Fast Facts
History in Brief: Started as a typewriter shop in 1930; became Marco in 1973 and is now one of the Top 5 technology providers in the United States; specializes in copiers/printers, document management, business IT services, hosted/cloud services, managed services, telecom carrier consulting services and both phone and A/V systems
Headquarters: St. Cloud, Minnesota
Locations: 42 (Illinois, Iowa, Minnesota, Nebraska, North Dakota, South Dakota, Wisconsin)
Employees: Around 900
Hardware Partners: (A3) Canon, Konica Minolta, Sharp; (A4) HP, Samsung
Noteworthy Software Partners: M-Files, PaperCut
To Steve Gau, Marco’s vice president of sales, the two most important things he learned while attaining the rank of Eagle Scout are commitment to excellence and the power of people.
Marco was one of the first organizations in Minnesota to offer an Employee Stock Ownership Plan (ESOP), and it’s on a relatively short list of U.S. companies that’s owned entirely by employees. “Whether you answer a phone, drive a truck or sell hardware, or whatever else, we all have a stake in our success,” Gau said. “We return a high percentage of our profits to our employees (dispensed as a percentage of a person’s income), which creates commitment from people who can help build our future.”
That future is extremely bright for Marco, and looking at revenue figures alone, who could argue? The company has gone from $34 million in 2004 to $92 million in 2011 to over $200 million this fiscal year—“astounding” isn’t a strong enough adjective to describe it. Staff headcount has also increased significantly, from 212 in 2005 to 349 in 2010 to over 900 today. Another telling statistic is that Marco currently has about 25,000 customers, up from 9,000 just five years ago.
“We’re a high-growth company, including from a location standpoint,” Gau continued. Marco’s approach to expansion is either to fill a gap in geography (one example is when the company recently bought Hadley Office Products in Wausau, Wisconsin) or acquire based on product need (managed IT or cloud services, for instance). “We have 42 offices in seven states. Fifty-two percent of our revenue growth is organic (same store sales) and 48 percent is through acquisition (recognized up till one year after the purchase). This puts us right on our target of a 50/50 split.”
The company isn’t stopping, either. Gau explained that Marco had been a regional company for a long time, but beginning in September 2014 it officially implemented a national strategy. “It started even before then when we entered the western half of the Dakotas because we realized it was tough for us to deliver consumables to that area within 24 hours. Now we have warehouses in multiple places and a next-day delivery partner. This learning experience set us on the path of becoming a national provider of technology.”
The notion of change, even in this small way, is critical in Gau’s estimation, as it can be a daunting task to stay up to speed with trends in any segment of the technology industry. “Planning is easy, but executing can be—and is oftentimes—the hard part,” he said. “So what I’m most proud of has been our ability to execute on sales, regardless of the changes that constantly happen with document imaging.”
Execution is made more difficult by one of Marco’s biggest challenges: hiring leadership and sales talent in its geography. “Retaining salespeople is easier today than it was in 2008, thankfully,” Gau said. “Culture is a big part of it. We have company parties, we host bigger events and we strive to make work a fun place to be. We also worked with some consultants to improve our comp plans. Sales reps have flexibility in that they don’t have a set number of vacation days—if they need time off, they take it.” The end result is Marco’s turnover rate in sales is now less than five percent, and any rep who’s been with the company for six years is making at least six figures. “But finding the right people? It’s always tough.”
Gau sees room for improvement in the software arena, too. Based on projections, Marco’s Copier & Printer Division will bring in $117 million for this current fiscal year—but only $2.5 million stems from solutions sales. Clearly this isn’t the balance between hardware and software that the company wants. “We’re in only one NFL city, Minneapolis, and we haven’t faced much competition in all the secondary and third-tier markets we cover, so we haven’t had to necessarily lead with solutions,” he said. “More recently, yes, we understood our strategy had to change—and has. Because with more dealers moving in, there’s more pressure to produce and we need to differentiate more.”
Marco has hired 10 solutions specialists—mostly in their thirties—who will play a huge role in building out its concentrated effort to increase revenue derived from software sales. Obstacles exist, of course, such as the dearth of opportunities to deploy solutions in rural areas and that the software market hasn’t really matured outside of big cities. “In a town with just a few traffic lights, there might not be enough demand for a gourmet pizza restaurant,” Gau said metaphorically. “But as adaptability quickens, we want to boost our $2.5 million in solutions sales to $5 million, then we can talk about $10 million.”
The company, according to Gau, has its best coverage—both hardware and software—in the education, financial and healthcare markets. For instance, the Copier & Printer Division has found success in both public and private education, but more so in the private sector (IT services has also done well in both, with a higher revenue rate in public). “The vertical piece is interesting, but it adds another level of complexity,” he said. “We’re working with a consultant to help us move from novices to experts on how to sell and deploy solutions. We just need to be ‘stickier’ with software to match our expertise with devices.”
“Planning is easy, but executing can be—and is oftentimes—the hard part. So what I’m most proud of has been our ability to execute on sales, regardless of the changes that constantly happen with document imaging.” –Steve Gau
Gau estimates that 15,000 of Marco’s customers are for hardware, with the rest focused on IT; of the hardware clients, roughly 2,200 of them have an MPS contract (others are leases with either service included or separate maintenance agreements). Based on projections for this fiscal year, the company will take in $23.4 million on MPS, the service portion of which is $17 million, or 26 percent of Marco’s service revenue. To put it in another context, the company services 353 million clicks for A3 and A4 combined per month.
“MPS was hot, and it still is, but the more important trend currently is in the managed IT (MIT) space,” Gau said. “We’re well positioned here and have a depth of expertise, with 510 IT engineers, techs and support desk workers on staff.” Formalized in 2010, Marco’s MIT services last year drove $15.2 million in revenue, up 20 percent over the previous year. “The way we see it, if you’re a dealer you have to be in the IT game. It’s one of the reasons why smaller organizations are being purchased by companies like us—they don’t have the infrastructure to support MIT.”
Marco is working hard to get ahead of the curve with other trends, including the aforementioned solutions. Gau also stated that the company’s clients are more accepting of single-function printers and A4 MFPs in the office, which speaks to the idea of fleet reconfiguration. And, “Consumers now don’t mind ink in the business world, and HP’s done a very good job of marketing its office-based ink series,” he said. “Customers immediately think ink means they’ll be spending more on cartridges, but it’s obvious to us that ink is a solid alternative to laser and is here to stay.”
Beyond all the stats and success, Gau believes the commitment to excellence demonstrated by the people of Marco is the company’s biggest asset. “For my final Boy Scout project, my best friend at the time and I built duck houses and then placed them along the Crow Wing River in Brainerd, Minnesota, on a wildlife preserve,” he said. “We supported each other, but we couldn’t have done it without the support of our families and the troop. That experience gave me a set of principles to live by. Marco wouldn’t be where it is today without all the people who, simply put, want to accomplish something bigger.”