As Global DocuGraphix transforms from acquisitional to operational, the marriage of traditional business forms and e-based initiatives has proved highly effective.
Mike Cate can pinpoint exactly what persuaded him to leave his position as president of the South Texas division of Corporate Express and become the Chief Operating Officer at Global DocuGraphix, headquartered in Lincolnshire, Ill. It was something Global's CEO, Graham McClean, said.
"Graham told me, 'We're just a bunch of good people, who have come together and are trying to build a world-class company and take care of customers,' " Cate recalled. "I think that speaks volumes about what Graham McClean is all about."
A year later, Cate has helped Global DocuGraphix transform from an acquisition-based company into an operating company.
"At some point, an organization grows to a size and scale where they really have to be able to execute its business plan," said Cate. "We really want to make sure, as part of our business model, we can manage our growth, provide a great environment for all the business partners in our existing sales organization and be around for a long time."
According to McClean, Global DocuGraphix started focusing more on operations in late 2000. "By then, we had reached a point where we had created some mass with multiple locations," he said. "Secondly, the financial markets changed, causing large acquisitions to become more difficult. Thirdly, operating as a world-class company is the most important thing, so we had to focus on that. These three things came together around the same time."
Since its inception in 1998, Global DocuGraphix has averaged a 55 percent annual compound growth—a combination of pure acquisitions, organic growth and adding salespeople.
"This past year, we've grown the most with sales professionals," said McClean. "We're a sales company. We own no plants and no bricks and mortar, so our investment is in people and systems."
TopForm Software is one system where Global DocuGraphix's investment has paid off considerably. "Our investment in technology has been significant and one of the things we've done is leveraged our relationship with TopForm, which is our operating system," sad Cate.
According to McClean, the TopForm Software division, Norcross, Ga., continues to evolve and adapt to the climate of the printing industry. "They have just announced an Application Service Provider (ASP) version for smaller companies that don't want to expend all the capital to purchase the TopForm software, which is the most robust in the industry."
In addition to the ASP version of its proprietary software, TopForm is also introducing TopForm Essentials—a scaled-down version of its software. "With TopForm Essentials, clients can receive the high functionality, but at a reduced cost," said McClean.
The key to Global DocuGraphix's increasing success in e-commerce and electronic solutions has been leveraging these initiatives with traditional forms products. "We're not trying to run away from business forms because the margins are still quite good," explained McClean. "Overall, as technology flourishes, the traditional business forms market is declining. We're aware of that and we work hard to maintain what we have and increase the lines that are growing."
This leveraging is most evident in Global DocuGraphix's Document Imaging sector, based in Denver. "From Convergys, one of our print salesman's major accounts in Jacksonville, Fla., we were presented with an opportunity to basically cross sell into Document Imaging with Marriott and approximately seven other companies," said McClean. "Now, we do the scanning and indexing of all of these eight companies' personnel files. That adds up to about 190,000 scans per month."
E.stubs, another one of Document Imaging's solutions, also stems from print sales. "For years, the print salesmen has sold payroll checks," said McClean. "Now, we have a solution called e.stubs through which a company downloads all its payroll data to us. We host the data on a Web site and employees can access their paystub on the site from kiosks at their company."
There are many advantages to e.stubs. It eliminates the need for paper, mailing expenses and extra storage, and the secure Web site that hosts the payroll information can be accessed from anywhere.
"Today, people expect you to have the basic products—business forms, commercial print and promotional items," said McClean. "They also expect you to have good prices, great quality and outstanding service just to play the game. The game changer that we see is definitely in the area of delivering services and products via electronic and digital data."
Although Global DocuGraphix is now more focused on operations than acquisitions, that doesn't mean it is going to stop acquiring companies.
"We are a sales- and distribution-driven company, so we're going to continue to grow," said Cate. "First and foremost, we have to ensure that our business platform allows us to take care of customers. Our customer base is the foundation of our company and we're going to protect it and grow it with everything we have."
One of the ways that Global DocuGraphix protects its customers is by ensuring that a potential acquisition is the right fit for both parties involved. According to McClean, for every 10 companies Global approaches or is approached by, approximately one deal will come to fruition.
"We have to be sure that we understand what is driving an individual to talk to us about selling their company," said McClean. "Most people are honest about it, but sometimes there are multiple motives, so it's very important for us to understand what's driving them."
In McClean's experience, survival is one of the main reasons why a company would be interested in consolidating. "In many cases, a medium-size business has wrestled with the electronic side of the industry," said McClean. "If it was to incorporate e-commerce into its business, it would have to make an investment that is not going to be recoverable in the next year. It's expensive, and many businesses aren't sure they want to make this investment."
Some companies consider consolidation to circumvent the decreasing printing prices. "Forms and commercial print companies need to constantly reinvent themselves in order to maintain a satisfactory profit margin," said McClean. "They need the infrastructure to handle increasing customer demands and with prices dropping, it continues to become more of a challenge to have a gross profit margin satisfactory enough to support all of that."
A Strong Infrastructure
By leveraging its size, Global DocuGraphix can support an infrastructure of many salespeople in various locations and still improve its bottom line. "Once our infrastructure was in place—not only of people, but of telecommunications, order management and e-commerce—it enabled us to provide a level of service that is a step up," said McClean.
Age is another major contributing factor to consolidation. "Many business forms distributors have reached a point where they would like to perhaps gain some liquidity, lock in a gain and alter their working hours a bit—not leave completely, but not have everything on their nickel," explained McClean.
Global DocuGraphix offers an annuity plan to owners of one-person companies who are ready to retire. "After joining us, they continue to receive income for sales over a three-year period and are provided with an alternative salesperson so they can wind down," said McClean. "This way, they can help with the transition and still receive residuals going forward."
McClean and his team are adamant about keeping key employees of any company that Global DocuGraphix acquires. "We have had an excellent track record of retaining the people who own these great companies," said McClean. "Our strategy has always been to keep the owner, the visionary, the person who built the company in the first place."
For the final two quarters of 2003, Global DocuGraphix hopes to achieve a revenue of $60 million in distributor sales alone. According to McClean, there are three components that will help Global DocuGraphix reach this lofty goal. "We've had a solid business plan to begin with and we've adjusted it as the market dictates," he said. "Secondly, I think we have found and kept exceptional people, both in sales and staff. Thirdly, we have been more focused on profitability than on revenues. This combination has worked for us."
By Jennifer Hans