The Snowball Effect: Novatech in Full Growth Mode
A Conversation with Company CEO Darren Metz
In the three-plus years since I last interviewed Darren Metz for this dealer profile, a lot—correction: a ton—has changed for both he and the company that he’s been leading for some time. Novatech, formerly NovaCopy, is today a burgeoning platform operation with a prime focus on acquiring dealers as well as other organizations that offer products and services relative to the document imaging space. While the company’s revenue (approximately $92 million, with a 2019 budget that’s already set at over $100 million), number of active customers (over 20,000), and MIF (over 30,000) are strong talking points, getting to the heart of the “Copy” to “tech” name change and following up on topics such as 3D and managed IT is far more intriguing. So, without further ado…
|Darren Metz, CEO of Novatech|
Carl Schell: First of all, happy anniversary to your company. Twenty years is a solid chunk of time.
Darren Metz: Yes it is. Awesome feeling. When I look at our history over these past couple of decades, the usual words like “successes” and “challenges” come to mind, but ultimately the anniversary still has me thinking about our direction forward.
CS: Right. The future.
DM: This is an exciting time in our industry. Not since the DANKA/IKON rollup days has there been such a clear path to liquidity. We’d decided many years ago that we didn’t want to be an “add-on,” and thanks to the recapitalization of our company in 2017 through Trivest, a private equity firm based in Miami, we’re not.
CS: So because of this, your growth track has two speeds: fast and faster?
DM: Exactly. We’d made a few acquisitions in the years leading up to the Trivest deal, including one that opened the door to Canon and two that helped us expand into Mississippi, but our goal now is one a month. We have our own M&A group that handles everything from what comes first to the integration after the sale—we’ve developed it as a core competency.
CS: The strategy is aggressive to say the least.
DM: Regionalization is critical in this day and age, with banks, schools—even dealers. By not having to subcontract, we wind up with better consistency as the businesses we acquire all live under the same roof. We’d like to have a contiguous service footprint from Florida to Texas by 2020, with nationwide coverage to follow by 2025. We have the capital that gives us the ability to aim high.
CS: Can you provide an example of a recent acquisition that’s been fruitful for you?
DM: Atlanta can be tough because OEM directs have a big presence and there just aren’t many dealers. That said, we bought a KYOCERA dealer earlier this year and we’re already Top 3 in the metropolitan area. We’ve reduced our physical locations in that market from three to one, which saves us money. The fact that we’re already in a dominant position so early is a case study for us to be mindful of as we make more acquisitions.
CS: If you had to pinpoint some of the reasons behind the success in Atlanta…
DM: Planning. Execution. Great team and local leadership. But, the main reason is our customer service. Priority No. 1.
|A look at Novatech’s growing footprint—and it’s only going to get bigger.|
CS: Okay. I know you’ve been a player in 3D for a while, what’s your current story here?
DM: It continues to perform very well. We’re partnered with HP and Markforged. The opportunity around metal is only becoming more attractive as pricing has come down in the last two years. The new Metal X from Markforged is 10 times less expensive than alternative metal additive manufacturing technologies, and that opens up new opportunities for many businesses. Overall, HP Jet Fusion technology has the power to drive revenue, while in my opinion, Markforged is one of the best kept secrets in the industry due in large part to its support program. Currently, we’re creating a new 3D showroom in Nashville that will include industrial printers from both partners.
CS: On the topic of support for 3D, that was one of the missing pieces going back. Different situation now?
DM: Absolutely. Some organizations have figured it out, some haven’t. A higher install base means more service and supplies dollars. At $50K for a device and then $10K a month in the aftermarket—that’s a good model for the BTA channel.
CS: When you put it that way, it’s a no-brainer.
DM: Or, putting it another way, we’ll end up somewhere in the neighborhood of $5 million in revenue from 3D in 2018.
CS: Good one. Has it been equally as good with managed IT?
DM: Yes and no. We’re doing over $5 million a year now in IT services revenue, up from $3 million in 2016. Migration to the cloud is wonderful for dealers, it de-complicates things. Automatic updates and anything related to Apple are beneficial too, as is the fact that there’s nothing onsite to break. But IT is more complex than, say, MPS. Overcoming the obstacles can be downright difficult at times, and winning customers is easier than profitably serving them.
CS: This is an area of interest to me so I’m all ears…
DM: The issues run the gamut. Shortage of techs and a high turnover rate. Price pressure. Supply chain. But unlike with 3D where we’ve turned a corner in regard to service, too many businesses prefer to pay as they go for IT work—but we need that recurring piece. Therefore, it’s no surprise that I’d rather move servers for free in exchange for an IT services contract than just moving the servers for a fee.
CS: Sounds like it’s been tough sledding. What are your next steps, then?
DM: Being a Konica Minolta dealer is different than being a Microsoft partner. Aside from us becoming more educated about IT and gaining more experience in the field, we’d like to acquire an IT house, specifically one that specializes in serving SMBs. Thing is, many IT firms are just VARs, so there’s not much valuation because the margins can be small.
“Regionalization is critical in this day and age, with banks, schools—even dealers. By not having to subcontract, we wind up with better consistency as the businesses we acquire all live under the same roof. We’d like to have a contiguous service footprint from Florida to Texas by 2020, with nationwide coverage to follow by 2025. We have the capital that gives us the ability to aim high.” –Darren Metz
CS: Between all your past and future acquisitions, your company wanting to do more with production and continuing the upward trend in 3D, the fact that you’ve been in the IT space and you’re forging ahead there, plus your successes with office hardware and software, I can definitely see why NovaCopy is now Novatech.
DM: Admittedly, I was hesitant about the name change. “Copy” isn’t obsolete or outdated—everybody still says “scan a copy,” “email me a copy.” And, of course, people knew us as NovaCopy. But the Trivest board helped me move past my own ego, that “tech” would be the smarter choice in the long term. We’re a tech company, not a copier dealer, it’s really as simple as that.
CS: Has the “Copy” to “tech” switch caused any confusion?
DM: I can honestly say no, but to achieve that was a Herculean effort. We didn’t hire an outside agency, everything was done in-house, country-boy style: We conceived the logo, adopted High Risk Red from the PANTONE chart because that color has a sense of urgency about it, had our site redesigned, and over-communicated the change through social media. Jason Levkulich, our Director of Marketing, took the reins from the outset and owned everything.
CS: What about other types of advertising and marketing?
DM: On a smaller scale, we had to print new stickers that we put on all of our devices in the field. At the other end of the spectrum, we like putting signage on prominent buildings that have a lot of traffic around them like the Mercedes-Benz Stadium in Atlanta, home of the Falcons and United FC. We’ve also increased our social media efforts and invested in new commercials that drive visibility to our rebrand. Analytics have been in the hundreds of thousands. I believe the money we’ve spent—no matter if it’s on stickers, digital advertising, or signage—is well worth the investment and truly does increase brand awareness.
CS: What’s the best way to sum up the name change?
DM: Little anecdote, actually. I’d been trying forever to get NovaCopy onto the Nashville Business Journal’s yearly list of Top 10 tech companies in Nashville. How many conversations did I have with people at that publication where I was told we were a copier dealer?... Since the rollout of our name change on April 1 of this year, though, I’m happy to say that we’re now ranked No. 2 on the list. The other really nice thing that came out of this is that it’s made recruiting easier as people would rather work for a tech company than a copier dealer.
CS: That’s both hilarious and ironic.
DM: It is. It really is.
CS: Well, thank you as always for the details about Novatech, and even more so for your time.
DM: My pleasure. I look forward to speaking with you again soon enough!
|Novatech recently held the official grand opening of its new headquarters at Sylvan Station in Nashville, along one of the latest revitalized corridors in Tennessee’s capital.|