business

St. Cloud-based Marco Inc., which sells, installs and manages networked voice, data, video and print solutions, doesn't hold patents, manufacture anything or offer unique products.

So how does the company distinguishes itself from competitors?

Primarily through its 350 employees, CEO Jeff Gau said. Happy employees, the Marco philosophy goes, make for better business.

When it comes to a happy workplace, it might be hard to top this: Marco, which is 100 percent employee-owned through an employee stock ownership plan (ESOP), returns 100 percent of its profits to employees.

This year they will receive about 15 percent of their income in Marco shares, $2.5 million total, through the profit-sharing program, Gau said.

"We're reselling other people's products, so our differentiation really comes from one place, and that's the people that walk in this front door and go to work every day," Gau said. "We've worked hard to create a great place to work, and we'll continue to do that. The ultimate benefit is when you share the ownership and distribute the profits to them."

Marco employees must largely agree: The company ranked fourth among the 45 small companies in the Star Tribune's recent 100 Top Workplaces 2010 survey published in June.

Marco launched its ESOP in 1989 and has been wholly employee-owned since 2001.

Revenue dipped to $60 million last year but should be up perhaps 25 percent this year to more than $70 million, Gau said. Profits were strong in both 2008 and 2009, despite the recession.

Recurring revenue, in the form of managed services and maintenance agreements, accounts for about half the company's sales. Marco did fewer corporate projects during the recession, as construction dried up and companies put off spending. But demand from private colleges and other educational institutions and governmental agencies was relatively steady during the downturn.

Marco, which has 13 locations in North Dakota, South Dakota, Minnesota and Iowa, is growing organically and also began making acquisitions during the downturn to help it expand into new markets. The company, which is debt-free, used cash to complete the acquisitions.

Acquisition strategy

The company has closed three deals in the past 12 months, Gau said. Those include a company in Sioux Falls and another in Rochester that has locations in Mankato, La Crosse and Decorah, Iowa. Gau said the company is interested in making further acquisitions in South Dakota and Wisconsin and is looking for deals in new states such as Nebraska.

The company was founded in 1973, Gau said, when founders and former IBM salesmen Dave Marquardt and Gary Marsden bought a typewriter shop in St. Cloud. (A separate division that was started in the late 1970s, Marco Workplace Interiors, sells $5 million in office furniture and design services a year.)

Adaptability has been a theme ever since. Marco evolved as technology has advanced from typewriters to word processors to PCs and as networking began linking computers, phones, printers and copiers and video feeds.

"I always say we paid the dumb tax," Gau said of the company's pioneering move into networking in the mid-1980s. "We lost a lot of money getting into that business, but today you look back and it was an investment in staying the course. The copier business funded our staying power. It was probably a decade before we started to see the results of that investment, but today networking is the hallmark of our company."

One way Marco gauges employee happiness is by surveying its workforce. The company, which enjoys low turnover, has been conducting employee satisfaction surveys for 22 years, using internal resources and writing questions the company has developed itself instead of outsourcing the work.

"We invest a lot in validating that our employees really do like this as a place to work," Gau said. "Everybody claims they have the best people. I like to see it validated sometimes. I'll put my report card up against anybody's because you know what? I've got one. Having a report card, having a point of validation helps, and our customers want to know we're just not talking about it."

Speaking of customers, Marco also has been conducting frequent customer satisfaction surveys since 1994. If a customer responds negatively to any of the 12 questions on the survey, the sales rep has 24 hours to get in touch and "start the recovery process," Gau said.

"We recover them almost 100 percent of the time," Gau said, adding that he's returned six-figure payments to customers "to make it right. That's really painful. But you get to keep the customer for life."

Choosing Marco's managed services program for the computer hardware and software and printers she buys from the company was "one of the top three business decisions I've made," said Toni Thulen, CFO of Orion Associates, a management services company in Golden Valley.

"We were in dire need of technology expertise," said Thulen. Orion has 120 computers in 25 locations, most of which Marco manages remotely. "It wasn't a good business decision for us to hire our own IT person internally. It made all the sense in the world to go with Marco. I've found them to be a company with a lot of integrity."

Deanna McLean of Old Dutch Foods Inc. in St. Paul said the company has bought and is leasing a number of copier/printers from Marco.

"They're very nice individuals and they don't try to sell us stuff we don't need," McLean said. "Their service techs are by far the best I have ever worked with."

The expert says: P.J. Voysey, a business management and turnaround expert who formerly headed a Twin Cities-based information technology company, said Marco's recurring revenue model is smart business and smart customer service. Marco gets regular, predictable cash flow and customers get regular, predictable costs.

"I would encourage them to be passionate about incorporating even more services and offerings into managed services," Voysey said. "I would set an ambitious goal to increase it to 65 percent or 75 percent of revenue."

Happy, engaged employees, Voysey said, "are like gold because they will care about clients. It's good that Marco has created a positive work environment. It's great that they are verifying both ends of the chain by surveying both their employees and their customers."

Todd Nelson is a freelance writer in Woodbury. His e-mail address is todd_nelson@mac.com.