Impact Networking CEO Frank Cucco Shares the Secrets to His Company’s Success Based in Waukegan, Illinois with eight locations in three states, Impact Networking has been one of the area’s most successful and progressive dealerships; and that’s because they do more than just sell hardware. CEO Frank Cucco and President Dan Meyer, 26-year veterans of the office technology industry, know a few things about selling office technology when they founded the company in 1999, but they were quick to realize that a successful dealership couldn’t survive and thrive on hardware sales alone—there had to be a strong services component. This month we chat with Frank about his dealership and the many services they offer to customers. Frank Cucco, CEO How’s business? Cucco: It’s been good. The first quarter was strong and last year we had our best net profit year ever. How’d that happen? Cucco: Up until 2008 the company was growing at 30 percent a year, then in 2008-2009, you know what the story was there, we flat lined. Then we adjusted everything, got everything stabilized and became highly profitable. That was done basically through a controlled cost environment.                                       How does the rest of this year look? Cucco: We’ll be able to grow our revenues again. This past March we had our best hardware month ever—$2 million. What’s selling? Cucco: Production—we got that Konica line a couple of years ago, which gave us access to high-end machines we didn’t have in the past. How have you been able to be successful in production since you’re probably going into places you hadn’t been able to in the past? Cucco: Because we have a sales force that is disciplined and goes out and find the business. We also have enough people on staff in other areas to help them secure that more sophisticated sale. We’ve been doing document management for a long time. We have a facility for scanning and archiving that a lot of companies just don’t get into. They just sell the hardware or they say they do it and bring in a lot of third-party people. We do everything ourselves. Who are your customers and primary competitors? Cucco: Our customers are midsize businesses and we basically compete with the direct manufacturer. Do you compete with your own manufacturers? Cucco: Yes. How’s that going? Cucco: It’s fun. There’s enough business out there for everybody. Rick Taylor has done a very good job at Konica Minolta of keeping these markets clean and so there’s not a lot of infighting. I think he’s done a very good job of sending the message, ‘You grow your line of business and we’ll grow our line of business and the two shouldn’t cross.’ That’s worked very well for us. You offer a wide variety of services. When did you realize this was the right strategic direction to be going? Cucco: It kind of evolved. Back in 1999 when we opened the company we came up with the name ‘Impact Networking’ because everything was converting from analog to digital and we knew that was the future. From there we wanted to diversify our lines of revenues. We didn’t just want to depend on selling copiers every month because as you know it’s an up and down situation with hardware so we created additional lines of revenue for the company to stabilize our revenues and profits. What percentage of your business are services versus hardware? Cucco: About 25 percent is services. Do you expect that to grow? Cucco: We want to grow that into what we do with hardware. What’s it going to take to make that happen? Cucco: It’s going to take time, good people, and being willing to make the investment. We had a very strong situation back in 2007 and we even cut back on that department in 2008 and 2009. Now we’re ramping it back up—I’m talking about our document management where we sell DocuWare. That’s a key growth area and most customers have still not discovered that software and what we can do for them with it. On those sales we run 61 percent margins. On copiers and hardware we run 33 percent margins, so it’s a much more important sale for the company. Are there certain services that are growing faster than others? Cucco: We’ve done very well with scanning services this year. I don’t know why that is, but it seems like a lot of people want to spend money scanning their documents and getting them digitized. In the last month we did $100,000 in business in just scanning alone which was pretty good. That’s been growing, document management has been growing, and our creative services have been growing too. Another thing that’s been growing, because we have access to the Konica Minolta line, is our clicks and color clicks. In March we did almost $1 million in new service agreements. How do you market the services? Is that part of the message your hardware sales people take to the streets? Cucco: We basically have document management and wrap all these other things around it. There are five areas we focus on—creative services, scanning services, network and telecom, and then office equipment. These are all under the strategic services flag. Our traditional up and down the street sales force tells customers, ‘We can come in here and do anything that automates or prints in your office,’ and based on what the customer is excited about or what they need, then we have specialists that come in and back our sales reps up in all those different areas. The good thing for our sales people is they still get paid the commission on it. What was the inspiration for doing creative services? Cucco: We started two years ago and got into it because there was a company that designed all our marketing materials and our Website. I thought it fit well with what we offer customers, so I bought the company. Did you have to hire any additional people to handle that or did they come along with the company? Cucco: We hired our first person this year. That company came with five people in it. They had no sales [force], it was a word-of-mouth business. Because we tied them in with us, now these sales reps run into customers that want Websites or design work. We don’t do the $500 or $1,000 Websites, our Websites are $15,000 and up, and that’s pretty much it, anything else we don’t take. We were able to bring a sales force to this company and this year we hired an actual sales person for that team. This acquisition wasn’t something I wanted to make a ton of money on; I just wanted all my stuff designed in house and be able to turn on a dime, and if I need a flyer or a handout, I can get it in a couple of hours and get it to my reps and change and move quickly. I wanted to bring it in here to help us get to the next level. They do all our marketing, all our negotiation for marketing, and they do all the company’s marketing and marketing materials for our customers. That’s a couple million-dollar business now. Going back to document management, do you sell mostly DocuWare? Cucco: I think we’re the number three DocuWare company in North America. We’re not interested in selling a $500 solution. Most of our DocuWare deals are six-figure deals. How did you come up with the concept for one-call MPS? Cucco: We’ve been doing it a couple of years. We’ve had success, not knock the cover off the ball success, but each month it gets better. How did you come up with the concept for one-call MPS? Cucco: That’s basically when we go to a lot of these seminars and these guys are telling you, ‘You have to capture these clicks on all devices and so on and so forth and combine them on one CPC contract.’ That’s what that is. That’s our strategy to go into accounts and take over all the equipment and service on the account. What was the biggest challenge of selling MPS initially? Cucco: Training—getting the reps to understand and be able to write it. Where did you acquire your MPS expertise? Cucco: Through the manufacturers. We also have an in-house trainer. Our previous trainer helped develop Toshiba’s MPS program. She helped us put that together and then went off and started her own consulting business. We have another trainer now. Training is key. I still haven’t figured out the right comp plan and I hear a lot of different things, but that’s the next thing we’ve got to nail down, a comp plan that makes sense. Is training still a challenge? Cucco: It’s in a good place and as we continue to go forward we continue to build on it, but I believe the whole MPS strategy and capturing those prints is the key to sustainability going forward. What portion of your business will managed print services encompass in the next three to five years? Cucco: It will grow substantially and we can do a month where we sell $1 million on clicks. We never would have been able to do that in the past, so this whole concept of saying, ‘Hey, we’re going to manage all your copiers and add all these other devices on there,’ it works. That million dollars is good business and it’s spread out over 36 months and we’re paid monthly, so there’s good cash flow with that and a lot of positive things that will come out of it. You’ve been doing this since 1985. What’s the best part of doing what you do? Cucco: I have the control to do what it takes to make people happy. I’ve worked at Savin, went to another privately owned company, had a company with my brother, and started Impact Networking in 1999. It’s been a good thing to do what I know needs to be done, to grow and get the job done where in past companies I wasn’t able to do that. What’s the most challenging part of being in this business? Cucco: Securing the capital and financing to grow the business. A growing company takes a lot of money to run. How do you envision your business changing over the next couple of years? Cucco: It’s all positive, because we went through the worst of it and our sales did not decrease. Our net income is on the rise, which is going to generate cash to let us add more people and grow our business. I don’t foresee the situation in 2008 happening in the near future. I think we’re recovering and our ultimate goal is to get to $100 million. For us to be able to do that we don’t need to add any more facilities or buildings or all the things we spent the money on the first 10 years because they’re all in place. The foundation has already been laid, now we just need to continue our profitability, which will enable us to bring on these additional teams. That’s our strategy and in the meantime we’ve been paying down substantial debt every year. Sounds like you plan on being around for quite awhile longer? Cucco: Yes, I would say until I’m old. I love the job and all the controversy and things that go along with it. This is a tough industry and I’ve always said, the day I wake up and don’t want to come in anymore that’s the day I’ll be done. People say, ‘Why don’t you sell or retire?’ I have fun doing what I do and when I don’t have fun anymore, I’ll make a change just like I did the last three times. I only had three jobs my whole career and each time I made a change because I didn’t want to get up anymore and go to work. Until that happens I’ll still be here.”