A Conversation with Centric Business Systems’ Rick Bastinelli  This month we speak with one of the most successful dealers in the Baltimore/Washington region, Rick Bastinelli, president of Centric Business Systems. An industry veteran, Bastinelli began working for an independent dealership in the 1970s right out of college before acquiring Centric in the early 1990s. He hasn’t looked back since. How’s business? Bastinelli: Business has been very good. We expect this year to end with a 30 percent increase to our 2011 revenues. What are you doing right? Bastinelli: Working hard. There are many fundamentals of our industry that haven’t changed over the past 30 years. Sticking to the fundamental basics of the business is a big key to our success and has created a lot of organic growth within the organization. We have expanded into production print with a dedicated sales force and the results have been extremely favorable. We continue to grow our production print business which contributes to our growth both in hardware revenue and the aftermarket.                                                                                                                                                                                                                                                        Rick Bastinelli In addition to organic growth our strategy has been to make synergistic acquisitions and expand into geography that is new but also adjacent to our overall footprint. Last year we acquired a company called Office Suppliers Inc., which focused on the western Maryland marketplace. We spent several months integrating that company into our organization and in 2011 we experienced the benefits of that acquisition with a lot of growth in that marketplace. In November 2010 we expanded into the eastern shore of Maryland. That’s had quite an impact on our sales. Were you pulled into production print or was there a conscious effort to ramp up your efforts in that area? Bastinelli: Our review of the marketplace suggested there was growing volumes in the production print area along with the advent of some very strong color products. We are a Ricoh dealer and they are having success with both the C901 and the C751. Our analysis of that marketplace combined with Ricoh’s investment in that space motivated us to establish a business plan. We decided if we were going to expand, we weren’t just going to take on the products and give it to our core sales force. We feel there are specialized talents that are required to market and compete in that space so we recruited a manager with a lot of experience in production print and proceeded to develop a team of specialists. They have been very successful with our go-to-market strategy. Have you done acquisitions before? Bastinelli: Yes, this was our third. What have you learned from previous acquisitions that were helpful when it came time to put this deal together? Bastinelli: Every time we made an acquisition we got a little better at improving the process. We have learned the importance of good due diligence prior to the acquisition such as verifying the revenues, verifying where the revenues were coming from, identifying the customer base, and which revenues were coming from which customers. The other part of the due diligence is analyzing what type of contracts they have with their customers. Are they month-to-month cost-per-copy contracts billed as they are used, or is there a solid contractual relationship? You just don’t look at the financial statements, revenues and expenses and try to determine the value of the business based on those barometers. You have to peel back the onion so to speak and really get in there and analyze the source and continued probability of those revenues. Why do customers ultimately choose Centric? Bastinelli: It all boils down to how we as a dealership build our value proposition. Centric has been successful over the years at building a company that has the size and scale to offer a full range of services and support to our clients. That includes hardware, software, and software integration; all supported by a sophisticated call center that includes help desk technicians. We have the size and scale to provide a full range of services from a local company that is integrated into the community, supports the local community and is capable of delivering responsive service. Everything we provide, i.e. warehousing, distribution, parts, supplies, equipment, billing, administration, and customer support, is all located in the local community. We are able to respond and deliver services more effectively because unlike the competition we’re not relying on support coming from other parts of the country to satisfy the needs of that particular client. What are the biggest challenges you’re facing as a dealer of late and how are you addressing those challenges? Bastinelli: One of the biggest challenges is competing against direct branches, especially with major accounts. The pricing you see on the street is absolutely mind boggling. We try not to be as dumb as our dumbest competitor. There are companies out there doing some very dumb things with pricing and their financials reflect that. I think you know some of the companies I might be referring to. The pricing pressures on the industry continue to be a major concern. How does this compare to other challenges you may have faced in the past? Bastinelli: The challenges we faced in the past were all the transitions taking place in our industry. I think you’re able to deal with those challenges by becoming a better student of the industry, by engaging and training and by hiring consultants to help you make the transition. We all had to grow into selling document management, managed document services and managed print services. Having the right sales strategies, developing the right sales processes, and developing the right compensation program were critical to our success but within our control. We have all been through a series of challenges, but at the end of the day most of the challenges of the past were challenges that were controllable by us. We just had to do the right thing and make the right transitions. A lot of the pricing pressures that exist today are things that are not within our grasp and fixing it requires awareness on the part of the manufacturers. If they want to have a strong independent dealer division marketing their products, they must provide pricing and support that is equal or consistent to their direct operation. Speaking of transitions, how have you handled the transition to MPS? Bastinelli: Centric has made the transition successfully. We have not made it as quickly or as easily as I would have liked. Our sales staff is primarily a copier-centric organization. It has taken a while for us to figure out how to make MPS a core focus of the organization. I think we have successfully made that transition. We’ve had an excellent past two years with MPS and we finally established it as a part of the culture. Do you use specialists, your existing sales people, or a mix of the two? Bastinelli: We use our existing sales people. We’ve tried all of the above, but we feel that it’s imperative for every one of our sales people to be effective at selling MPS. How are you making sure they are effective? Bastinelli: We’ve tied into every incentive that Centric has to offer from different forms of recognition such as trips or other contests and as it relates to their bonus structure. They have gates and quotas they need to achieve in the hardware arena and have gates and quotas they need to achieve in the MPS arena. How’s that working? Bastinelli: As you would expect, some of the folks who have been here for awhile have had a little trouble making the transition, but they finally got there and obviously a lot of the newer reps made the transition pretty easily. You have a strong document management focus, and with so many products on the market, how did you narrow down your offerings? Bastinelli: That is always a challenging question. I think there is a proliferation of companies that provide very attractive document management software. Our selection process focused first and foremost on the product and the different levels of the product offered, scalability of the product so we could upgrade customers as they grow and their needs for document management grow. That was a very important part of it. Equally important is the focus on the stability of the software developer. We were interested in partnering with companies that offered the stability to help us support our customers for the long term. What are you doing to ensure Centric’s long-term health and profitability? Bastinelli: The pricing pressures taking place in our industry are motivating us to focus on the productivity of our organization. We need to figure out ways to do more with less. At Centric we are attempting to incorporate technology into every department of our organization. For example, we are doing more things remotely to help lower cost of operations and deliver a better value to our customer. To us that means providing very competitive prices, but doing it with a high level of service. You started in this business straight out of college, are you still having fun? Bastinelli: I enjoy it. We just built a 39,000-square foot corporate headquarters that is Gold LEED certified and a tremendous facility loaded with technology. We have received favorable comments from people both in and out of the industry. The building speaks to the Centric experience; who we are, what our people are capable of doing and of course what we are able to do for our customers. We’re energized. We think despite the challenges there’s tremendous opportunities in our industry and we’re committed to transitioning Centric to be a long-term player.