"Distributors don't want people to tell them how to run their business," Clark says. "So they need freedom. But by the same token, they need support because they have large customers." Clark offered to help, and the sales representatives soon recruited nine other people interested in becoming distributors. "It was pretty much a group of people who sat down with a blank piece of paper and asked, 'How can we make this work for all of us?'" Clark says.
Building the Foundation
The 12 partners formed DocuMedia Group, a distributorship network based in Santa Ana, Calif. DocuMedia would provide customer service, financial service and technical support on a contractual basis. The distributors would sell under the DocuMedia name but independently determine their prices, vendors and profit margins, plus oversee their receivables. Seventy percent of profits would go to the distributor; 30 percent would go to DocuMedia. Distributors could invest in DocuMedia as shareholders and provide input about its operating procedures.
"This was a big departure from previous situations," says Clark, DocuMedia's president and CFO. "One of the larger problems you have with distributors and manufacturers is they continue to change their commission structures based on what they need to make a profit. We put the onus of making profits on the reps." The partners' common goal, Clark says, is "serving the end user the best way possible."
DocuMedia raised $250,000 of capital. "We started ourselves in a reasonable financial situation," Clark says. Today, the partnership includes Clark, a customer service representative, a technical administration representative and 14 distributors who officially are independent contractors. All distributors are located in Southern California and are company stakeholders. They're responsible for 100 percent of the company's sales, which will total approximately $6 million this year. The firm's diverse customer base includes banks, movie producers and sod growers.
Clark says some distributors adapted to the partnership quickly, while others adjusted more slowly to their independence. "It's a balance in providing support and being hands-off," he says, adding that cooperation is the key to DocuMedia's setup.
Clark worked with DocuMedia's distributors to form 5- and 10-year plans that map future sales growth and the company's expansion. Within five years, he says, DocuMedia could include 25 distributors and reach annual sales of $15 million.
Enjoying the Results
DocuMedia's partners share several benefits, including the use of new technology. When the company noticed purchasing agents becoming more comfortable with the internet, it designed an online ordering system called ePrint. The firm's partners can access ePrint from anywhere, tailor it to end users' product preferences, link it to manufacturers, use it to produce summary bills and more. "This is a very expensive, complicated piece of software that small distributorships normally wouldn't have access to," Clark says. "We provide that extra hookup for these people and extra support they're not going to find in the general market."
DocuMedia's distributors also enjoy flexible work schedules. "You can carve out a job that works best for you," Clark says. "We've eliminated the problems of an overhead structure with a lot of managers and people to support, and we aren't going to get into any type of manufacturing." One distributor sells insurance during half of the business day and printing during the other half. Another distributor scaled back her sales goals in order to spend more time with her two children.
In addition, DocuMedia's size gives its distributors clout, helping them gain vendors' respect and reassure customers that if one partner goes on vacation or becomes sick, someone still tends to business. "We're doing something that we're having a good time with," Clark says. "A lot of us weren't having a good time before."
Your most sought after prospect has a document need that's our of your
league. A major client demands a turn-around time that's out of left field. What
should you tell the prospect? "That's out of our element." What do you tell the
client? "You're out to lunch!"
Those responses are out of the question, assuming you want to nab potential
long-term business (and aviod left hooks to the nose). A better strategy -- one
that can help your firm achieve greater flexibility and efficiency -- is to
leverage the capabilities of other firms through partnerships.
Partnering has evolved from a sexy trend to a necesssary tactic. Industry
alliances are wide-ranging, involving mixes of distributors, manufacturers,
suppliers, software firms and more. The best partnerships are based on mutual
problem-solving, efficient, communications and improved value for end users.
The firms featured in this story exemplify the power of partnering. They
evaluated core strengths, realized their limiations and now employ collaborative
stategies that work.
Partnership:
Network of 14 distributorships
Chief Architect:
Matthew Clark, president and CFO of DocuMedia Group, Santa Ana, Calif.
Matthew Clark boasts a master's degree in financial planning, 25 years of experience in financing and starting companies, and 15 years of experience in the printing industry. So it seemed natural to Clark when two direct-selling sales representatives approached him in 1998 for advice about starting distributorships.
Clark had observed an increasing number of end users asking for 4-color work, computer forms, labels and other non-traditional products. He also realized more end users were outsourcing their printing work. "There [was] a tremendous amount of change going on in the market," he says.
Charting the Plan
The two sales representatives met Clark for lunch and told him about their frustrations selling for a direct. Becoming independent distributors, they reasoned, would allow them more flexibility in the solutions they offered to end users. But they worried about finding enough resources to serve large accounts effectively. They weren't eager to handle the burdens of starting small businesses alone in California. In fact, the Small Business Survival Committee, a lobbying group based in Washington, D.C., ranks California as one of the worst states for entrepreneurs, largely due to high taxes on personal income and capital gains.
Partnership:
Distributorship and software developer
Chief ArchitectS:
Alan Olivero, Dan Hare, Rich Profeta and Dave Basta, owners of Matrix Imaging Solutions Inc., Niagara Falls, N.Y.
Thanks to strategic partnerships, Niagara Falls, N.Y.-based distributorship Matrix Imaging Solutions Inc. has changed for the better. Led by owners Alan Olivero, Dan Hare, Rich Profeta and Dave Basta, Matrix partnered with software development firm Turn Key Solutions approximately 10 years ago. Matrix's goal was to offer mail processing.
Turn Key Solutions provided data support, hardware maintenance and custom software to facilitate the transfer of information between Matrix and its customers. By 1996, Matrix processed 400,000 first-class pieces of mail monthly using equipment such as Xerox laser printers and intelligent inserters. The partners began sharing office space, including photocopiers, phone lines and even coffee pots. Matrix acquired Turn Key Solutions in the late 1990s.
That experience enticed Matrix to expand its capabilities. The company invested in a 4-color Didde web press, 180-page-per-minute variable data Xerox printers, VIP Xerox application software and more. It hired seven programmers and currently works with two others. In 1996, Matrix processed 400,000 mail pieces. Today, it processes nearly 5 million per month. Matrix previously sold $1 million annually in labels. Today, it sells $8 million in warehouse management systems (WMS), including label hardware, ribbons, applicators, scanning equipment that captures data from labels, and proprietary WMS software that utilizes captured data. The firm also offers web archiving. In short, Olivero says, "Forms become a byproduct of the services we're selling."
Charting the Plan
Matrix typically initiates partnerships. "Do they just fall in our lap? The answer is no," Olivero says. The firm's owners spend "endless hours on the internet," read research manuals and attend trade shows to find potential partners, he says.
In 2000, Everett, Wash.-based Intermec Technologies Corp. turned the tables on Matrix's usual routine, approaching the distributorship about a possible partnership. Intermec provides printers, handheld terminals and batch terminals for automated data collection. Specifically, Intermec wanted to partner with Matrix on its FingerPrint programming language, which enables Intermec printers to double as PCs. Manufacturing firms can use FingerPrint to tighten security on their shop floors and save space and money.
"If you get complacent with what you have, you're going to be left behind," Hare says. "Most of the forms industry is realizing that. You have to continually progress with new technology. You have to evolve."
Building the Foundation
Matrix partnered with Intermec on a small installation as a trial run--not so much to test the products as to test the company. "We like to take baby steps first," Hare says. "People can make a great presentation and then fall down at the back end....We found Intermec to be very helpful and very knowledgeable. Their work ethic was just like ours: You stay there until you get the job done, and you get it done correctly."
