Published January 18, 2018 | Updated September 11, 2020
In a survey of 114 private equity firms with at least one office products company in the portfolio, 82% said that a differentiated business model was the key to management teams obtaining higher EBITDA multiples and business valuations.
As a dealer principal, you can’t ignore the amount of industry consolidation and general merger and acquisition activity that has occurred in office products in recent years. In addition to the industry and competitive impact, there is a very personal one. Most dealer principals have a strong percentage of their wealth tied to the value of their enterprise. And while there are myriad ways principals can maximize the value of their equity position, the simplest might be differentiation.
When private equity firms or larger dealers want to expand their base of office product dealers, what do they look for? Earnings history, strong products, a solid management team, and well-performing geographies are all staples investors seek, and they are relatively easy to evaluate. But then there is the dealer’s durable competitive advantage. What are the reasons customers choose your company beyond the manufacturer name you represent? Is there a real service delivery model that extends beyond the abstract definitions of “great service” and “great people”? Is there real differentiation in the customer experience that consistently delivers value in the market?
As evidenced by the private equity survey, a principal can maximize their wealth with just a continual focus on differentiation. Here are three verbatim quotes from focus group research from dealer principals illustrating the importance of the issue:
“A strong earnings history, the top manufacturer in the market, 30 years in business through two generations of ownership and nothing made the impact our multiple more than our core business model. Our new owners became enamored with what we did to create a unique customer experience that was about far more than price.”
-Former CEO of a $28MM Dealer in Minnesota
“We would have never received the price for our shares without really taking new ownership through all the key elements of our customer philosophy and how we deliver it. From community involvement to real financial solutions that extend beyond payments – our customer care model was the ballgame.”
-CEO of a $61MM Dealer in Texas
“We just go farther than the competition. We provide more support for the customer decision at all points in the relationship and the partnership that is created there truly wowed investors. We sell what lots of others do – but our approach was the difference. One example, is that we use a finance company that tons of others do. But our version of the finance offering is so customized and ingrained in our business model…it’s like they work for us and ultimately our customers. I’ve retired at a level I couldn’t have imagined and sleep well knowing what we built is now in good hands for the future.”
-Former CEO of a $73MM Dealer in California
When the day comes, when it’s time to make the most of your career investment, what will your quote be? At LEAF, we help dealer principals with far more than a simple finance program for your equipment. We make your equipment easier to buy with customized solutions that create a differentiated and improved client experience. For decades, LEAF has been a leader in office equipment financing, and now may be the time to evaluate how your finance program could add more value than you might once have imagined. To begin a discussion, reach out to your LEAF Account Champion.