develop a product that connects into the graphic arts business. “Before vacuforming mold mass production, or before producing large runs of point-of-sale or other signage,” he said, “these printers can be used to produce the 3D elements in smaller runs for testing purposes. But they can also be used to produce smaller sized projects.” The Mimaki printer will print in full CMYK color, and will print solid objects. On display at the show was a hand that could be used for medical education purposes that could have colorations all the way through, including 52

showing the veins. Inks are quite flexible, so the fingers could be flexed back and forth without damaging the piece. The Mimaki offering, which will be available sometime next year, uses a jettable gel. In addition to CMYK, the gel is available in white and clear. It uses UV heads and UV lamps to immediately cure each layer. The way Mimaki is addressing the issue of needing to remove supports after the object is printed is to use a water soluble, eco-friendly support gel. “Once the object is printed,” Horsten says, “you simply rinse away the support gel with tap water and the object is ready to go. One of the cool things about the support gel is that if you want to print a sphere, say the Earth, you start by printing two to three layers of support gel, meaning that the globe is perfectly spherical with no indication of where printing began or ended.” While pricing has not yet been established, Horsten expects it to be “midrange.” The company plans to show the printer at FESPA in 2017.

Shaping the Future with Highcon

Highcon was showing the Highcon Shape as a technology demonstration. This is an unusual approach that uses paper to build 3D objects or molds, similar to Mcor Technologies’ Arke and Iris products. For example, the company was showing a chair that was made of paper layers, as well as a unique one-off cement bench featuring intricate designs that was created using a mold produced on the Shape. This offering can easily fit into a printing operation. It’s a great way for printers to use up make-ready waste!

Printing on 3D Objects

While it’s not exactly 3D printing, another hot topic at drupa was printing on 3D objects. These solutions might be more relevant to a graphic arts company today. Printing on 3D objects can produce all kinds of imaging and labeling on various types of objects. Think about printing directly on wine bottles to be used at a wedding or other event. Or customized perfume bottles for that very special gift, including the recipient’s name, a loving message, and your anni-

www.enxmag.com | November 2016

versary or other date. This is something that has been possible for a long time using labels, but by printing directly on the object, you have the opportunity to produce a more luxurious-looking item. Mimaki has been printing high quality images on cylindrical objects for quite some time with the Kebab option [http:// www.mimakieurope.com/products/uv/ ujf-3042hg-ujf-6042-kebab-option/] for its UJF-3042HG and UJF-6042 printers. We saw it in action at drupa printing on wine bottles (and even scored a bottle of wine!). It’s quite impressive. It’s been used for a variety of applications, including printing directly on cosmetics bottles around the holidays in places like department stores such as Harrods in London, and in many airports around the world. Xerox was also showing this capability with its Direct to Object Inkjet Printer capable of printing on objects as small as bottle caps and as large as football helmets and shoes with very impressive quality. There is a brief description and image in this blog post [https://digitalprinting.blogs.xerox.com/2016/06/02/ drupa-2016-recap-week-one/#.V3bTmLgrKM8]. And Heidelberg has entered the fray with what they call 4D printing – The Omnifire 250 [https://www.heidelberg. com/global/en/products/press/digital_ printing/jetmaster_dimension/product_ information_49/product_information_5. jsp] can print in one to four colors with an optional protective coating on object sizes up to 20” wide by 40” long. We saw a variety of printed objects, including hockey sticks.

Now It’s Your Turn!

There are many opportunities in 3D printing for you and your customers. It’s one more thing you can sell to printing companies or educational institutions. A 3D printer is also a nice add-on for architectural or engineering firms that want a faster way to produce models. These are just scratching the surface. But they offer ways to generate new revenue, attract new customers, and add value for your existing base. Or maybe you would prefer to start your own 3D service bureau. The sky is the limit in a 3-dimensional world. Start pushing your limits today! ♦

We Saw It In ENX Magazine


Jim Zipursky

Exit Strategy News Briefing

Multiple Mania: Current Market Multiples & What Your Banker Won’t Tell You

I

n previous articles, we discussed earnings multiples and their impact on the M&A process. As previously discussed, we tend to view earnings multiples as shortcuts which, when properly applied, can be useful as sanity checks, but we certainly would never recommend acquiring or selling a privately-held business strictly based upon an earnings or purchase price multiple. Of course, there are many factors which influence multiples, as we discussed previously. One factor is the prevailing or current economic condition. We all know how bad the economy got in 2008 and 2009. Our current economy is much stronger than eight years ago, but we still have some rocks in our path. Purchase price multiples are post-mortem account; you do not know the number until the transaction has closed. That is one of the problems with reviewing multiples. However, we do know during the period of 2006 to the middle of 2008, purchase price multiples were higher than they had been in the 2003 to 2005 timeframe. Those of us in the M&A business watched as purchase price multiples declined significantly during the latter half of 2008 and the first nine months of 2009. Thankfully, we have seen a recovery in the market multiples have improved, but certainly not to the levels we say pre-Recession. What drives multiples? There is one key ingredient in the multiple recipe very few outside the M&A industry understand or recognize, but this ratio is the driving force in almost all leveraged transactions. What is this mystery formula? When analyzing credit requests (a/k/a loan requests by buyers), banks review and calculate myriad ratios. One such calculation includes measuring the ratio of a company’s Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) against the debt being borrowed. We call this the “EBITDA to Senior Debt ratio.” Here is how this works: Company A has EBITDA of $1,000,000. Bank Z has an EBITDA to Senior Debt ratio of 3.0. That means Bank Z would be willing to lend a buyer up to $3,000,000 to acquire Company A. This assumes Company A has enough assets to support $3,000,000 in leverage (debt). If Company

54

www.enxmag.com | November 2016

A does not have enough asset value to support the leverage (both term debt and/or a revolving line of credit), regardless of the cash flow, Bank Z will only lend what is supported by the asset value. The table below illustrates this example: Company A

Book Value

Advance Rate

Debt Available

Accounts Receivable

$2,000,000

75%

$1,500,000

Inventory

$1,000,000

50%

$500,000

Fixed Assets

$1,000,000

30%

$300,000

Total

$4,000,000

$2,300,000

We have used Advance Rate to be the measure for what percentage of the underlying value of the asset Bank Z will lend to a borrower. As you can see from the table above, a buyer looking to borrow money from Bank Z would only be able to borrow approximately $2.3 million, even though the Bank Z’s own EBITDA to Senior Debt ratio supports higher borrowing. Historically, during the “go growth” pre-Recession period, we saw the EBITDA to Senior Debt ratio go as high as 3.1 to 3.5 (for companies with less than $5 million of EBITDA; the ratio was higher for larger companies). At the trough of the market in early 2009, we saw the ratio drop to 1.25 to 1.45! Today, for companies with less than $5 million of EBITDA, the ratio is approximately 2.5 to 3.0; for larger companies, the ratio has risen to 3.5 to 4.0, perhaps higher for really large companies. Using the table above, if Bank Z’s EBITDA to Senior Debt ratio fell to 1.35 like most lenders at the nadir of the Recession, the most a buyer could borrow to acquire Company A is $1.35 million even though Company A’s assets could be leveraged to $2.3 million. What does this have to do with earnings multiples? As the EBITDA to Senior Debt ratio declines, purchase price multiples for leveraged transactions decline as well because there is less leverage available for buyers to make acquisitions. Imagine the following scenario: Company B has $2,000,000 of EBITDA and wants to sell its business for $11,000,000 (earnings multiple of 5.5x). Buyer 1 wants to acquire Company B and goes to

We Saw It In ENX Magazine

continued on page 55


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Multiple Mania: Current Market Multiples & What Your Banker Won’t Tell You Bank Z (whose EBITDA to Senior Debt ratio is now at 2.5) for a loan. Bank Z tells Company B it can only borrow $5,000,000. To fill the $6,000,000 gap between what Company B wants for its business and what Buyer 1 can borrow from Bank Z, Buyer 1 will either have to increase the equity it puts into the deal, thus significantly lowering its return on equity, or it will have to borrow from a high-priced cash flow (mezzanine) lender, lower its offer for Company B, or walk away. A buyer who does not have to use leverage to close deals will be unconcerned by this ratio. For the vast majority of buyers of middle-market companies, leverage is a requirement, so this is a fundamental, driving force in valuations. Having gone through three downturn M&A cycles in the past 25 years, we are very familiar with the ebb & flow of the EBITDA to Senior Debt ratio. When the ratio increases, purchase price multiples increase; when it declines, so do acquisition prices. Unfortunately, no banker will really disclose this number to you, it is not published anywhere, and most banks seem to use the same ratios. However, if you recognize the importance of this ratio, you will understand why purchase price multiples are so heavily dependent on the availability of leverage. ♦ We Saw It In ENX Magazine

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Ken Edmonds

Service Management News Briefing

The Product Specialist

E

very service manager I know is tasked with more work than they can ever complete. One of the challenges they face is dealing with constant flow of information from their vendors. I know when I was a service manager that I had a box on a table in my office where I put the printed bulletins that came in. I was always going to read and file them, but it never happened. One way to help deal with this situation is a product specialist.

What is a Product Specialist

For this discussion, the term product specialist applies to a technician or a supervisor assigned to specialize in one or more product families. A product family is a group of models from one vendor that have similar properties. In many cases, one training class may cover three to five models, and this would be a product family.

Why You Need One

Every week, most manufacturers are releasing bulletins associated with the products they produce. Some of these bulletins are important, some may outline special programs that reimburse dealers for upgrading equipment with firmware or new modifications. Additionally, with a multitude of products supported by most dealerships, the technicians never have the opportunity to excel on any one product. The result is a service force of generalists with limited skills. The field technicians will never have the time or will to read every bulletin on every product. The solution is to have a technician specialize in one or more product families. For large dealerships, it may be possible to have a different technician assigned to each product family. In smaller dealerships, it may be necessary to have a technician cover multiple families. 56

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www.enxmag.com | November 2016

Duties of a Product Specialist

The first duty that should be assigned to the product specialist is to read every bulletin and make sure that important information is disseminated to the appropriate people. For example, if a manufacturer has a program to reimburse the dealership for upgrading firmware, that information needs to be provided to the service manager. Additionally, the firmware and process to document the completion need to be given to the technicians that work on the product. Parts change information should go to the inventory department. Since the product specialist is reading all of the bulletins, the technicians should be encouraged to contact the product specialist when they have trouble resolving problems in the field. This serves two purposes. First, the answer may be in a bulletin. Second, by having all of the difficult problems referred to the product specialist, a problem new to the technician may be something that another technician has dealt with and the product specialist should know how it was resolved. In some dealerships, they compile a problem solution handout to help technicians solve issues more quickly. This duty would fall to the product specialist as well. Since he is the point of contact for unusual problems, he could easily start to compile this information and share it.

Selecting a Product Specialist

For dealerships that have large numbers of technicians, the challenge is how you choose the right person. I recommend starting with the technicians that other technicians go to for help. In almost every department, there is a go-to tech that other techs rely on. These individuals are the logical choice for a product specialist. Another possible candidate is the technician that supports the largest population in the field. Because he supports the most maWe Saw It In ENX Magazine

chines, he will typically see more different problems, and have a better grasp on the issues with the product. Supervisors are also potential candidates, depending on their workload. Additionally, individuals that you want to evaluate for advancement are good prospects for this role. Technicians that show initiative by completing online training and asking for training are also potential candidates.

Training and Motivating the Product Specialist

As with any other responsibility assigned to a technician, training is required. The supervisor or manager should review the role of the product specialist and outline the expectations for the position. It would be good to go through some bulletins and point out how the information should be categorized and disseminated. I would recommend that the product specialist be the first technician sent to school on any new products that they would be assigned. For a product specialist to be effective, he will need time allocated to completing these responsibilities. He needs the time to read all the bulletins, and to research issues that technicians are dealing with. The amount of time required will vary depending on manufacturer and product families supported. Since this role is really an extra duty that not all technicians have, the product specialist needs to be rewarded for successfully handling this role. The value the product specialist provides should also be considered when evaluating technicians for recognition.

Reap the Benefits

The product specialist concept allows a dealership to improve the efficiency of their service department. It will help the technicians have the important information they need to service the product. It will also reduce the service manager’s workload allowing him to focus on the big picture items. ♌


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Britt Horvat

Technical Tips News Briefing

Differences in the Xerox® C123 Style and Introducing the WC-5335 Family New but Familiar Models - Comparing the WorkCentre® 5335, 5330, & 5325 models to the earlier models in the series

T WC-5335 Copier / Printer

62

echnicians love seeing a style of machines continue to grow. It means a relatively short learning curve for techs that have worked on the earlier models. This month let’s have a look at the C123 style and see how similar are the three families within this series of Xerox® black and white copiers, in particular the newest family which includes the WorkCentre® 5335, 5330, and 5325. There are a lot of similarities, but as always, a few changes that you’ll want to be aware of. The C123 style of monochrome copiers / printers are very popular. This is due partly to the fact that these machines have very few inherent problems. They run up to 35 pages per minute. There have been four families released over the years. Here are the Four Families of the C123 style below: • WC-M118 Family (CopyCentre C118, WorkCentre M118/M118i) • WC-Pro133 Family (WorkCentre® Pro123/128/133, M123/128, CopyCentre® C123/128) • WC-5230 Family (WorkCentre® 5222/5225/5230) • WC-5335 Family (WorkCentre® 5325/5330/5335) All of these have a simple toner cartridge that is quite easy to refill (and good toner is available for these, and consistent which is a big plus). The toner CRUM chips are different for each family. Then each family has its own version of the drum cartridge, which includes the developer station as its lower half.

www.enxmag.com | November 2016

Parts Similarities & Differences:

The fusers are not all the same, although they are C123 style fusers – extremely all look alike at first similar glance. to one another. They are all worth rebuilding. See the part numbers for each family below and notes about which ones are interchangeable and note that all but the first use the same heat rolls and pressure rolls: WC-M118 Family: 126K16458 (different from all those which follow; heat roll and press roll not interchangeable with any of the other families) WC-Pro133 Family: 126K16480 (interchangeable with WC-5230 version below) WC-5230 Family: 126K24980 (interchangeable with WC-Pro133 version above) WC-5335 Family: 126K29392 (not interchangeable with any others, but the heat and press rolls for the earlier models work in this new version) The feed components have changed a few times. First the WC-M118 family had a unique single large roll and a separation pad built into Tray 1. Then the feed rolls for the optional second tray matched the WC-Pro133 family feed rollers (a more typical 3-roll system – 604K20530 / 604k20630 / C123PFRK). The WC-5230 family followed suit. The newcomers (WC5335 family) have wider tires although they’re similar in design (604K56080 / 5325PFRK). We Saw It In ENX Magazine

Document Feed Roll Kits feeder parts have changed a few times as well. Again you’ll see the WCFor WC-Pro133 / M118 family WC-5230 is unique. The WCPro133 and WC-5230 families For WC-5335 Family share the same type of feed, nudger, and separation rollers (604K20760 / C123DFRK or tires only C123DFTK), and the new WC-5335 family has a new design (604K58410 / 5325DFRK). “UI Diagnostic Mode” (User Interface diagnostics): From the powered on state, press and hold down the ‘0’ key for five seconds, then press the ‘Start’ button while still holding the ‘0’. The screen will prompt you for a password. Enter the default access number (6789) and press ‘Confirm’. The colors on the display will reverse to show you that the machine is now in diagnostic mode (for the WC-5335 family, you’ll instead see the small tab at top right which shows the username will turn orange and will now say ‘Service Rep’ so you know you’re in diagnostics). The next step is a little different depending on which model you’re working on: For WC-Pro133 family (WCPro123/128/133, M123/128/133, CC-C123/128/133): Press the ‘Log In/Out’ button. For WC-5230 family (WC5222/5225/5230) & WC-5335 family (WC-5325/5330/5335): continued on page 63


Differences in the Xerox® C123 Style and Introducing the WC-5335 Family Press the ‘Machine Status’ button. Then touch the ‘Tools’ tab. Next for any of the models, select ‘System Settings’ in the left column, followed by ‘Common Settings’ in the middle column, and then scroll down to ‘Maintenance / Diagnostics’ in the right column and you’ll see the main menu: • NVM Read/Write: Non Volatile Memory adjustments. • Component Control (or I/O Check): For testing sensors, motors, solenoids, etc. • Print Test Pattern • Initialize NVM • Adjustment / Others: Includes ‘Machine ID / Billing Data’, ‘Initialize the HFSI’ (High Frequency Service Items), ‘Adjust Toner Density’, and ‘Tray 5 (Bypass) guide adjustment’. Fault Codes: the meanings of fault codes have remained pretty consistent throughout. If you were to refer to the older articles that were in ENX which talk

about the C123 style, you will find those to be mostly accurate. The one important exception is that the fuser fault codes changed for the newest WC-5335 family. The NVM (Non Volatile Memory) chain/ link code that needs to be reset to ‘0’ to clear fuser faults also changed. For the WC-Pro133 & WC-5230 families: The fuser fault code which required resetting in NVM Read / Write were 010-320 and 010-327. The NVM code that needs to be reset to ‘0’ is 744220. For the new WC-5335 family: There are now several new fuser fault codes that would require resetting from diagnostics—010-338 (Fuser Fault), 059-315 (Center Thermistor Over Temperature), and 059-317 (Rear Thermistor Over Temperature). Any of these three would require resetting code 744-005 back to ‘0’ in the diagnostics using NVM Read / Write. System Administrator Menu: You or your customer can go to the machine’s We Saw It In ENX Magazine

control panel and press the ‘Log In / Out’ button, OR browse to the machine’s IP address from a browser on a computer on the same network (that will bring up the CWIS / CentreWare Internet Services screen). In either case the username and password remain the same (depending on which model you’re working on). WC-Pro133 family (WorkCentre Pro123/128/133, M123/128/133, & CopyCentre C123/128/133) & WC-5230 family (WorkCentre 5222, 5225, 5230) Username default = ‘11111’ Password default = ‘x-admin’ WC-5335 family (WorkCentre 5325, 5330, 5335) Username default = ‘admin’ Password default = ‘1111’ If you know the older C123 or WorkCentre Pro123/128/133 models, or the WorkCentre 5225/5230 models, you will have absolutely no trouble repairing the new beautiful WC-5325/5330/5335 models. ♦

November 2016 | www.enxmag.com

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ENX Magazine November 2016 Issue  

Connecting People, Ideas and Products in the Office Technology and Document Imaging Industry since 1994

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