Always Looking for More: How UBEO Became a Mega Dealer
Taking Care of Customers and Employees Helps Business Take Care of Itself
Question No. 1: What gives with the company name?
“We were searching for something more on the modern side, something more abstract,” said Jim Sheffield, UBEO’s CEO. “Our thinking in 2017 was to build a brand of excellence around UBEO (the U is pronounced You, the rest as it sounds) so it would become synonymous with great customer experience. Funny thing is, it was only after the fact that we learned that its astrological meaning is not accepting things at face value, digging deeper, and wanting to help others.”
Check, check, and definitely check.
The company began life in 2004 as DOCUmation of Austin, had revenue of $38 million just five years later, and, after establishing seven startup offices throughout Texas (in Bryan, College Station, and Conroe, to name a few), emerged from the pack as the largest dealer in The Lone Star State. Witnessing firsthand the consolidation going on in the industry, the company sought out institutional money—to facilitate the goal of a nationwide footprint—and formalized an agreement with New York City-based Sentinel Capital Partners in April 2018.
“When we signed that contract, UBEO had revenue of $60 million,” Sheffield said. “We were looking for a firm that would allow us to run the company the way we wanted to. Sentinel was attracted to us because we’re a value play with recurring revenue and our business is scalable.” At the time, he reported, UBEO had very good energy and a solid foundation of best practices. The process took two years—interviewing 26 potential partners—before the official word was announced.
The results of the transaction are hard to argue. UBEO has in short order made six acquisitions in its home state and Louisiana, while the merger with Ray Morgan Company in October 2018 gave the company a key stronghold in sunny California (and Las Vegas). Following this aggressive period of gobbling up dealers and the rapid 3x growth that’s ensued (revenue is in excess of $220 million now), UBEO is in digestive mode as it turns its attention to synergizing 30 branches and 800-plus employees.
|UBEO’s Jim Sheffield, CEO (left), and John Barbieri, COO.|
Aside from a small acquisition made prior to its relationship with Sentinel, UBEO was solely focused on organic growth. However, it proved extremely difficult to gain a vendor partner at the outset. As such, cashflow was tough in the earliest days of the company. A deal with Ricoh was finally struck and then came Texas-size expansion, including in Dallas–Fort Worth and Harris County (in which Houston lies).
But: “While acquisitions are vital to financial aspirations, organic growth is still the heartbeat,” Sheffield said. “You only have 100 percent of your time, so why not concentrate on what you’re good at and less time with what you’re not? I’m talking about core business, and to balance the scale so to speak, we currently have our eyes back on gaining device-placement market share in the office.”
In an effort to make life easier for its customers, UBEO has made serious inroads with document management. This is just a part of what Sheffield referred to as a “comprehensive solution”; though these systems equate to less than 10 percent of the company’s revenue, document management software is layered into an organization’s infrastructure “quite often.”
Production is another crucial element in UBEO’s long-term vision. Along with Ricoh “big iron,” the company sells Konica Minolta and Xerox equipment, the latter of which is the latest addition to the portfolio. “We started investing in production in 2014 but had to retract a little a few years later,” Sheffield said. “Our momentum is pushing us in this direction more, and we’re bullish on this segment being close to 20 percent of our revenue by the end of 2019.”
“When we signed that [private equity] contract, UBEO had revenue of $60 million. We were looking for a firm that would allow us to run the company the way we wanted to. Sentinel [Capital Partners] was attracted to us because we’re a value play with recurring revenue and our business is scalable.” –Jim Sheffield
The Great Recession was—like for many of its peers—a trying time for UBEO. The company didn’t lay off any of its employees but didn’t hire anybody, either. Budget had to be tightened, sales were flat, but operating income was up 14 percent. As Sheffield and UBEO COO John Barbieri had a desire to provide positive culture throughout the company, it was tough to keep people safe, proud, and motivated during this time.
Then, in 2010, came revenue growth of roughly 8 percent. Midsize to major account business saw an uptick. The aforementioned journey into production happened. And through a picky selection process, along with the assistance of Sentinel, acquisitions enabled UBEO to level up.
“There’s no number we have to hit with bringing dealers into the fold—it’s about feel and, of course, the acquisition target’s culture,” Sheffield said. “So far this year, we’ve closed on an organization in January, a couple in March, and a fourth in April. We’re going to do what we need to do to have a pipeline of great acquisitions, because nothing is ever good enough.”
|UBEO currently has a presence in its home state of Texas, plus California, Las Vegas, and Louisiana.|
The Ray Morgan move is one of the most impressive achievements in UBEO’s history (the first decade of organic growth and the Sentinel partnership are the other two). This merger was bigger than the ComDoc–Global Imaging deal, according to Sheffield. He went on to say that RMC is an anchor organization—UBEO will find other businesses of the same size and scope as RMC to be anchors in other regions.
RMC, which had revenue of approximately $120 million when the merger happened, was closely aligned with UBEO, including the fact that RMC keeps a bright light on core business. Regardless, the two entities aren’t perfectly identical, and managed IT is a du jour example.
“Ray Morgan has been providing network services longer than UBEO,” said Sheffield, who added that the plan is to leverage some of RMC’s expertise to get beyond the strategic partner method, which is basically a lead gen exercise. “IT is a challenging financial model for us—it’s an abyss, with incremental wallet share instead of recurring revenue that we can build on. If we’d had trouble growing our core, then we would have already gone higher, wider, and deeper with it. But our eyes are wide open, we consistently weigh the risk versus the reward, and eventually acquiring an IT firm isn’t out of the question.”
“There’s no number we have to hit with bringing other dealers into the fold—it’s about feel and, of course, the acquisition target’s culture. We’re going to do what we need to do to have a pipeline of great acquisitions, because nothing is ever good enough.” –Jim Sheffield
Sheffield and Barbieri are industry vets dating back to the ALCO days. UBEO benchmarks metrics on the Johnson Model, but as Sheffield explained, the company doesn’t adhere to it 100 percent because certain aspects—higher selling expenses due to how UBEO approaches customers—fall outside of the target.
Thanks to their belief that ensuring employee satisfaction and company success are symbiotic, Sheffield and Barbieri are more than happy to routinely supplement the company’s culture initiative. UBEO focuses a good deal on employee autonomy by providing the training, tools, and resources to get the job done, then empowering the team and letting them execute.
That said, the customer comes first. Always.
For instance, UBEO prefers “printer standardization” to MPS. “It’s hard to manage a mixed fleet, you’re simply not giving your clients the best user experience possible,” Sheffield said. “We offer the Kyocera A4 line up to 52 ppm, and the success we’ve had in this area of our business is simply to rip out the old and replace with the new—and streamline. Having just one printer vendor in a location means improved efficiency around devices as training and maintaining become that much easier.
“We’ve come a very long way in a short amount of time,” Sheffield continued. “We closed our first official monthly book in March 2004. Now, we’re a much bigger company that’s eager to become a big national player, but we feel no pressure to make it happen too quickly. We’re thinking long into the future here, with our commitment to business and, mostly, our customers—we can never take the spotlight off of them.”
|UBEO is co-headquartered in Austin and San Antonio, Texas.|