Employees buy out Central Office Systems

When five long-time employees of Central Office Systems purchased the company from founder Stan Cozzuli this summer, they knew the New Berlin-based office supply firm was a sound investment.
However, they didn’t anticipate that their investment would pay off so quickly.
After about three months of overseeing all of the company’s operations, Central Office Systems’ revenues have increased by 200 percent.
The five owners, each of whom manages the department they work in, said the addition of sales manager Rob Lyons, who started with the company in May, has been a key component to that growth.
"A big part of that (growth) is Rob, who worked with us before," said Herb Schrank, the company’s warehouse manager and one of the five partners. "When we sought out a sales manager, we knew it should be someone who knew our customers and knew how our operations worked."
Even though the decision to hire Lyons was made before the company was officially purchased by the group, it was one they arrived at together, like all major changes the company has made since the new ownership team was formed.
"We all have our own specialty," said Kathleen Simonis, one of the partners who is also the company’s business manager. "The large capital things we work on together."
Central Office Systems has been in business for more than 30 years, selling office equipment such as photocopiers, fax machines and scanners, as well as maintenance and supplies for those machines.
The company has been at its 6,000-square-foot New Berlin location for about one year after moving from a Brookfield location.
All five of the company’s new owners said the comfort level they have with each other after working together for many years was one of the attractions to purchase the business from Cozzuli earlier this year.
Perry Bartkiewicz, one of the owners selected to serve as the company’s president, said the diversity of the ownership team’s areas of expertise is critical to the firm’s success.
"It’s more of a family type of business," Bartkiewicz said. "And since last September, we have been real involved in the whole picture of the business, the flow of revenue and product. We were kind of running the business since last October."
Simonis said having the department managers take a more active role in the day-to-day operations at Central Office Systems was one of the factors that led them to think about making an offer to Cozzuli to purchase the company.
"We were able to make it more profitable month to month," she said. "We saw that we could do it ourselves, and we approached Stan. We saw that he was ready to turn the company over."
Although Cozzuli has sold the company, he has stayed on as an employee in its sales department. While he doesn’t work every day, Charles Jewell, a partner who works as the company’s marketing director, said the former owner is serving an important role.
"Stan is still involved in the business, and that’s important for us," Jewell said. "He has a lot more experience than we have. And sometimes we’ll pass things by Stan. A lot of times, what looks like a golden egg will be rotten on the inside."
While the sale of the company was completed July 1, it was not something that came about quickly. The five partners proposed the sale last December.
Each needed to come up with about $20,000, their share of approximately $100,000 they would use as a down payment for the company.
The partners declined to disclose what they paid for the company, but said they were able to purchase it though a U.S. Small Business Administration loan and financing through Waukesha State Bank.
Jewell said all of the partners had to expose themselves to a bit of risk with the company acquisition, but the roll of the dice was the right decision.
"Our necks are long and thin," Jewell said. "But with 200 percent growth, it’s worth it."
The company is expecting about $2 million in revenues for 2004, Jewell said.
The new partners also had to take on some liabilities with the purchase of the business, Simonis said. Specifically, one-year maintenance contracts that were signed before July 1 were seen as a liability because money had been taken in, but the company was still obligated to send workers and parts for machines needing service within the contract period.
Simonis and other partners said the purchase was made as easy as possible because the new partners and Cozzuli used the same accounting firm during the acquisition process.
"They made sure everything balanced out, and no one felt cheated in any way," she said.
Bill Berkhahn, the fifth partner and service manager, said having the same accountant on both sides ensured that all details of the transfer were worked out seamlessly.
"We were closing on a Friday, and we were here until midnight on that Wednesday," he said. "We were looking at all of the last little details until the last moment."
The ownership transition has been relatively seamless for the company’s employees and its customers, Simonis said.
"We sent letters to specific vendors and anyone we’ve had contacts with," she said. "And with most of our customers, it’s been verbal, because it was a friendly acquisition."
Even though the change was made as smooth as possible, a few changes have been made throughout this year.
Aside from hiring Lyons to head up the sales team, several other sales specialists were hired, helping to increase the firm’s sales numbers, Jewell said.
One of the specific areas in which the company has seen an increase has been through the sale of a new product, the Konica/Minolta Business Hub C350, a color and black-and-white copier that also scans, prints and collates.
"We’ve got more order placements than any other dealer in southeastern Wisconsin," Jewell said.
New owners
Central Office Systems recently was purchased by a group of five department managers who have a combined 76 years of service with the company. They are:
* Kathleen Simonis – Business administrator, has been with the company 20 years.
* Bill Berkhahn – Service manager, has been with the company 17 years.
* Charles Jewell – Marketing manager, has been with the company 17 years.
* Herb Schrank – Warehouse manager, has been with the company 16 years.
* Perry Bartkiewicz – Company president and service manager, has been with the company eight years.
October 1, 2004, Small Business Times, Milwaukee, WI