As the “roll up” M&A environment continues to move quickly, office equipment dealers often find themselves looking for the best ways to maximize the value of their enterprise. While much time with investment bankers and private equity types is spent talking EBITDA trends, it’s the driver of those numbers that really seems to make the biggest difference. And nothing is driving EBITDA for office equipment dealers right now quite like the expansion into more comprehensive solutions over just selling hardware.

The Importance of Your “Service Mix”

Going beyond the hardware is a long-established path to greater account-by-account profitability.

But do you know just how important it is to those establishing a value to your company? A recent survey of 28 private equity firms with at least two office equipment dealers in their portfolio revealed some of the top items that enhance enterprise value:

• Strong recurring revenue from service agreements as a percentage of total revenues
• Higher percent of service revenue per transaction
• IT services, particularly networking services, that reach beyond traditional office equipment support

But when asked in a survey of their own, office equipment dealers (319 in the US) report that more than 70% of their energies as a business are spent on activities related to hardware sales. It seems as though many dealers still see their service offering as a “nice to have,” rather than a critical driving force to their bottom line.

One of the private equity survey respondents said, “All dealers talk about the importance of their service mix, but it’s the ones that really build the business around it that get our attention. For almost 20 years and through nine portfolio exits of office equipment dealers, we’ve seen that the most durable part of the office equipment dealer value proposition is their commitment to making services integral to each offering and from that – building total solutions.”

Another private equity survey respondent stated, “Dealers know the equipment. So that’s what they sell. While they may all point to their service capabilities, few really make those a hallmark of the value proposition. We’ve passed on dozens of dealers with strong revenues and reputations because we can’t get comfortable with the transactional, equipment-driven mindset they execute with.”

This feedback is telling the industry that buyers of dealerships are less likely to be interested in a hardware shop. In 115 verbatim comments from the private equity survey, the phrase “value proposition” was used 15 times more frequently than all financial measures (like EBITDA or an EBITDA multiple) combined.

So just how focused is your business on building service-driven solutions as a major part of your offering?

At LEAF, we do more than just make your equipment affordable. We solve real problems, and we are committed to helping you maximize the value of your enterprise.