Computer Business Solutions

January 1, 2000 Roger Matz

Photo by Kris Kathmann

If you’re reading this after January 1, 2000, by candlelight, shivering next to a dead computer, then Bob Dale was wrong about the impact of Y2K.

As 1999 waned, he believed that 2000 would make a benign arrival, with computer clocks and calendars clicking into the new millennium relatively glitch-free. “There might be some minor inconveniences, but I’m not moving to northern Minnesota and digging my own well,” he said, defining a minor inconvenience as finding your supermarket short on some items because less confident individuals stocked up on canned goods or their favorite cereal.

As owner of Computer Business Solutions (CBS) in Mankato, Dale spent much of 1998 and 1999 preparing his customers for a smooth transition. Still, he didn’t approach the end of 1999 with a cavalier disdain for possible electronic misbehavior. “My contention is there’s always that one percent chance that something might happen, so we advised our customers to print out hard copies of their data. Why take a chance?”

Dale took his own advice, running off the CBS accounts receivable list at year’s end. “Otherwise,” he smiled, “I’d have to call my customers and ask if they owed me money.” He also kept CBS technicians on call during the holiday weekend, just a beeper’s buzz away from helping heal any surprise bites from a Y2K bug.

That’s the kind of concern Dale’s customers have learned to expect during the past 20 years, first from Mankato Business Products and now from CBS, where service seems to be a habit rather than an afterthought. “We’ve always prided ourselves on service after the sale,” Dale said. Dedication to that principle built his Mankato Business Products into a $6 million company. Two years after he sold it to a national corporation, that principle helped motivate him to buy back the computer portion of the business and reenter the field as an owner rather than a corporate employee. Instead of cowering at some “what-if” Y2K disaster as 2000 begins, he’s embracing new technology which he believes will help CBS grow 20 to 30 percent during the next two years. He predicts it will climb back to $6 million in sales by 2001. “It might even happen faster than that,” he said.

CBS specializes in selling computers, mostly Compaq and Hewlett Packard, to businesses and networking them to create a seamless business system. It sells little software beyond what’s required for networking. Customers include small manufacturers, law offices, insurance firms and service businesses. Networking a powerful server to several less-powerful workstations can be a tricky, complicated feat, but Dale has found that “the average businessman doesn’t care how it works, just so it works.”

For years, Dale tried to pinpoint when PCs would become as powerful as main frames. “It finally happened about 1996 or 1997,” he said. “They’ll continue to become more powerful. Hardware manufacturers are in a race to keep up with software creators, who are writing programs that require more memory, and more and more speed.”

Dale is a survivor. He once worked two full-time jobs to support his young family. He paid 23 percent interest to fuel the growth of Mankato Business Products during the crazy inflation of 1980. When PCs burst on the scene in the mid-1980s, he led his company into this uncharted field, struggling up with an ever-changing learning curve when others went broke, or simply gave up, and closed their doors. “It was a very hard business because mistakes cost money.”

Today, Dale marvels at how he managed two jobs or stayed afloat while dragging the anchor of a 23 percent loan. “I wonder how I ever survived. If you threw that at a business that’s highly leveraged today, it would be impossible to survive,” he said. Then he corrects himself. “It just points out that you do what it takes to get through situations. People and businesses surprise themselves at what they can do,” he said. If faced with double-digit interest again, “I’d have to make adjustments, but I just know I would survive.”

Dale’s father owned a small office supply business in Mankato, but closed it in 1965 after struggling with poor health. “I was about 18 at the time and not ready to take it over,” he said. Instead, he spent about a year at Minnesota State University, then took a restaurant management job.

In 1970, he began selling copy machines for a large company with Faribault and Owatonna as his territory. After 10 years, he bought Mankato Business Products, which was a branch of his employer. He concentrated on selling and servicing several brands of copy machines, then opened an electronics division in 1985 to market electric typewriters, electronic typewriters and eventually computers. At first, Dale’s store sold PCs to individual retail consumers. “Most didn’t have any background in computers and they would have difficulties and problems that would take us an enormous amount of time to help them through,” he recalled. As PCs became more powerful, and it became possible to network them for small businesses, Dale decided to specialize in that service.

During the infancy of the PC, Dale said “everybody in the business was going through a huge learning curve. A lot closed their doors and went bankrupt. We went through a shakedown period where all suppliers to small computer firms became really strict with credit because a lot of them had been burned.” But his store was positioned better than most. “Our copier business stayed healthy and kept growing. Without it, it would have been hard to support the computer business,” he said. “We had 3,000 accounts happy and pleased with us and if we could do their computer business, they wanted us to do it.”

In 1995, Dale’s company was still growing and still profitable, but still highly leveraged. That’s why he listened when a large national corporation, Alco-Standard, offered to buy him out. “I loved the business and my only headache was the financial aspect, the cash flow. To keep at a 16 percent growth rate, I had to have a good amount of profit and it was hard to remove the leverage,” he said. Alco-Standard grew by acquisition, “buying copier businesses and absorbing them. They came in and bought companies and didn’t change a thing. They didn’t interfere with the way you ran their business.”

After verifying Alco-Standard’s track record with former owners, Dale accepted the offer. “I went from owning my own $6 million company to working for a $6 billion corporation. It looked like a perfect opportunity. They were a cash-rich company and would remove that cash flow headache,” he said. Dale shed debt, stayed in charge of the business he so enjoyed and relished perfection for two years. Then Alco-Standard changed its name to Ikon, changed its operating philosophy, and removed some of the local service and control. “With the new philosophy, they consolidated everything into the metro area,” Dale said. The local “help desk” was closed and trouble calls were routed to dispatchers in the Twin Cities. Response time remained good, because Ikon kept the local technicians. “Ikon’s goal (for response time) was as soon as possible, with a guarantee of not longer than eight hours,” Dale said. “Within the industry, that’s good. I’m not insinuating that Ikon ran a bad business. I met a lot of good people in their organization. It’s just a different philosophy, a different approach.”

However, Dale’s customers perceived a big difference when they found themselves talking to dispatchers in the Twin Cities, who were strangers, instead of the help-desk personnel they knew in Mankato. “There’s just a difference between the metro area and a rural area. We treat things differently out here. The attitude is more personal versus just being a number,” Dale said. “In Mankato, people were used to talking to the same person all the time. They got to know each other, whereas up in the Twin Cities, they might have 20 dispatchers and the phone rang to a different one each time. You don’t build up that personal rapport. The same is true of billing or accounts receivable. That personal touch was gone.”

In the fall of 1997, “Ikon decided they were going to cut the computer division from the Mankato branch because it wasn’t as profitable as the copier side of the business,” Dale said. He told Ikon he felt the move would be a mistake. “We were servicing a lot of computer networks and it wouldn’t be right to tell them they were now on their own. I also didn’t want to see 20 people lose their jobs.” Ikon responded to Dale’s concerns with a question: “Why don’t you buy back the computer business?”

Intrigued by the suggestion, Dale began negotiating a buy-back. The discussions dragged on for months. During the process, an Ikon executive asked Dale what differences he’d found between working for a large corporation and working for himself. “I said we’d been having these meetings for six months to make this decision (on the sale), whereas I could have made the decision in an hour and a half. They asked what if I made a mistake, and I said I could have changed the decision in an hour and a half. In a big corporation, making a decision is like turning a battleship, but in a small company, it’s like turning a speedboat.”

Dale said he’s always trusted his management team with “the power to make mistakes. Therefore they make better decisions. But if they make a mistake, we learn from it, whereas in a large corporation what you learn from a mistake is to find another job. I was surprised to find out how much corporate politics there are.”

He also was surprised at the short-term view publicly traded corporations take toward operations which affect stock prices on a quarterly basis. “They don’t look into the future as much as I thought. They have an obligation to their stockholders. They don’t want them to lose money from quarter to quarter,” he said. “That was one reason Ikon wanted to remove the computer division. I showed them that in two years it would be doing 16 percent growth, but two years was too far out. I couldn’t operate under that day-at-a-time pressure.”

Under Dale’s ownership, CBS strengthened its emphasis on service and cut the response time goal to four hours. “Most of our customers run their whole business on computers. That’s why it’s critical to have a fast response time,” Dale said. “We have calls that we determine to be ‘mission critical.’ If your server is down, your business can’t function. If a work station goes down, that’s not critical. When a (non-local) dispatcher doesn’t understand the customer’s business, you miss that piece.”

In the mid-1980s, part of Dale’s interest in handling PCs came from talk in the industry “about the eventual combining of copier technology with computer technology. Manufacturers were telling us it was coming, that it was just around the corner. As it turned out, we were really looking far ahead because it didn’t happen until 1998 with the digital copier.”

These innovative new machines can be wired directly to a computer or network. They accept electronic output so no original needs to be printed for copying. “Let’s say your document is five pages, printed on both sides, and you need to get it to 10 different people,” Dale said. “You just send it to a digital copier, which prints, sorts and staples it. This is going to be huge! We don’t even sell analog copiers. We feel it’s senseless because a digital copier costs about the same and even if you don’t interface it now, you have the ability to interface it later. So why get an analog copier?”

In the spring of 1999, Dale inspected the new digital copiers and digital printer/copiers at a trade show in Las Vegas and found himself welcomed by the manufacturers he wanted to represent. “We were the exact type of company that they wanted, a computer company with copier expertise. What we’d talked about in 1986 was finally coming about.”

CBS is one of five Hewlett-Packard digital dealers in Minnesota and also handles Minolta and Konica. Hewlett-Packard has introduced a digital printer/copier, a combination which fascinates Dale. “Our thought process was they have been a leader in the print industry for many years, they are so good at printers, and they can only be good at the copier part of the business too,” he said. After the trade show, CBS hired and trained a sales force and “really started concentrating on this. We don’t have a lot of these out there yet, but we anticipate probably placing 15 to 20 of those units (printer/copiers) per month after the first of the year,” Dale said. As usual, service goes with the sale. “We have people who’ve serviced both printers and copiers, so they’re trained and ready.”

If CBS grows as Dale anticipates, it’s going to run out of space in the near future. Ikon and CBS operate now as neighbors in the former Mankato Business Products building, which was split in a remodeling project when he and Ikon parted company. Since Dale owns the building, the continuing success of CBS means Ikon will eventually have to move out.

It’s difficult to discern which excites Dale more these days, the marriage of digital printers with copiers or his return to an ownership role.

“CBS is owned 100 percent by myself and I’m glad to be in that position,” he said. “I have that entrepreneurial personality. I like to make decisions and make them fast. The challenge of it all keeps me going.”

Dale had invested some of the original sale proceeds in Voyager Financial Services Corp., which owns a Mankato bank. The stock has done well, so rather than sell it to buy back his computer business, he borrowed money. But he still carries less debt than he did in 1995. “It’s better than before,” he said. Without the distraction of severe cash flow problems, he’s better able to enjoy the challenges.

“The challenge of doing a good job and building the business really gets my adrenaline flowing,” Dale said. “I’ll never retire. I just couldn’t do it, and that’s not to say I don’t admire people who do it. The other thing that keeps me going is the people I work with. A lot of them I’ve been with for 25 or 30 years. I’ve built a lot of strong friendships with these people.”