Reprographics 101

I’ve had only some exposure to recessions that impacted the reprographics industry, and that’s because I missed one completely (I was out of the industry during that one, thank goodness), but I thought I’d do a post about recessions that affected the industry, including another comment about the one the industry is currently experiencing.

For you younger people in the reprographics industry, this recession – the one we are in the midst of right now – may be your first. This one is going to be an interesting ride, so to speak, from all appearances (based on everything I’m reading and hearing), this one is going to be deep. But, deep does not mean that companies can’t make it through to the other side – – make it through to the next up-cycle is, I guess, how I should say it. This is your time to learn about how to deal with recessions. I remember saying to friends years ago that, when were in college, one of the courses they should have had on the curriculum was “recession” planning. In Business School, we learned Marketing and Accounting and Finance and Management and even took courses that were about Business Planning for the upside, but nothing about how to deal with recessions.

In 1973-4 (if I remembered the years correctly) our little reprographics company (we called ours a blueprinting company back then) was affected by a recession. And, in a major way. I was still very young in the industry, that was my first experience with a recession, and it was not fun, not fun at all, but we managed to make it through to the other side. Our sales, Y-O-Y, declined by approximately 25%!!! That was a real shock to me and to our company. We kind of got hit with a double-whammy; there was a recession in the U.S. economy AND there was a building moratorium in Montgomery County, MD (MC is a suburb of Washington, DC.) That building moratorium was caused by the County not wanting to further stress its water/sewer system. Unfortunately, most of our business, back then, came from A&E firms that were involved in projects in the suburbs, Montgomery County being the major one for us and where we and most of our customers were located. As I look back, what allowed us to get through that down-cycle was cost-cutting to-the-bone (my salary got reduced, as did my father-in-law’s), and we were fortunate that we had only a minor amount of equipment debt. We had to layoff one employee, but we kept everyone else on the payroll; we did go to an abbreviated work-week. Lesson learned – you can make it through a recession that affects the A/E/C industry. Retain some of your profits, as that money may later be necessary to help you make it through a recession.

Another recession hit around 1981-2 (if I’ve got the years correct), and interest rates soared. But, we didn’t feel that one much, if at all. As I recall, our sales climbed through that one. What happened is that we were aggressively growing our market share, and we also acquired a couple of companies (in our market area, Washington, DC and environs), closing redundant locations and consolidating operations. In 1982, we acquired our largest competitor; that competitor had 52 employees, we kept only 7; that competitor had 5 locations, we closed 4 of the 5 (and “sucked” the business from the other 4 locations into our own locations.) We also acquired (through a small merger transaction) an engineering photolab business, closed its location and brought the work into our existing main-plant location which already had an engineering photolab department. One other thing about the acquisition is that we had less competition, and that had a favorable impact on pricing. So, that particular recession did not hurt us at all; we grew right through that one. TG.

The next recession to hit the A/E/C industry and, of course, the reprographics industry, started around 1989 (at least it did in the eastern part of the U.S., later rolling across the country; my understanding is that the west coast felt that one after the east coast had already been experiencing it for a while), but I, personally, had no direct experience with that particular recession, for I “retired” from the business and industry in mid-1988. From what friends (who were in the reprographics business all the way through that recession) told me, that recession hit the reprographics industry very hard, for it was brought on my serious over-development. I don’t know when that recession ended, could have been 1992 or a bit later. I don’t know what the ‘sales revenue fall-off’ was like during that recession, although I do recall hearing some friends say that it was “ugly.”

There was a recession in 2001, but the company I was with did not feel that one much. Our sales slowed a bit in the Orlando, FL market (development tied to tourism – theme parks, hotels, retail related to that – tailed off for a while), but our sales were quite robust in our Tampa and Jacksonville, FL markets. In 2001, we were still a rather small company, so we had lots of upside growth, even during a minor recession, from aggressively securing market share gains. Our FM (On-Site) business segment was growing very well, even through that recession period. On an overall basis, I don’t recall that our sales dropped during that recession.

For the benefit of “younger” people in the industry, I would appreciate it if some of you “older” people, who’ve had experience with recessions that impacted the reprographics industry, would jot me an e-mail with your experience; this so that I can post your recollections on my blog-site.

Basically, if you have a manageable debt level before a recession hits, if you know how to, and do, right-size your business, and if you’ve been paying attention to costs all along, you can manage to make it through the recession the industry is now experiencing, provided that the downturn is not ridiculously severe. I’ve heard some friends say that they can get through this recession if the sales decline is 20-30%. If the sales decline is a lot more than that, well, I don’t even want to think about, or comment on, that.

Well, this post is a “brief” follow-up to two previous posts about ARC’s stock price.

Yesterday afternoon, ARC’s stock price closed at $3.16 per share.

I think the only appropriate acronym for that is OMG!

As I pointed out in an earlier post, ARC, in 2007, acquired 19 businesses for $146.3 million.

At $3.16 per share, that price-per-share computes ARC’s “market cap” (total market value) to be around $145 million.

And, at that price-per-share, one can now by ARC – all of ARC – for less than ARC paid for just its 2007 acquisitions.

A market cap of around $145 million now values ARC at around:

– – – 20.6% of ARC’s 2008 Sales
– – – 1.08 x ARC’s 2008 EBITDA.
– – – 49% below ARC’s y/e 2008 Book Value

I am even more stunned now than I was in my previous post!

And, ARC’s declining stock price provokes certain questions:

1. How much lower could ARC’s stock possibly get?
2. At what price would ARC’s founders consider taking ARC private?

I’ve had the opportunity, during the past few months, to spend a good deal of my time in Europe. Since I’ve been in and around the reprographics industry in the U.S. for many years, I’ve had the opportunity, over the years, to meet quite a lot of guys (and gals) who own reprographics companies in the U.S. But, my “European experience” has allowed me to meet owners of reprographics companies in Europe. Quite interesting. In October, I attended a conference sponsored by GlobalGrafixNet (which is wholly-owned by Service Point Solutions), and there were a number of European reprographics companies at that conference.

There are a number of differences between the reprographics business in the U.S. and the reprographics business in Europe. I’m not going to get into all of that at this moment; perhaps in a future post I’ll cover some of that (if I remember to do that, and that, at my age, is never a given!)

There is one difference I am going to mention in this particular post; I consider this one to be a “major” difference between the U.S. and Europe.

Before I get into this, I do want to say that one of the vendors I’m going to mention, OCE, is, to me, one of the finest manufacturers of large-format imaging equipment out there. When I was in the reprographics business in the U.S., we were an OCE dealer (and we were dealers for KIP, HP and Canon as well); we had a significant quantity of OCE equipment at our Production Centers and at the many FM’s (On-Site’s) we operated, and “my take” on OCE is that its equipment is extremely reliable and dependable. (Please also note that I’m also a fan of KIP, HP and Canon wide-format equipment.)

For those of you who are in the reprographics business, whether in the U.S., the U.K. or in Europe, I think you might find this interesting:

Most of you, if not all, are aware that OCE in the U.S. got into the FM (On-Site Services) business when it bought Archer Management Services (actually, the guy that owned Archer, Stan Katz, was an acquaintance of mine, so I was very aware of the scope of Archer’s business, “pre-OCE.”) Archer’s FM business was limited to small-format and its primary customers were legal, accounting and corporate customers. After buying Archer, OCE changed the name of that business to OCE Business Services (OBS.) I am not aware that OCE Business Services (in the U.S.) has changed the Archer-business-model all that much, except maybe for the government-sector business OBS has been, and is now, pursuing in the U.S. In other words, I am not aware of any OBS FM’s in the U.S. that are for A/E/C firms ….. OBS’ business in the U.S. appears to target legal, accounting, corporate and government agency business. [An example of OBS’ government sector business – in Florida, OBS was providing an FM service (a staffed FM) for the District 7 office of the Florida Department of Transportation (FDOT), but that deal ended, and OBS was replaced by Canon Business Solutions, in September 2007. Mostly a “small-format” FM (only one piece of large-format imaging equipment), but FDOT is an agency that contracts with engineering firms for public infrastructure project design/engineering. OBS was also the FM provider for FDOT District 5, but Canon Business Solutions took that deal away from OBS a few years ago. That particular deal was for “small-format” only.]

As to OCE’s OBS business segment ……. in Europe, things are, apparently, very different !!!

OCE’s OBS business in Europe is quite significant and EXTENDS into the A/E/C industry. For example, OBS provides a staffed FM (On-Site Service) for Skanska in one major European city. And, OCE uses that site [which is in the corner of an office building, on the first (the retail) floor] to provide reprographics services to other A/E/C firms in that city, in other words, that site does not just service Skanska. That site, or I guess I should say “store,” has a sign on the outside that says “OCE ReproCentrum” (meaning “reprocenter” for those of you I have to translate for!) I had the opportunity to meet the guy who runs OCE’s business (all OCE business segments) in the country where that city is located, and, when I asked him about OCE’s OBS (FM) business in the A/E/C community in Europe, he said that OCE’s FM business in the A/E/C community is quite significant throughout Europe. When I said to him that OCE does not compete with its customers in the U.S. for the A/E/C FM business, he so much as said, “well, this is Europe, not the U.S.”

My guess is that OCE doesn’t compete for FM business in the A/E/C community in the U.S. and doesn’t operate A/E/C reprographics centers in the U.S. because OCE does not want to piss-off its U.S. reprographer customer base. I can only imagine the look on your faces (those of you who are in the reprographics business in the U.S.) if OCE began going after A/E/C FM customers in the U.S. Please also note that I did ask Patrick Chapuis (of OCE USA) about this issue and Patrick (one of the nicest, smartest guys you would ever meet) did reply that OCE has no plans to compete in the A/E/C FM business in the U.S. and no plans to open “reprocentrums” in the U.S. Well, that was good news, I think, for reprographers in the U.S.

But, I still wonder about European reprographers; in particular, does it not piss them off that OCE’s OBS unit is in the A/E/C FM business in Europe – – OCE is competing directly with European reprographers for that FM business – – but does not do that in the U.S. (and, apparently, the UK situation is the same as the U.S. situation.)

I think one of the reasons for this is OCE’s very commanding market-share position in wide-format equipment placements in Europe. KIP, which I believe is a strong #2 in the U.S., is pretty much a “non-factor” in Europe. I did have the opportunity to meet the President of KIP Europe at the GGN conference I attended (he reports to Japan, not to the U.S.) At the time I met him, he had been with KIP for only about six months – – he came to KIP from one of the small-format copier/printer manufacturers, so, to me, he is still a “newbie” to the large-format industry, and I suspect it will take him a while to figure out why KIP is a non-factor in Europe, where that’s not the case in the U.S., and how it might be possible to use to KIP’s advantage (vis a vis, sales to reprographics companies in Europe) – – my opinion here is that KIP should have at least some competitive advantage because of the fact that OCE’s OBS unit competes with OCE’s reprographers customers in Europe. However, that does not mean that KIP will figure out that things are different, U.S. vs. Europe, nor figure out how to take advantage of that difference.

I’d love to have your insight on this. If OCE went into the A/E/C FM business in the U.S., and, further, began using its A/E/C FM sites to provide services for non-FM A/E/C customers – in other words, if OCE went into direct competition with the core business segments of U.S. reprographers – do you think the U.S. reprographer community would push more of its equipment business to KIP and Xerox …and away from OCE?

In 2007, ARC acquired 19 businesses for $146.3 million.

Today, March 4th, ARC’s stock price hit $3.50 per share and, at that price, ARC’s “market cap” (total market value) is around $160 million.

Considering the fact that ARC has completed significantly more acquisitions than just 19, and has been acquiring companies for years, it is a stunning statistic, I think, that one can now buy ARC for not much more than ARC paid for just its 2007 acquisitions.

Although I’m pretty sure I won’t be able to accomplish this project, I’d at least like to attempt it. Please bear with me while I explain.

What this project consists of: A “barometer” of how businesses in the reprographics industry (in the U.S.) are doing, month by month, quarter by quarter, sales-wise.

What would be necessary, I think, to make this happen: To get monthly sales information from at least 50 different firms (and from different parts of the U.S.) And, to be able to get this information no later than 15 days after the end of each month.

What would be published: Total monthly sales (no breakdown by region, just total sales for all reporting companies) month by month, comparative, 2009 vs. 2008.

Who would gather the information: Not me. I would ask one of my C.P.A. friends to be the gatherer and compiler of the information. I would not be privy to who reported what. Participating companies would e-mail their sales data to that C.P.A, not to me.

Publishing: I would, after receiving “totals’ from the C.P.A. firm, publish the totals on my blog-site, once a month, shortly after the 15th of each month.

Benefit: While I realize that some would consider ARC’s publicly-reported Sales figures to be a good barometer of how the industry’s sales are faring, ARC benefits from “national deals” (due to its Premier Accounts Group efforts) that others cannot benefit from. So, comparing your company’s numbers to ARC’s numbers are not a completely-direct comparison.

If you are willing to participate in this barometer project, please e-mail me (joel.salus@mac.com) to let me know. (Please refer your friends in the business to this post on my blog-site.) If I get a sufficient number of yes-responses, I will move forward with the project.

I trust you’ve heard of the “Case-Shiller” Home Price Index? Well, if I’m able to get this reprographics-business-industry barometer project done, I’ll be calling it the “US REPRO SALES INDEX.” (A thankless project, if you will, because I won’t get one red cent for doing it!)

Regards to all.

Well, I did mention in my initial post that I’m highly opinionated. So, here we go with one of my opinions.

This one has to do with considering the big picture when approaching the issue of how to charge (or what to charge or if to charge) for the services you provide to customers (or promote to prospects). In particular, I read on someone’s blog that you should never give anything away for free. That, if you do that, that sends a message to customers (and to prospects) that you don’t place any value on those services. And, that, if you don’t, why should they?

Well, to me, that those statements are “generalities” and, to me, generalities often overlook “specifics.” Ever since I was a much younger guy in the reprographics business, I’ve felt that in order to be successful in sales, one must have a “sales strategy” and that “sales strategy” should be approached very specifically, i.e., on an “account by account” basis. In other words, while you do have to have an “overall” sales strategy for your company, each individual account (whether customer or prospect) requires and deserves individual attention, more specifically, what I refer to as an “account strategy.” While many customers (and prospects) are alike, no two are really ever exactly the same. Some have different “hot buttons” than others (“hot buttons,” meaning, what’s important to them; what issues are likely to influence them to do business with you.) The other factor to consider, “account-strategy-wise”, is the overall value an account offers, i.e., if you had 100% “account share”, what would that mean to your company’s sales, and, of course, related to that, to your company’s market share.

Take, for example, e-plan room services and digital services. How do you charge, what do you charge, do you charge, should you charge? If you listen to some supposedly knowledgeable sales management and top management people in the reprographics industry, you must always charge, without exception for every service you provide. And, if you listen to me (and, I’m positive there are others in the reprographics industry who share this opinion), whether you charge for each individual service or offer some services for free (i.e., bundled into other services) should depend, almost totally, on your strategy for each individual account.

Also, I don’t want to forget to say this ….. when you find a competitor who says “you must charge for each individual service, don’t give away anything” …… he/she is, in my opinion (and, based on what I’ve learned and observed) either a) putting up a smokescreen (meaning, getting you to think his/her company is charging for every individual service, even though they may not be doing that), or b) plain stupid.

This, of course, has to do with what some call your “value proposition.” Why should a customer continue using your company, why should a prospect consider converting its business to your company? Decide what your value proposition is, but never ignore the fact (I say fact, meaning it is fact to me) that developing and employing sales strategy on an “account by account” basis requires that one consider the most effective way of delivering that value proposition. There are situations (this, folks, based on my experience in the real world) when “bundling” services is an appropriate account strategy.

Well, as most of you (in the reprographics industry), if not all, are aware (or, should be aware), Fedex purchased Kinko’s a few years ago, and, if I’m recalling this correctly, Fedex paid about $2.3 billion for Kinko’s. Inasmuch as I’m a pauper, $2.3 billion is a lot of money to me. But, I guess it was a drop in the bucket for a company the size of Fedex. Kinko’s is an interesting story itself, but that’s not something I’ll get into during this post. (If you want to know more about Kinko’s history, I think there’s information about that on Paul Orfalea’s web-site (Paul was the founder of Kinko’s.)

Funny story: Back in 1986, shortly after we took our first company public, I wrote a four page letter to Fred Smith (Chairman of Fedex.) In that letter, I explained to Fred that I felt there was a synergy between the “copy center” business and the “overnight courier” business – further explaining to Fred that quite a number of the customers who used our copy-center services would, right after we finished their jobs, run over to a Fedex store. I don’t recall the exact details of my letter, but, the essence of that letter was an offer to Fred – if Fedex would make the space available to my company, my company would open mini-copy-centers in Fedex stores; I’d put up the money for the equipment and people, Fedex would provide the space, and we’d share the profits. (I did not say what the profit split would be.) I sent that letter to Fred via Fedex Overnight Letter. He did receive the letter, for, a couple of weeks later, I got a letter from a Fedex VP of Business Development (I don’t recall the guy’s name), and, after thanking me for my interest in Fedex, he tactfully explained that “they” reviewed my letter, but did not share my opinion that there was any synergy between the copy-center business and Fedex’s overnight courier business. (Oh well, nothing ventured, nothing gained. Not every initiative is going to work the way you hope it will work.)

Fast forward many years (was it 17 years later?) …… I saw a press release that announced Fedex’s acquisition of Kinko’s …… and noticed the amount of money ($2.3 billion ???!!!) that Fedex had agreed to pay CDR for Kinko’s (CDR = Clayton, Dubalier & Rice, the private equity group that purchased Kinko’s from Paul a few years before CDR sold Kinko’s to Fedex). So, me being me, I wrote a second letter to Fred Smith at Fedex. In that second letter (which I also Fedex’d to Fred), I (a) congratulated Fred on Fedex’s purchase of Kinko’s (wished him well, of course, since that’s always the polite thing to do), and (b) reminded him that if he’d taken me up on my offer in 1986, Fedex might have been able to avoid having to spend $2.3 billion to get into the copy-center business. Well, I did not hear back from Fred (a guy like Fred, given his position, certainly cannot waste time corresponding with a crack-pot like me), but, I did, a few days after I sent my letter, get a phone call from Gary Kusin. (At that time, Gary was the CEO of Kinko’s, the hired gun that CDR installed to prepare Kinko’s for sale. It’s my understanding that Gary remained with Kinko’s for several months after Fedex purchased Kinko’s, but then went on to more important things.) I had a nice chat with Gary; based on what he said on the phone, my letter was found to be at least somewhat amusing to Fred!

Anyway, there are a few morals to this story. (1) Set your goals very high; you will not always achieve your very high goals, but it is fun to pursue big goals (and during your later years in business, it will be fun to reminisce, just like I’m now doing), (2) If you want letters you send to important big-whigs to get read, send them via Fedex, and, (3) Take the time, occasionally, to think out of the box.

By the way, I’ve been a Fedex customer for as long as Fedex has been in business. To me, Fedex is one of the finest examples of a company that gives fantastic, very reliable, dependable service and one that makes its business extremely “customer friendly.” I’ve used Fedex since the 1970’s, Fedex has never lost any of my letters or packages (at least that I’m aware of), and, from the very first day Fedex started, Fedex has made it totally simple to use its services. This is not to say that I agree with all of Fedex’s decisions. It is my humble opinion that Fedex’s decision to discontinue the Kinko’s name was absolutely stupid, Kinko’s being one of the most well known brands in America. And, of course, I think Fedex was stupid for not taking me up on my offer in 1986 to open copy centers in Fedex stores. (You did expect me to day that, I’m sure!)

I had the opportunity to meet Paul Orfalea, founder of Kinko’s, when he made a presentation, back in the early 1990’s at a meeting of the L.A. Venture Capital club. Paul, one very smart fellow, is an absolutely wonderful speaker. And, a humble one at that. It is not often that you meet someone who achieved what Paul did who attributes part of his success to, well, “it was a fluke,” kind of like, good things just seemed to happen. Even though I don’t really know Paul (I only met him that one time), my impression of Paul is that his success was, in large part, very much attributable to his care and concern for the team members that he worked with. That brings to mind one of my ATF books, “The Servant” by James Hunter. Paul probably could have written that book.

Okay, that’s enough rambling for this particular post!

If you’re an older person (and I am an older person), you’ll probably recall the old EF Hutton advertisement that said, “when EF Hutton talks, people listen!” Well, I, too, have a saying (this saying is related to my stock-picking prowess)….. “when Joel buys, sell.” Case in point: the other day, I decided to buy a stock that’s fallen quite a lot over the past two years, a stock that’s fallen a bunch in just the past six months. Just prior to executing my “buy” transaction, I e-mailed a friend to tell him what I was going to buy, suggesting to him, in light of my saying “when Joel buys, sell,” that he should considering “shorting” the stock I’m about to buy. (This, because whenever I buy a stock, it goes down …. and, if I’m not going to make money, at least one of my friends should.) Well, I did buy the stock, and, guess what, the stock did go down. Well, at least my track record is intact!

Which brings me to the subject of ARC’s stock price. The big question is, “is ARC’s stock (symbol ARP on the NYSE) a good buy at $4.00 per share?” Well, I think it is a tremendous value at that price. And, if ARC’s stock falls even more, it will be more than a tremendous value ….. it’ll be a steal. But, what do I know, anyway? At this point in my life, I have a very long-term investment horizon for stocks I own, since I’m not planning to (and don’t think I’ll have the need to) cash in my stock portfolio for approximately ten years.

For those of you who’ve been active in acquiring, merging or selling reprographics companies over the years, you’ll find these financial measures interesting:

At a price of $4.00 per share, ARC’s market-cap (market valuation, which is computed by multiplying the number of shares outstanding by ARC’s price per share) is around $183 mil. Theoretically speaking, if one had $183 mil, one could buy 100% ownership of ARC.

At a price of $4.00 per share, ARC is now valued (based on its market cap) at 35% below “book value”. [Book value is “stockholders’ equity. ARC just wrote off approximately $35 million in Goodwill (Goodwill “impairment” charge), which substantially reduced ARC’s book value.] [Okay, for all you naysayers out there, there are some who would discount Goodwill as a component of book value; but, I don’t; ARC’s roll-up strategy has been based on leverage, goodwill, and earnings power.]

At a price of $4.00 per share, ARC is now valued (based on its market cap) at 26% of Sales Revenues (2008 Sales Revenues). If ARC’s 2009 Sales fall to $600 mil (and, I’m not saying or implying that ARC’s Sales will fall to that level for 2009, I’m simply using that number as an example), then, at price of $4.00 per share, ARC would be valued at 30% of Sales Revenues.

Earlier in my career in the reprographics business, my company was active in acquisitions and mergers. Although my exposure to this sort of activity is rather ancient at this point, I do have a few comments I’d like to share with you about valuations of reprographics businesses, at least from a historical perspective:

(1) In the past, it would be highly unusual, if not extraordinary, for anyone to be able to buy a profitable reprographics company for less than book value. At the price of $4.00 per share, one can now buy the industry leader (ARC) at a hefty discount below book value.

(2) In the past, one could buy profitable reprographics companies for 50-75% of annual Sales Revenues, sometimes even less. (Well, that’s changed a lot over the years, companies who acquire now being much more focused on EBITDA and EBIT multiples rather than focused on % of Sales or book value. In considering acquisition opportunities years ago, we looked at a variety of financial measures; earnings multiples, book value, Sales, EBIT, EBITDA, pricing, margin, etc.) At the price of $4.00 per share, one can now buy the industry leader (ARC) at 26% of Sales Revenues.

(3) If I’m recalling this correctly, ARC’s been paying [according to press releases, SEC fillings (including exhibits) and investor presentations] acquisition purchase prices that range from 4.0 x EBITDA (some may have been lower) to 6.0 x EBITDA (some may have been higher.) Yet, right now, at $4.00 per share, ARC, itself is valued at less than 1.4 x EBITDA. (Hey, someone out there, how about checking that math – – is ARC, at $4, valued at 1.4 x EBITDA?)

There are two ways to make money in the reprographics business. You can make money from your own business. And, if you buy stock in a publicly-traded business in the industry and that company’s stock goes up, you can make money that way as well. Does owning stock in a competitor mean that you’re helping your competition? Well, the only answer I think pertinent is, “who the hell cares.” If a stock is now undervalued and poised, at some point, to go much higher, then someone’s going to benefit from that …. why should I forgo that potential, just because the company is a competitor?

Full disclosure: I do own ARC stock and I am planning to buy more. As I mentioned in my background information (in an earlier post), I’ve been very fortunate to have been able to cash-out of two different reprographics companies. The way I look at it is, if I buy a lot of ARC stock now and it goes up substantially over the next 5-10 years, that would be a “third” cash-out for me. (And, now that I’ve said that, remember that I said, “when Joel buys, sell.”)

Finally, a friend of mine in the reprographics industry recently posed this question …. “given ARC’s performance of late (he was referring to ARC’s stock price), do you think that ARC will consider going private?” Well, my take on that (whether ARC will remain a publicly-traded company or go private) is, “who the hell knows.” Certainly, it’s got to be very frustrating to watch your company’s value (market-cap) fall from $1.7 billion to $182 mil. And, it is very expensive to be a publicly-traded company, considering all of the expenses that go with that, not to mention the time and effort it takes to work with and respond to annoying, aggravating questions from analysts and large investors. Another friend asked me about Fedex; “would Fedex be a likely candidate to acquire ARC?” Well, another “who the hell knows” answer from me. Fedex acquired Kinko’s for $2.3 billion (was that the number?) and then proceeded to discontinue one of the most well known brands in America (a move that I personally think was dumb, but what do I know, anyway) …. and I’ve yet to hear anyone say that Fedex knows how to grow that business. And, if Fedex hasn’t yet figured out how to profitably grow Kinko’s (now Fedex Office), what success would Fedex have with ARC?

Okay, that was a very long-winded post. (If you think my posts are long, you should have seen my proposals!)

In a previous post I mentioned that both of the reprographics companies I was with were members of the IRGA.

And, I said in that post, “if you are not an IRGA member, you’re not just a fool, but a complete idiot. I can’t possibly tell you how much I learned from being a member of the IRGA. The networking experiences are truly invaluable.”

In saying that, I wasn’t trying to cute or funny or arrogant. I was simply stating FACT. If you’re in the reprographics business and are not a member of the IRGA, you’re an idiot. And, I don’t care whether you are just beginning your career in the reprographics industry or are a veteran in the industry – – – regardless of your situation – – – if you are in the reprographics business and are not a member of the IRGA, you’re an idiot. Well, I think I’ve said “idiot” three times in this post!

Over the many years I’ve been in business, I’ve been accused of being redundant. So what. There are lots of hard-headed people out there and those people, especially, need to hear the same information over and over …… at some point the information might actually sink in!

So, what’s so important about being a member of the IRGA? Well, one is never too old to learn (or too young to learn.) If, on an annual basis, you pick up even one tidbit of information from attending an IRGA Convention or from reading The Repro Report – – – that tidbit, depending on what you picked up, could be worth its weight in gold.

Simply and frankly put – – – the IRGA had an extremely positive influence on my personal success in the reprographics business and on the success that both of my former reprographics companies achieved, and I am very aware that had I not been a member (had my former companies not been members) of the IRGA, my success (our success) would not have been what it was. Not even close.

I hope that you achieve the success that you want. But, I can’t imagine anyone in this industry achieving a high level of success if they don’t take advantage of what the IRGA offers. In my first career in the repro industry, I joined a very small, family-owned business in 1970; our annual sales at that time, $90,000! By the time I retired from that company (we sold it in 1988), our sales had grown to more than $26 million annually. We grew slowly but surely between 1970 and 1979, but, things took off like a bat out of hell around 1979, which, coincidentally, was the year I attended an IRGA convention for the first time. Between 1979 and 1988, our business exploded (in a good way!) Getting involved in the IRGA (being a member of the IRGA) helped immensely with these issues; exposure to more vendors and better exposure to vendors, networking with other reprographers, learning and (later on) sharing strategic plans, business development and sales strategies, ferreting out acquisition targets, just to name a few. By the time I retired from my first company in late 1988, I probably knew (face-to-face, not just by name) close to 200, if not more, owners of reprographics business in the U.S., and all of the industry’s largest vendors knew me and my company. I’m like most people. I observe what others do, I learn from what others do and think, and, then, I try to emulate stuff I agree with and try to avoid stuff I don’t agree with. Membership in the IRGA was an extraordinarily valuable factor in my first career. And, that repeated itself, a second time, in my second career. After 8+ years of being retired, I was, in 1997, invited to join a reprographics company in the S.E. U.S. Annual sales at that time around $5.5 million. Prior to selling that company in late 2007, we had managed to grow that business to $23 million in annual sales. During my second career, I attended every IRGA convention, renewed friendships with those I’d met during my first career and made many new friendships with vendors and reprographics business owners I’d not previously met during my first career.

I don’t know exactly how many IRGA Conventions I’ve been to in the 39 years I’ve been in and around the reprographics industry. Suffice to say, I’ve attended a bunch of conventions. Each convention can be broken down into three parts – 1) educational seminars and presentations, 2) trade-show / exhibits, 3) networking opportunities (during lunches, dinners, networking sessions and “after hours” in the bar, restaurants or wherever.) My favorite “parts” of an IRGA Convention are Parts 2 and 3. Since no one really likes to share the secrets of their success (and, since most won’t), Part 1, the educational seminars and presentations, are sometimes useless – bunch of “generalisms”, drivel, whatnot. But, during Parts 2 and 3, the networking opportunities, both with vendors and other reprographers, are tremendously valuable – – as some might say, “worth the price of admission” (worth being a dues paying member and spending the money to attend the convention.)

So, if you are in the reprographics business but are not an IRGA member (or have left your IRGA membership lapse), get a grip, join up (or renew) …. and give yourself (and your team members) the opportunity to learn and network. Late in your career, you will thank me (I won’t be around by then, I’m already old, but, whatever….) for challenging your thinking on the issue of being an IRGA member.

In a future post, I will, if I remember to, talk about the value propositions of being a member in The PEiR Group or ReproMAX or RSA.

A former associate who visited my blog today (after I threatened to smack him upside his head if he did not visit my blog) suggested to me that I should provide at least some of my background information for visitors who visit my blog, just so they will know that I’m a real crackpot, not just a pretend crackpot.

Fast Facts:

Graduate of the University of Maryland, B.S. 1970, Accounting major.
Earned my C.P.A. certification in 1975.

First reprographics company I worked with (Rowley-Scher Reprographics*, which is now part of ARC’s MBCPI “division”) – 1970-1988 – I joined the company when our annual sales revenues were $90,000. I retired from the company when our annual sales revenues were $26.8 million. And, yes, I worked in virtually every position in that company; my last position was Chairman/CEO. In late 1985, we took our company public (we traded on Nasdaq National Market System), and in 1988 we sold the company in a LBO (my partners and I cashed-out and I retired not too long after we sold the company; Citi-Corp Venture Capital funded the LBO acquisition of Rowley-Scher.) During my tenure with the company, we completed approximately 14 different (mostly small) acquisitions, mergers and dispositions. At my first company, our FM (On-Site) business segment was quite considerable. Our first 24 FM’s (On-Site programs) were all “staffed” FM’s. [*Actually, I began my career with Silver Spring Blueprinting; name was changed to Allied Reproduction Service, then was merged into Rowley’s Blueprint Service, a couple of years after Rowley’s merged with Max Scher Blueprints.]

Second reprographics company I worked with (National Graphic Imaging – NGI) – 1997-2007 – I joined the company when our annual sales revenues were approximately $5.5 million. By bequest of the company’s CEO (Martha, our guiding light), my title was Senior Vice President and my informal title was “Chief Business Strategist”.) Our last reported annual sales revenues [as reported by the public company (ARC) that purchased our company) were $23.0 million. NGI’s growth was purely “organic” (i.e., no acquisitions; we simply never got around to doing any.) Like at my first company, NGI’s FM (On-Site) business segment was quite considerable. I “cashed-out” and “retired” from NGI when we sold the company in December 2007. TGWSNGIWWD!

In between my two “extended” careers in the reprographics business:

I was, for a period of about 16 months, the Director of Business Development for a “national” company that offered only “large-format digital color printing and finishing services.” That position gave me great exposure to the then developing large-format color services business segment. That company had 8 locations around the U.S (literally, from the east coast to the west coast.)

And, I was, from Jan 1997 until I joined NGI in Oct 1997, the Chief Operating Officer of T-Square, a very well established company that operates in South Florida (purchased by ARC a couple of years ago.) I enjoyed my time at T-Square – Jeff, Rusty and Jose are great people – but when Martha Korman of NGI recruited me to join NGI, how could I possibly have resisted?

And, prior to getting back into the reprographics world, I spent about 18 months screwing around in the contract textile screen printing business as the hired President and COO of a small public company that provided apparel screen printing services to companies you’ve all heard of – including Disney Theme Parks, Disney Stores, The Gap, Banana Republic, Bugle Boy, Gotcha, Mossimo, Redsand, OP, Quicksilver and several companies who distributed T-shirts in the music industry in support of traveling rock concerts. We also printed T-shirts for licensees who had licenses for entertainment properties, such as Batman and The Simpsons. We were, at the time, the largest volume contract textile screen printing operation in the U.S. Altogether, our plants in Georgia, Alabama and California had the capacity to produce (we we often did produce) 50,000 dozen printed T-shirts per week. Quite a nasty, cutthroat business, IMHO.

I’m a native of Washington, DC. But, I’ve also been fortunate to live in other places, including Corona del Mar, CA (Newport Beach area), Nashville, TN, Tampa, FL and St Petersburg, FL. I’ve had the opportunity to travel a lot over the years; I’ve been to 47 of our 50 states (not yet made it to Montana, ND or SD.) I’ve also traveled to most of the countries in Europe, including several eastern European countries.

My only hobby? Well, that would be the reprographics business and industry. I don’t play golf or tennis. While all of you were out playing, I was studying the business and industry! Having been fortunate to cash out of the buisness not just once, but twice, I can tell you, first-hand, that hard-work, commitment, passion and homework do pay off, provided you get a little bit of luck (and have partners and key associates who are smarter than you.)

My mentors in the reprographics industry include the following people:
Gerson (“Gus”) Nadell (b.1917-d.2007). Gus was my first “professor” in the reprographics business and had a major impact on my career in the reprographics business.
My ex-partner John Zeller. I have yet to meet, in 39 years in business, a person who was more devoted to superior customer service (and dedicated, reliable performance) than John was.
My ex-partner Gary Rowley. He was a “master” at marketing and sales. I feel blessed to have had the privilege to learn from Gary.
Bryan Dyer, who recently retired from Lellyett & Rogers. L&R is based in Nashville, TN. When I reflect back over my career(s) in the reprographics industry, Bryan’s name stands out, for he is one of the smartest people I’ve ever met.
My ex-partner Martha Korman. Martha was NGI’s secret weapon (at least, that’s how I referred to Martha.) Martha’s natural ability to network and develop relationships at the highest levels, opened doors to us, creating significant selling opportunities.
Some of my friends in the reprographics business were also mentors, even though they may not be aware that I consider them to be among my mentors – Bill Thomas of Thomas Reprographics, Sol Magid of National Reprographics (NRI), Paul Koze, formerly of Blueprint Service Co (San Fran), Jack Cushing, formerly of Cushing & Co. (Chicago), Tog Rogers, the “older” one, formerly of Ridgway’s (Houston). And, last, but certainly not least, Mark DiPasquale, former CEO of Service Point US Operations and now CEO of Archimedia Solutions Group (Mark is more than 20 years younger than me; have you ever heard that old saying, “one is never too old to learn?” Well, I learned a lot from Mark, who is young enough to be my son.)

Industry Associations:
Our first company was a member of MiniMax. Our membership in MiniMax gave me great exposure to leaders of businesses in the reprographics industry, country-wide.
Our first company was a co-founder of ReproCAD (which, after merging with MiniMax, is now ReproMax.) At one point in time, my first company owned 20% of ReproCAD’s stock (3 shares out of 15.) ReproCAD’s first real President, Mark Sirangelo, left ReproCAD to join Rowley-Scher. What an amazingly smart young man.
Both of the reprographics companies I was with were members of the IRGA. If you are not an IRGA member, you’re not just a fool, but a complete idiot. I can’t possibly tell you how much I learned from being a member of the IRGA. The networking experiences are truly invaluable.

Okay, that’s more about me than anyone would ever want to know.