Ever since he joined the OP industry, Craig Bartholomew has been heavily involved in the US independent dealer community. Starting with his own dealership 360 Office Solutions, he soon became involved in buying group Independent Stationers (IS) and in 2009 with Pinnacle Affiliates, the dealer group for the biggest independent OP operators in the country.
Bartholomew recently completed his two-year stint as Chairman of Pinnacle. From his new backseat perspective – though he’s still on the board of the group for another year – he talks about his own dealership, the creation and rise of Pinnacle and the importance of size in today’s business supplies industry.
OPI: Please tell me about your career path. What led you to work in office products?
Craig Bartholomew: I’m an accountant by trade and have a Masters in Tax from the University of Utah. Before joining the OP industry about 15 years ago, I worked for three years as Controller and Principal Accounting Officer for an independent power producer in Montana called PPL. Prior to that I was with KPMG for seven years. So overall, I’m good with numbers!
OPI: I guess when you became part of 360 Office Solutions in 2002, the numbers looked a bit different from today… What is the history and set-up of the company?
CB: Yes, they were different. The precursor to what is now 360 was a company called Reporter Printing which was founded in 1941. In the 1970s the firm got out of the printing business and continued in office products and furniture. Over time, the name changed to Reporter Office Products – that was the company name when I bought it nearly 15 years ago.
Back then, we were basically a Billings, Montana-based OP and contract furniture company. Since then, we have done 11 acquisitions in the area, which allowed us to become a Ricoh and Kyocera dealer along with expansion into the breakroom and facility supplies business. For a time, our overall branding strategy wasn’t very cohesive and we had all sorts of different names, but about four years ago we went through a rebranding exercise and came up with the name 360 Office Solutions. Our tag line is to provide ‘smart answers everywhere you turn’.
I have four business partners. One is the youngest son of the family who started the business back in 1941 – he is in charge of the contract furniture division. Another partner runs the business machines division of the company. Then I have a partner in one of our Helena – the state capital of Montana – locations. In essence, I run the business operations and finances overall, while my partners oversee different sales disciplines within the company.
OPI: How is 360 Office Solutions looking today, from a revenue, staff and location perspective?
CB: We were just under $30 million in sales last year and have approximately 130 staff. About 70 to 80 people are here in Billings – that’s our biggest market. Then we have another 50 or so staff in various other locations in the state, including in the cities of Bozeman, Butte and Helena.
OPI: So your overall geographic coverage is mainly the state of Montana?
CB: For OP, our mainstay is Montana and we drop-ship to customers outside the state. From a contract furniture perspective we also go into North and South Dakota, Wyoming and occasionally Idaho. In terms of business machines, that’s pretty much Wyoming and Montana. End to end, we cover an 800-mile radius.
OPI: What was 2016 all about for you and what are your plans for this year?
CB: We have continued to do a lot of work on our core values and we had some success with that, but with four acquisitions last year we took a few steps backwards. One of our key objectives for this year is to re-engage the value proposition that this company offers and getting that really ingrained with the employees that came on with these acquisitions.
It’s a real cliché, but I truly believe that we can never win unless our employees really support the value and the vision that we have for this company. If you don’t all pull in the same direction, you have no hope of going anywhere, so that’s definitely our number one initiative this year.
I’ve found this is actually one of the hardest jobs in a company. It’s particularly challenging because we’re geographically dispersed, so I can’t just walk around one building, talk to people and be visible all the time. I frequently travel to all our locations, listen to employees and talk to them. It can be very rewarding but also very frustrating at times.
360 Office Solutions is an acquisitive company and we need to make sure that we buy the right companies with the right people that believe in our values. The markets here in Montana still have a very strong relationship-based culture and we need to foster this culture through our acquisitions.
OPI: What type of companies have you bought?
CB: All of them expanded out of our existing capabilities. We’ve always been a contract furniture company, so we grew from that and now support all manufacturer lines we have with our installers and design crew. In the machines business, like I said before, the acquisitions have allowed us to be both a Ricoh and Kyocera dealer. We last year picked up a copier contract for the state of Montana and recently completed the roll-out of the first wave of 300 copiers.
What was attractive about the acquisitions we made was that they were stable, long-standing and well-respected businesses. We still have to get deeper into adjacencies like breakroom or facilities supplies. And maybe some straightforward office products dealers if they’re in our existing geography and if there are synergies to be had in pairing up. I don’t think there’s much point in going further afield for a pure office products player.
OPI: How are your overall revenues spread out over the various divisions?
CB: Traditional OP now accounts for less than 40% of sales. Breakroom and facilities supplies are a growing category for us and are in the 5-9% sales range currently. The copier/machines business is about 30% while contract furniture is just over 20%. It’s a fairly well-spread mix.
OPI: Tell me about your competitive landscape.
CB: It’s an internet world. OP-wise, Amazon is a competitor, though mostly on the B2C side at the moment. We have a lot of small firms in our area and many of them are Amazon customers, so we definitely see that influence. Staples’ and Office Depot’s online business is also a factor.
In terms of other small independents, there are only a few in our region, so we’re well positioned in that regard. In the furniture business, we’re competing with other small contract furniture houses; the same applies to the machines business – lots of very small copier businesses.
OPI: You mention Staples and Depot. Are they invading your space in their effort to move further down into the mid-market?
CB: Nothing has really changed – they’ve always been here, but haven’t made any real headway from what I can see, with the exception of taking more online sales. We’re on the OP state contract with Staples and Depot, of course, so we compete with them in that way as well.
OPI: Who’s your first call wholesaler?
OPI: Before we move on to Pinnacle Affiliates, where do you see the company in a few years?
CB: We’re going to continue to push in order to grow, with expansion into new territories as well as acquisitions. If you’re not growing you’re going backwards. In the current business environment I also believe that you need to build size to maintain your relevance.
OPI: Let’s talk Pinnacle – what’s 360’s involvement with the group? For a start, when did you join?
CB: We joined Pinnacle as its 16th member and that was about seven years ago. We were previously a member of IS where I was also treasurer for some time and eventually chairman for several years.
OPI: Given your size of about $30 million, are you a ‘typical’ Pinnacle dealer? I believe some of the other members are substantially larger.
CB: A Pinnacle member has to be over $20 million, so we fit the bill but we’re definitely one of the smaller members. And you’re right, there are some very large dealers within Pinnacle in the big metropolitan areas of the country, like Washington DC, Chicago, Los Angeles, Seattle, etc.
OPI: What made you join? You can only just have passed that $20 million threshold at the time…
CB: Pinnacle was founded in July 2008 by Kevin Johnson from Warehouse Direct, David Guernsey from Guernsey and Mark Miller from Eakes Office Plus. This is a group of extremely intelligent dealers who had a vision of what large dealers need to be successful. I was actually on the board of IS at the time, but I saw what they were doing and thought that, if we’re going to be a survivor in this industry, we had to grow and join that group.
I don’t even remember our size back then, but it was something we wanted to drive towards. Through acquisitions and organic growth we qualified for the direct buy requirement initially which is $3 million.
The most appealing aspect for me of this group was – and still is – to learn from my peers and these highly intelligent people. Just as an example, we hadn’t broken into the breakroom category when we joined, but listening to Dave [Guernsey] talking about his breakroom programme, his approach, catalogue, pricing, etc, was a real eye opener.
Of course we had to rationalise it for our own market, because he’s in DC and we’re in Montana, but that best practice sharing allowed us to move a lot faster than if we had had to do that groundwork ourselves.
Pinnacle Affiliates aims to be a low-cost model, that drives manufacturer and dealer collaboration. What we do is spend a lot of time talking to our fellow members and then use that knowledge to make our own dealerships better.
OPI: What about purchasing power?
CB: Of course you get the purchasing power that comes with those combined revenues. We also need to continue to drive a high level of compliance among Pinnacle dealers, benchmark how we are doing, support our vendor programmes and always want to improve on what we do.
OPI: Is there a cap in terms of how big you want to grow Pinnacle? You’ve just added three more dealers and now stand at 33 I believe?
CB: That’s correct. We want dealers that are market leaders, forward thinking and realise the need to work together with fellow dealers and manufacturers to strengthen the dealer community. There’s no limit in terms of numbers, but let’s not forget that the group doesn’t suit everyone. Not all dealers understand or agree on the pillars of what we do and how we operate.
OPI: Before Pinnacle, you were very involved with IS, as you mentioned before. I believe there continues to be a relationship between the two?
CB: Yes – and it’s a very good relationship. Pinnacle has a back-end office support agreement with IS whereby the group does rebate collection from the manufacturers, for example. Pinnacle members have the ability to be part of the various IS offerings like the national accounts or federal sales programmes. We also work in a collaborative way with IS when it comes to merchandising and some IT initiatives.
Additionally, many of our members are part of AOPD and successfully use the programmes the network offers – it does a good job.
With all that said, Pinnacle has its own initiatives and objectives. We need to stay focused on these because in the end we should never lose focus of what’s best for the dealers of Pinnacle.
OPI: To finish up, after two years as Chairman, are you happy with what’s been achieved in your time?
CB: We’ve done ok. But it’s important not to lose sight of the hard work that was done to form Pinnacle. Kevin, Mark and Dave are the ones that deserve the credit for the success we have today. They put tonnes of stuff in place that allowed us to continue to be successful. I didn’t mess it up and that’s a good thing. We continued to grow and add members. But there’s plenty more to do: we need to add a little more structure and our vision will continue to be refined.
I have one more year on the board of Pinnacle and then it’ll be time for someone else to step up and be involved. All the members of Pinnacle have the opportunity to impact the direction of the group – as they should. Because in the end, it’s all about them.