MEBANE — Three years ago, ARCA took the bold step of blowing up the way it sells its cash-handling machines to banks and credit unions, shifting from a network of bank equipment dealers to an in-house sales force.
When the results generated by its new 12-member sales force proved disappointing, ARCA took an even more radical step: It blew up its sales process all over again in mid-2012.
Overhaul No. 2, which counterintuitively involved creating a sales team that includes staffers who aren’t directly involved in sales, proved to be a winner. The revamped sales effort, combined with a booming market for its machines, enabled the company to ship 3,300 units for the 12-month period that ended in August, nearly twice the 1,700 units it shipped in the prior 12 months.
“I always believed it would give us incremental improvements,” founder and CEO Mort O’Sullivan said of the company’s new sales model. “But it’s even better than I imagined.”
Indeed, ARCA made the latest Inc. 5000 list of the nation’s fastest-growing privately held companies, coming in at No. 4,999. The company’s sales rose 35 percent to $32.7 million in the 2012 calendar year, and O’Sullivan projects that revenue will jump 65 percent this year.
But the enhancements aren’t limited to the company’s revenue numbers.
The cost of acquiring a new customer has been reduced by about 40 percent. And the sales cycle has been shortened from an average of 15 months to between five and six months, O’Sullivan said.
The increased business has by necessity pumped up the company’s staff, which has expanded from 69 at the end of 2012 to 86 today. O’Sullivan anticipates the employee ranks will swell further to 100 by the end of the year.
O’Sullivan, 41, founded ARCA – the original name was ArcaTech Systems – in 1998. He previously worked at a company that sold software used by the banking industry.
Today O’Sullivan estimates that ARCA is the No. 2 maker of cash dispensers and cash recyclers machines with about 40 percent of the market, up from a 12 percent market share in 2010.
A cash business
ARCA makes cash dispensers and cash recyclers, machines the size of an office copier, that it sells under its own brand as well as equipment that others – including Diebold, Burroughs and, in Canada, IBM – sell under their names. It also makes components that Toshiba Tec uses in its point-of-sale systems.
Cash dispensers, which employ the same technology used by ATMs, are used by banks and credit unions to dole out cash to customers as a way of boosting efficiency. Among other things, they speed transactions and reduce time devoted to balancing the cash drawer at the end of the day.
Cash recyclers, meanwhile, are two-way machines that take in cash as well as doling it out. They allow bank tellers to focus on engaging customers – and, most critically, cross-selling – rather than counting cash.
Cash recyclers store bills in a secure safe, reducing time-consuming trips to the vault. They also serve as a deterrent to robberies if the branch posts a sign saying, “Our associates have no direct access to cash. All cash is auto-dispensed.”
ARCA’s cash dispensers range from $15,000 to $25,000; cash recyclers start at $25,000 and can cost as much as $40,000.
ARCA touts that it has a wider array of machines than its competition, including market leader Glory Global Solutions.
“We’re not less expensive,” O’Sullivan said. “We don’t compete on price.”
A team approach
In January, the First Capital Bank of Texas, a community bank with seven branches in three Texas cities, installed an ARCA cash recycler in a newly built branch in Lubbock. It was so pleased with the results that it has since installed two others and has three more on order, said George Reeves, executive vice president and chief operations officer at the bank.
“They are fast. They are accurate,” Reeves said. “They reduce a lot of man-hours.”
First Capital’s tellers routinely count the money twice in any cash transaction, said Reeves. But those that work with the ARCA machines – two tellers can share a machine – don’t count the bills once they’re dispensed thanks to the machines’ accuracy.
“We give it directly to the customer without recounting that money, and we haven’t had any losses,” Reeves said.
Nor do the tellers count the money in their cash drawer at the end of the day. “They just lock the money up and leave their workstation,” Reeves said.
When ARCA embarked on its second overhaul of its sales efforts, the company began with a methodical, step-by-step breakdown of the sales process.
The startling conclusion: Most of the steps didn’t really require salespeople at all. Instead, they involved activities such as analyzing a prospect’s operations and goals, then ascertaining whether ARCA’s technology can help them reach those goals. That process, “depending on the size and complexity of the opportunity,” can take a few weeks or even a few months, O’Sullivan said.
The upshot is that although the company’s overall sales effort continues to be handled by a 12-member team, just two of those team members are salespeople. The others include project directors that analyze whether ARCA’s technology makes sense for a prospect – the answer isn’t always yes – and sales coordinators that handle everything from the salespeople’s calendars to coordinating the efforts of project directors and the company’s technology team.
“We created a more cohesive team approach to sales,” O’Sullivan said.
Goodbye, sales commissions
Another major change was the elimination of sales commissions.
“The salespeople became salaried employees, just like every other employee at the company, and we pay them as if they are hitting all their (sales) targets,” O’Sullivan said. “Now, they are focused on meeting customer needs, doing what is best for the customer. And they no longer have to worry about commissions.
“I actually think our customers can perceive that difference,” he added. “Our salespeople are truly more like consultants than salespeople.”
Right now the market for ARCA’s machines is robust, thanks in part to pent-up demand from banks that had to rein in spending during the recession, O’Sullivan said.
ARCA’s customers to date have been mostly community and regional banks. But the company is talking to the national banks.
“They are looking at it right now,” O’Sullivan said. “The bigger banks typically want a more customized solution. It takes them longer to make a change to their processes than a smaller bank might take. They are much more methodical about rolling out a technology that will change the way their branches operate. I do think it will come.”
O’Sullivan estimates that there are 28,000 to 35,000 cash dispensers nationwide, and fewer than 10,000 cash recyclers. That’s not a large number, he notes, in comparison to the number of bank and credit union branches nationwide – O’Sullivan has seen estimates ranging from 120,000 to 180,000 – and given that a single branch can use two or three machines.
“We’ve got less than 10 percent market penetration today,” he said.