Twelve years ago Tom Carns knew nothing about the quick-printing business, yet today his PDQ Printing boasts sales and margins that dwarf industry averages. How did he do it? He listened. He learned. And he leveraged his most valuable asset: an outsider's perspective
Twelve years ago Tom Carns was a furniture retailer in Lynnwood, Wash., about 15 miles north of Seattle, and the recession of the early 1980s was taking its toll on his business and his life. Though just in his early forties, he decided to liquidate what was left and look around for a change of scene.
His wife, Carolyn, a native of San Diego, suggested someplace where the sun might on occasion show for more than one day at a time. Carns ventured to Hawaii, where he found the recently arrived residents less than receptive to outsiders. He considered California, but that seemed too crowded. His wife then blurted out that she really wanted to move to Las Vegas. Carns replied, "Nobody lives in Las Vegas." They moved on April Fools' Day, 1980.
The move didn't exactly solve Carns's problem of what to do with the rest of his life. After taking a couple of months off, he enrolled in card-dealing school and completed the six-week course that would enable him to facilitate the separation of gamblers from their money. But then it dawned on him that inhaling other people's cigarette smoke and venomous airs as their money ebbed in the direction of the casino's coffers wasn't exactly his idea of fun. On the day he was to report for his first shift of duty at a local casino, Carns simply didn't show up.
By then his mind was turning over another possibility. He knew a few people who ran quick-printing shops, those ubiquitous hole-in-the-wall places where photocopying equipment hums day and night, and the pungent smell of ink hangs in the air. The work was unexciting but steady. Carns, a man with a placid facade that conceals a churning interior, had developed high blood pressure up in Washington, and his doctor had warned him that if he wanted to keep on living, it might be a good idea to slow down. Carns thought that maybe starting a quick-printing business would be a good way to ease into the slow lane.
In June 1981, with $25,000 in working capital, he opened PDQ Printing in a 1,100-square-foot space off a busy Las Vegas boulevard. After netting $82.56 that first month, he worried that maybe he should have taken a nearby 900-square-foot space instead. After all, he wasn't reinventing the wheel. There are some 40,000 quick-printing shops in the United States, and up to 25% of those are franchise operations. The average shop grosses $265,000, with net margins hovering around 8%.
Carns has done somewhat better. This year PDQ Printing will gross $5 million, or about 19 times the industry average. Sales in 1991 rose 18% from the prior year. The last quarter of 1991, a traditionally slow time of year coinciding with a deep national recession, was the best in the company's history. PDQ's net margin now approaches 20% -- or 2.5 times the industry average.
That kind of performance has made Carns a guru of sorts among fellow quick printers looking to learn his secrets so they can turbocharge their businesses. They fly in for intensive two-day meetings, for which Carns charges $3,500. (In 1991 he did 40 such consultations.) He also holds seminars for people who want to get started in the business and bypass the franchise route. This year Carns has 16 seminars booked across the country. He also will be speaking in Australia and the United Kingdom.
So how exactly did all this happen? How did Tom Carns, looking to put the brakes on his life, walk into a low-key, me-too kind of business he knew nothing about and build it into a smooth-running $5-million operation that now clears a cool $1 million a year?
Identifying The Market
A need for custom manufacturing, not commodities Tom Carns owes part of his success to luck. He arrived in Las Vegas when it was just another mildly booming Sunbelt town. Today, a decade later, Las Vegas has 800,000 people, making it the fastest-growing American city of the 1980s. Beyond good fortune converging with better demographics, PDQ owes its rise to the fact that Carns was an outsider who came to his new calling with a fresh perspective. He was a savvy businessman, walking into an industry dominated by craftsmen. That offered him insights many of his established competitors never had. "I did not come up in the printing business," says Carns. "My paradigms are not the same as those that are consistent in this industry."
But fresh insight wouldn't be worth much without some attendant energy, which Carns indubitably has. At 54, he is a thoughtful, persistent, and quietly driven man. "Tom's a very dynamic, aggressive marketer. He watches trends, and he tries new things," says Buzz Warren, owner of Buzz Print, in Overland Park, Kans.
"Tom has this energy level that always keeps him going forward. He knows how to get to the people who will help him get things done," adds Patrick Leamy, a friend of Carns's who heads EconoPrint, in Madison, Wis. More to the point, Carns is thorough. He leaves few stones unturned. When he set about getting into the quick-printing business, he immediately immersed himself in the industry to learn its nuances. To become a successful quick printer, Carns knew he had to be a quick study.
Before he got into the trade, Carns went out and "shopped" every quick-printing shop in Las Vegas -- all 70 of them. He walked into each, looked around, and made copious mental notes. "I watched how they treated their customers, what the business looked like, and how good the quality was," Carns recalls. And he liked what he saw. "Most shops were dirty and disorganized. The people were sloppy dressers. They played loud rock music in the back of the shop. They were definitely lacking in customer service and commitment."
Carns happily concluded that the field was crowded with people in ink-smudged smocks who cared to do little more than apply ink to paper. "This industry is dominated by craftsmen who are not business oriented," says Carns, adding, "there's one thing I know how to do, and that's read a financial statement. There was definitely a place for a sharp, aggressive businessperson." Carns reasoned that the upper end of the market, where professionalism and customer service were important, was wide open.
He then zeroed in on the professional-services market: medical offices, accounting firms, brokerages, and the like. His thinking went as follows:
Just because there are 40,000 quick-printing shops in the country, it doesn't necessarily mean this is a commodity business. In fact, that is a misapprehension Carns believed would work in his favor. He argues that his business is, in fact, "a custom-manufacturing business." Customers' needs vary widely. Many customers, seeing printing as a small part of their operations -- yet reliant on good printing to keep things running -- put great stock in a printer's expertise and professionalism. For that they will pay a premium. Small and midsize white-collar service companies best fit this profile.
But why not larger companies?
Larger companies, Carns figured, work in larger volumes -- and think accordingly. "They don't want the printer to make much money," says Carns. They also might often have an employee whose principal duty is to buy printing services. Smaller companies could not afford such a specialist and thus would be reliant on the printer. Moreover, in white-collar service companies, printing, done right and on time, is more critical to the overall health of the operation than it is in other types of businesses.
Today white-collar professional operations such as doctors' and CPAs' offices, real estate and stock brokerages, and law offices constitute the core of PDQ's customer base. They account for about 75% of annual revenues, with the typical account doing about $4,000 worth of business per month.
The medical market is a case in point of how Carns's strategy to provide a custom-manufactured product rather than a commodity has paid off. Health-care providers routinely drown in paperwork, which they must complete expeditiously to stay in business and survive. As Carns studied that market, he noticed something interesting. Vendors sold complete "packages" to medical practitioners. Those included not only printed matter but software and related services to keep an office running. But then the vendors would disappear, and soon after, the printed forms would run out. Carns realized that certain oft-used forms relating to billing and insurance were critical. PDQ came in and offered to print specialized replacement forms on a timely basis. That filled a pressing need and gave PDQ an immediate toehold in the market. It also provided PDQ with a window on the medical market, so the printer could then appraise what other needs it could fill. Moreover, since workers in the health-care field tend to stay within the industry when they change jobs, PDQ started getting a lot of referral business. Today 20% of PDQ's sales are to medical practitioners. Carns estimates PDQ has as much as 50% of the Las Vegas medical market.
Gathering Grass-Roots Intelligence
Who are the decision makers and what do they want? More recently, PDQ has also made serious inroads into the legal market by filling a simple and very specific need -- the timely photocopying of documents for litigation work. And like PDQ's entry into the medical market, that was the product of grass-roots research.
One day Carns spotted an empty 825-square-foot space in what appeared to be a strategic location -- the ground floor of a prestigious building in downtown Las Vegas. Maybe PDQ could set up shop there? From talking with contacts in the legal field, Carns knew the building was home to four of the five top litigation law firms in the city. He knew litigation required a great deal of photocopying work to be done on short notice and to precise standards, or else the court wouldn't allow it to be filed. Thus, quality, timeliness, and confidentiality were paramount. Price was not.
Now Carns, who had been looking for an opening in the legal market, got interested. He wondered who exactly controlled the flow of copy in a law office. The answer, he discovered, was paralegals. He also discovered that paralegals in Las Vegas had their own professional organization. He contacted the head of the organization and invited her out to lunch. He told her he wanted to meet with her for perhaps two hours twice a month, for two to three months, to learn as much as he could about the market. He was willing to pay $500 for each consultation.
By the time those meetings were done, Carns knew plenty about the legal profession and its printing needs. He devised a brochure whose cover was stamped with the word confidential in bright red letters, since that issue, he learned, was of paramount importance to lawyers. He attached a copy of a document that all PDQ employees were obligated to sign when they began working for the company, agreeing, under threat of dismissal, that they would keep confidential all documents they handled. He then had his lawyer draft a one-page document, holding PDQ itself liable for any breach of confidentiality. Last, he made it known that PDQ's facility would have a shredder, ready to devour any flawed or mangled copies.
Carns then saw to it that one of those packets landed on the desk of every paralegal and every partner in every law firm in downtown Las Vegas, days before PDQ opened its legal-services division. Meanwhile, Carns discovered that paralegals in Las Vegas had a monthly newsletter. He offered to redesign it and print one issue for free, in exchange for an exclusive ad in its pages. In early January 1991, the PDQ blitz hit in the form of the redesigned newsletter and the PDQ brochure, reinforced with the offerings of a local baker Carns had lined up. Every day for four weeks, boxes of doughnuts -- compliments of PDQ -- were delivered to the city's largest litigation firms, which Carns had dubbed PDQ's "10 most wanted." (Those firms account for about 80% of the litigation work done in Las Vegas.) By month's end PDQ had landed all 10 accounts.
In its first full month of operation, February 1991, PDQ's legal-services "division," operating three photocopying machines out of an 825-square-foot space, grossed more than $64,000. For all of 1991, it generated $600,000 in revenues, or more than twice the volume of the average quick-printing business in the United States.
Getting The Message Out
Bucking industry norms with advertising and sales efforts Back in the 1960s, after graduating from college, Tom Carns got a job selling advertising for the Los Angeles Times. That experience convinced him of the value of advertising and, even more important, the worth of advertising consistently.
Within a month of PDQ's inception, Carns was advertising in local media -- something he has done with undying regularity to this day. He employs a broad media mix, using local broadcast and print as well as a healthy dose of direct mail. PDQ's ads stress image, not price. Last year PDQ's ad budget was 4.5% of sales.
Advertising consistently and aggressively, Carns believes, tells the world you exist -- a critical element in the crowded quick-printing business, where customers are accustomed to searching out copy shops as the need arises, and customer loyalty is far from a given. Carns knew PDQ couldn't just open its doors and expect people to show up -- which is precisely the premise that most quick-copy shops operate on. Those shops do little advertising -- and they certainly have no outside sales force.
Having an outside sales force in the quick-printing business is almost unheard of. PDQ, however, has had one since its first month of operation, and today it numbers seven people. Carns recently hired his brother, Rick, who used to own a copy shop, to be PDQ's sales manager. Unlike most sales managers, Rick Carns spends little of his time behind his desk. Most of the time he is in the field with PDQ's sales force, calling on customers.
"Most quick printers are not successful at outside sales because they don't understand what sales takes," Carns claims. "Even if they get around to hiring outside salespeople, they usually don't tell them much more than, 'Go out and sell some printing.' "
Carns argues that successfully selling something as basic as printing requires as much product knowledge, initiative, and persistence as selling supercomputers. On his desk he has a small sign that reads, "Nothing happens until after the eighth call." Carns explains that bit of wisdom this way: Most salespeople stop calling after three calls. Most buyers will not buy until the sixth call. If you make at least eight calls, then you have outperformed the competition, and it's likely you've softened up the most reluctant of prospects. But equally important -- and less understood -- notes Carns, is this: "If you make eight calls on a prospect, then it will take someone else at least that many calls to get that prospect away from you." One of PDQ's major clients, required 24 sales calls before signing up with the printer, but Carns knew the account was worth the effort. Today that client does $70,000 worth of business each year with PDQ.
The doggedness of the sales force at PDQ mirrors Carns's methodical persistence. When making a cold call (always in person), a PDQ salesperson simply introduces himself or herself to the receptionist (the gatekeeper) and asks for the name of the person in the company who buys printing (the prospect). Upon returning to PDQ that afternoon, the sales rep leaves the names off in the print shop. The next morning at 6 o'clock, PDQ's pressmen arrive for work and print up sheets bearing the gatekeeper's and the prospect's names, along with PDQ's logo. The bindery workers arrive by 8, when they glue the sheets into notepads and shrink-wrap two sets of three, along with the salesperson's card. The salesperson arrives at work by 9 o'clock, picks up the personalized note-pads, and drops them off at the prospective client's company that morning.
The salesperson then follows up with a phone call two or three days later to ask if the prospect received the notepads. Then the rep asks if he or she can come in and talk, some days hence, not to sell anything but to determine the prospect's needs. A few days later the salesperson returns with a written proposal detailing how PDQ might be able to help. If the prospect demurs, then the PDQ salesperson simply asks, "May I be backup printer on your next job?" Notes Carns, "No one has ever said no to that."
By now PDQ has developed a mailing list of 10,000 names, including virtually every business in the city, to which it tries to send PDQ's bimonthly internal newsletter. In October PDQ had a monthlong 2¢-per-photocopy sale for volume users. That was a means to identify large copy users and then follow up with sales calls. As a result of the sales, notes Rick Carns, "we picked up 12 sizable accounts and 6 more we are likely to get."
Every PDQ employee who does not come into daily contact with customers must go out with a salesperson one day per quarter, while once a year each salesperson visits half a dozen competitors' operations to discern what they might be up to. Each week salespeople write thank-you notes to customers who have recently placed large orders. Carns himself used to do that, until the business grew too big.
Gaining instant competitive advantages Two months after starting his company, Tom Carns went to his first industry trade show. The National Association of Quick Printers (NAQP) has two meetings a year. One is its annual convention and trade show. The other is a midwinter series of seminars. Carns hasn't missed any of those semiannual meetings since he started his company.
Carns, a past president of the NAQP, finds such sessions ripe for intelligence gathering because they're intensive and filled with people from noncompeting markets. "You talk with people at breakfast or the cocktail hour. It's a great way to learn a lot. On top of that, for obvious competitive reasons, if you talk to printers from Cincinnati, they're going to tell you a lot more about their business than printers from Las Vegas would."
At the 1982 convention Carns saw a manufacturer's thermographic printing press that produced raised letters on the printed page. He was pretty sure no one else in Las Vegas had such a press. He bought one. "We automatically did every letterhead and business card that way at no additional charge," says Carns. "That was the first thing that really differentiated us from the local competition." In 1983 PDQ's sales rose by 73%, largely because of the acquisition of that one piece of technology.
Over the years at industry conventions, Carns has gotten to know a handful of like-minded, fast-track quick printers. Two years ago Carns and seven other large, successful quick printers formed the TIP (Top Instant Printers) group, which convenes quarterly at different members' businesses to exchange ideas. Last year the group began conducting intensive top-to-bottom audits of each member's company on a rotating basis, to gauge how well the individual business was being run. Carns says the TIP group has been a great boon to his business, for obvious reasons. "Say we hired a Big Six accounting firm to look at our company, but it doesn't really know the industry. The help and knowledge I'd get from seven of my peers really can't be matched by someone coming in from outside the industry."
After the first audit, of Patrick Leamy's quick-printing business in Madison, Wis., Carns realized that finding and keeping good people was a concern in an industry with historically high turnover (45% to 50% is not uncommon), and it was an issue he hadn't really addressed. He hired a full-time director of training with a degree in human resources and beefed up PDQ's training program so it lasted a month and included a number of quizzes. "It really hit me over the head back in Wisconsin that no one's goal in life is to enter the quick-printing business, and there are fewer and fewer quality people to select from. So if we spent the money up front to hire the right people and train them well, then maybe we'd end up cutting turnover." It seems to have worked. Carns estimates that PDQ's annual turnover is only 10% or so.
Meanwhile, Leamy was so petrified by the prospect of his peers picking his business apart that he started looking at his operation two months before his fellow TIP members arrived for the audit. "I was able to cut $90,000 off our yearly overtime bill," he says.
The obvious but missing ingredient Sitting in his office one day, Tom Carns leans forward on the couch, and with disbelief rising in his voice, says: "Sixty percent of all the printing that is done in America is either screwed up or late. What an indictment of an industry! There's a printer in Las Vegas with a sign that says, 'This is not Burger King. Here you get it my way, or you don't get it at all.' Can you imagine?"
PDQ does what it can to see that customers get it their way. In a room at PDQ, a row of loose-leaf binders sits atop a set of filing cabinets. Those binders contain a copy of every form PDQ has printed for every one of its commercial accounts. Each form is numbered and indexed on a master list. The customer gets an identical book and a master list, so when running low on a certain form, he or she can simply call up PDQ and ask for a refill by job number. Conversely, PDQ keeps track of the quantities ordered and the dates they're requested; that way, if there is an abnormal interval between orders, PDQ can call customers and ask if they're perhaps running low on a certain form.
PDQ also assumes responsibility for proofreading customers' jobs before they go to press -- virtually unheard of in the industry. "Other quick printers make customers come back and proof jobs," says Carns. "Look, you don't go to a restaurant and have the waiter come out and say, 'The chef is ready to put your steak on. Do you want to come into the kitchen and see if it's being done right?' " Besides, he adds, "customers are terrible proofreaders to begin with."
Carns says that PDQ has always striven "to operate on the same level with our customers. That means not having them step down to deal with us." Assuming responsibility for such key tasks as proofreading, typesetting, and design affirms that sense of equality. Running a business where employees dress neatly and no radios blare from the back of the shop reinforces it.
PDQ is nothing if not solicitous of its customers. With every job, it sends the customer a survey dubbed "Two Sides to Every Story." "In it," says Carns, "we tell our customers that we try to do things right and on time. The form has a blank side, with prepaid postage on it. We ask customers to give us their side of the story. 'What are your needs?' "
Every December PDQ also does its "defense defense" sales calls. "We go out in person to our 150 largest customers, thank them for their business, and ask how we can improve things," says Carns. "We ask them one other key question: 'What kind of printing are you buying elsewhere that you're not getting from us?' " A few years ago Carns found that "continuous forms" was cropping up frequently as the answer to that question. "So we bought a short-run continuous-form press in December 1989." Today PDQ sells continuous forms to 60% of its commercial accounts.
A New Paradigm
Professionalism and technology Tom Carns knows he couldn't have picked a better time and place to start a quick-printing business. Yet what is truly odd is that he seems to have spawned so few imitators. A year ago the commercial quick-printing industry had its trade show in Las Vegas. How many of the other 150 local quick printers besides Carns attended? None.
Carns believes not only that he caught local competitors flat-footed but that the quick-printing industry remains ripe for professionalization. "I think in the years ahead you'll see more people with M.B.A.'s getting into this industry because the level of competition is so low," says Carns. "It remains an industry of mom-and-pop outfits, yet with the electronics and computers now available, it's potentially very dynamic."
As evidence, he points to the 120 quick printers with whom he has formally consulted -- many of them highly successful. How many of those had ever written a business plan? One. Writing a business plan was one of the first things Carns did before starting PDQ.
Tom Carns could probably take PDQ on the road and set up shops in other cities. But he has no plans to expand beyond three locations and beyond the Las Vegas city limits, to be sure. He would rather strengthen his position simply by running the business better.
He'd also like to see it grow a viable arm based on his accumulated knowledge of the industry. This year Carns plans to kick himself out of his office and step up his consulting and seminar work. "I'd like to help other people get into this business." That will keep the business vital and help him stay in touch with others in the industry. It will also be a way for Tom Carns to avoid getting stale as he did a decade -- and a lifetime -- ago up in the Northwest, when he had no idea that a midcareer crisis could turn out quite like this.
Research assistance for this article was provided by Martha E. Mangelsdorf.