Rearview Mirror: Impact Networking and The Great Recession

When Expansion, Marketing, and Culture Collide

04/09/2019

 

 

“We’re always trying to stay ahead of our investments and growth, but the bottom line is that our goal every year is to outsell what Frank spends,” said Dan Meyer, Impact Networking’s President. While that quote is a sterling example of Meyer’s dry humor, there’s always truth behind a good laugh.

 

Frank, of course, is Frank Cucco, Meyer’s longtime business partner and the company’s CEO and visionary. They founded Impact Networking in 1999, establishing a technology provider of products and services for organizations in greater Chicago. According to Meyer, no independent dealer based in The Windy City had ever achieved $30 million in annual revenue, so in their original business plan, he and Cucco detailed how the company would attain that dollar amount and have three branches in Chicago—downtown, southwest suburbs, north/northwest suburbs—by 2010.

 

However, a process rarely progresses as smoothly as people would like, especially when the objective is that aggressive. “Our revenue for ’07 was $21 million, we were on track to hitting our target,” Meyer said. “From 2000 to ’06 our lowest growth rate was 16 percent, with a high of 75 percent. All organically. Things were coming up roses for us: Okay, MPS wasn’t producing the desired results as we had a rip-and-replace approach, and IT—one of our offerings from Day 1—didn’t have recurring revenue, but we were moving a ton of boxes and we’d done very well with document management…”

 

Then, with the force of a rhino stampede, The Great Recession came thundering down.

 

 
Impact Networking Co-Founders Dan Meyer, President (left), and Frank Cucco, CEO.

 

The company didn’t feel an impact from the recession until 2009. Two years earlier, Cucco wanted to take the next big step so, going off script, he and Meyer set out to make an acquisition. In the fall of ’07 Impact announced the purchase of Kubichek Office Products, a dealer with a pair of locations in Wisconsin (Madison and Milwaukee). Kubichek had a legacy in typewriters and fax machines, renting used equipment, and—if you can believe it?!—repairing electric razors, but its staff had no knowledge of selling solutions.

 

“We bought Kubichek when it had revenue of $7 million, but by 2010 that figure was down to $4.5 million,” Meyer said. “We were told by the naysayers that ‘what you do in Chicago won’t work in Wisconsin’ (ended up not being true), the salesforce was extremely reluctant to change, and it all added up to an ugly scene that was made worse by the fact that the recession had stagnated us.

 

“In August ’08, we opened an office in Indianapolis to house two teams of eight salespeople and a tech each, with a demo room and a staging area,” he continued. “Mike Pietrunti, who was formerly the President and CEO of Kyocera Mita America, convinced us to expand into this economically sound city, but one where OEM directs had a stronghold in for years.”

 

As Meyer explained, this wasn’t a bloodbath investment as most of the costs incurred were from salaries, but growth was tortoise-like and revenue never escalated above $4 million until 2016.

 

And, as the saying goes, things—good or bad—happen in threes. With the company bursting at the seams of its initial office, Cucco decided to buy adjoining plots of land in Lake Forest, Illinois, and build both a new headquarters and distribution center. The latter was opened in ’08, but the HQ had to be delayed because of the recession.

 

“Many businesses are scared to spend money, but Frank is ahead of his time and isn’t afraid,” Meyer said. “It was his idea to move right off 294, which is among the most heavily trafficked highways in the US, to place a huge Impact Networking logo for everybody to see. It was his idea to create high tech-looking buildings to communicate that we are a high-tech company. Nothing with our Lake Forest campus was cheap, but it’s all part of the grand marketing plan that’s in Frank’s head.”

 

 
Impact Networking’s state-of-the-art headquarters in Lake Forest, Illinois.

 

As if the mountains of money being spent by Impact on its expansion weren’t enough, Cucco pitched a marketing concept to Meyer that had him literally hitting his head on the desk as he fell to the floor. “Back in the day, a dealer maybe had a crappy billboard or ran some commercials on an AM station down the dial,” Meyer said. “What Frank suggested, a partnership with the Chicago Blackhawks, was insane because the team wasn’t that good, they had no fanbase, and the cost was through the roof.”

 

The company doubled down on the investment in sports when it began advertising in Miller Park, the home of the Milwaukee Brewers. More exposure, yes, and in a different market, but still at a time when cash was tighter than Fred Flintstone’s fingers in a bowling ball.

 

“Advertising with NFL teams is expensive, there’s just not enough visibility during games,” Meyer said. “The NBA is better, and MLB can be a nice proposition with logos on the outfield wall and by the bullpens, though behind the plate on a scrolling board requires another level of commitment. What makes the NHL the surest bet when it comes to marketing is that your logo is on the boards and can be seen for half of the game.”

 

“Many businesses are scared to spend money, but Frank [Cucco] is ahead of his time and isn’t afraid. It was his idea to move right off 294, which is among the most heavily trafficked highways in the US, to place a huge Impact Networking logo for everybody to see. It was his idea to create high tech-looking buildings to communicate that we are a high-tech company. Nothing with our Lake Forest campus was cheap, but it’s all part of the grand marketing plan that’s in Frank’s head.” –Dan Meyer

 

Impact Networking’s revenue from 2008 to 2011 was $25 million a year. Meyer claimed that client retention was good, and while the company was still profitable, it was hemorrhaging money—like Lehman Brothers or a ridiculously bad poker player—on the balance sheet.

 

But for an organization that prided itself on having “culture on steroids,” The Great Recession was difficult for Impact to say the least. The company went from 180 employees to 130. Trips were eliminated. The matching 401K program ceased. Even coffee had to go. Every expense was scrutinized to the nth degree.

 

“From the outset of the company, Frank and I wanted to make culture one of the biggest aspects of the business,” Meyer said. “We were spending money on expansion, on marketing, and I’m very sorry to say that our employees bore the brunt of those hard times. We had to pull back on things like MPS, IT was flat, but we didn’t bail on any products or services…in reality, we never really have.”

 

Communication must always be prioritized—particularly during a recession. Cucco and Meyer recognized that and addressed it head-on. “The worst thing you can do is to avoid broaching the subject,” Meyer said. “You always have to be vigilant about your culture. You have to explain that times are tough, so this is why we’re taking these measures. If that doesn’t happen, then you’ve got a mutiny on your hands.”

 

 
Who wouldn’t want to work in an office like this?!

 

When the calendar flipped to 2012, Impact started to grow again. The company had hired an MPS specialist, who quickly moved the needle with this portion of the business thanks to a true consultative strategy that continues to thrive. Plenty of lessons had also been learned in the IT space, and Impact now has that managed—no longer is it a methodology based on billable hours and break/fix situations. And, because of the Kubichek acquisition, from which the company gained entry to Konica Minolta’s portfolio, Impact was experiencing healthy returns in the production arena, too.

 

“Once we realized we had the wrong person running the former Kubichek operation, Frank and I promoted somebody internally and we did $18 million last year,” Meyer said. “The same happened in Indianapolis, where we transplanted one of our guys from Chicago and he helped us do $12 million in 2018, which is about halfway toward our bigger goal, though we haven’t achieved what we set out to do with this location.”

 

Meyer admits he shouldn’t even question Cucco’s decisions. Most notably around marketing, as he now comprehends that getting your name out there is crucial when trying to play with the big boys. Most of Impact’s offices have highway exposure, and the company has built out its sports advertising in major league fashion: Impact began working with the Chicago Cubs the year before the North Siders won the 2016 World Series (logo in the bullpen under the bleachers), and it sponsors the Chicago Bulls, Milwaukee Bucks, LA Kings, and Anaheim Ducks. The company was lucky enough to have its logo on the cover of Sports Illustrated when the ’Hawks won 21 consecutive games (and has been a sponsor of the team during all three recent Stanley Cup seasons), and it obtained the stadium naming rights of the Chicago Dogs minor league baseball team (Impact signage can be seen when flying in and out of O’Hare).

 

“My favorite part of this story is that our culture is now better than ever,” Meyer said. “We take care of our employees because our employees are the people who take care of our customers. We work hard and play hard. There’s been rapid career advancement. Sales isn’t the only department that’s rewarded—everybody from the admin staff to the janitors is recognized. Heck, we have a cappuccino machine!” (At the time of this publication, Impact Networking is celebrating a successful 2018 with 300-plus employees in Puerto Vallarta, Mexico.)

 

Spend money to make money. Always be confident. Never show fear. Impact Networking has abided by these maxims for a long time. It made it through a downturn, is prepared for the next one, and—

 

“Anything can be overcome,” Meyer said. “The power of positive thinking.”

 

 
Take me out to the ballgame!

 

Related Reading: The Rise of the Mega Dealer (Part 1 of 3)

 

 

Carl Schell
Managing Editor
With over a decade’s worth of experience at Buyers Lab, Carl manages workflow on the BLI side of Keypoint Intelligence’s Office Technology and Services Group. He also manages both editorial content on the KPI corporate site and the BLI newsletter, LabLines. For the past few years his primary interest has been on the channel, specifically writing dealer-focused articles, while his prior responsibilities included producing reports on printers/MFPs and software.