500 Main Street
SBS leverages the expertise gained over more than a half century as a business-to-business market leader to accomplish its value proposition of letting customers buy when, where, and how they want, from experts who know their business, understand their needs, and simplify their office operations.
New England Business Service, Inc. (NEBS) is a leading supplier of office products and business services in North America. The company's product line includes business forms, checks and banking supplies, labels, envelopes, business stationery, cards, and calendars, and a wide range of office equipment and other supplies. NEBS also provides promotional printing, logo design, and payroll services. NEBS was acquired by Deluxe Corporation in 2004 and operates as part of Deluxe's Small Business Services group.
Catalog Sales Reach More Customers: 1952-70
NEBS had its start in 1952, when Al Anderson, a forms salesman based in Cleveland, Ohio, became aware of the lack of customized forms in the small quantity and reasonable price range that would make them accessible to the average small business. Instead, small retailers, beauty salons and barber shops, electricians and plumbers, and other small service businesses often used their rubber stamps on generic carboned forms. Anderson decided to fill this business niche. Because of the scattered nature of the small business market, he decided that direct-mail marketing would be the most efficient and least costly way to build his company. Moving to Townsend, Massachusetts, he assembled a selection of business forms manufactured by a variety of outside printing companies, put together a brochure, and mailed it. He focused his sales efforts on smaller companies with 20 or fewer employees, that is, customers for whom buying custom-printed business forms was usually unrealistic because of the large print-runs per form required from most printed form suppliers. The idea was a success; orders came pouring in and by 1955 Anderson had moved NEBS out of his backyard barn into real office space. He also hired Jay R. Rhoads, Jr., to help handle the business side of his growing forms business. By 1968 NEBS was posting $3.5 million in net sales. The 90,000 active customers for its products were serviced by 163 full- and part-time employees.
Printing Capabilities Provide Key to Expansion: 1970-80
In 1970 Anderson retired, leaving CEO Rhoads to expand NEBS's marketplace. Working closely with his brother, Richard H. Rhoads, now company president and director, Rhoads planned for an ambitious expansion of the company. Realizing that the average customer purchased only a limited quantity of any one form during a given year, NEBS concentrated on the efficient management of large volumes of small orders. The company could soon pride itself on a six-day forms turnaround schedule. Because of its ability to respond quickly to customers depending on it for the forms they used in their day-to-day operations, reorders quickly reached a rate of more than 70 percent of sales volume.
A crucial element of any major growth, Rhoads realized, was ending NEBS's reliance on outside vendors to provide its base forms. With printing capabilities of its own, the company would be able to capture wholesaler profits as well as the retail markup it currently earned. By 1973, with 315 employees and net sales of $11 million, NEBS expanded its customer base to 258,000, thereby reaching the point where it could absorb the overhead of its first large-run high-speed printing press. With the addition of the press, NEBS expanded its Townsend office and warehouse facilities, upgraded its computer system, and began expanding its product line.
Over the next few years Rhoads also would set up printing plants in Peterborough, New Hampshire, and Maryville, Missouri, to better serve NEBS customers on a regional level. In addition, through the 1976 establishment of office and production facilities for NEBS Business Forms, Ltd., in Midland, Ontario, the company expanded its sales territory into the English-speaking regions of Canada (bilingual forms would be marketed beginning in 1985). This expanded sales territory, growing far outside the New England region to encompass both the United States and Canada, was aided by the introduction of a toll-free 800 number for phone sales. By 1981, 40 percent of the orders for NEBS products were received by phone.
In October 1977 NEBS went public with an offering of 50,000 shares of common stock; the company would be listed on the NASDAQ beginning in December 1980. With sales now passing $30 million and a customer base that included more than 411,000 small businesses in both the United States and Canada, 1977 would be a banner year for the company. However, it was only the beginning of a major growth spurt. As its customer base grew by 41 percent to 700,000 very small business firms by 1981, net sales followed suit, reaching $79 million by the end of fiscal 1981. Although the inflationary national economy had impacted these sales figures, NEBS's actual growth could be measured by the 1,300 employees now promoting and producing its products. Company estimates, which put "real" growth in 1981 at 9.7 percent, reflected the company's corporate restructuring activities and capital expenditures in anticipation of further expansion. The NEBS Forms Division, which accounted for the largest percentage of both sales and profit, had become an independent operating entity in 1980. Corporate offices, in search of more space, were relocated to Groton, and plans were implemented for the construction of a manufacturing plant in Flagstaff, Arizona, to better service customers in the Western states. In 1981, NEBS also made a three-for-two split of its common stock to encourage additional investment in the company.
Changes and New Markets: 1980-90
As the company progressed through the sluggish 1980s, its project development program remained its primary focus. Alerted early on to the possible proliferation of computers in small businesses, NEBS began serving the needs of those firms investing in first-generation computer technology. Custom-printed continuous forms, perforated into pages and lined by "pin" holes for use with dot matrix printers, became a top seller for NEBS, which offered small companies competitive prices and fast service. In addition, the 1984 acquisition of the Santa Clara, California-based Devoke Company allowed NEBS to offer its customers special-purpose computer furniture as well.
The market for computer-related products would begin to level off in mid-decade, a lull after the storm of PC installations in the small business market. This slowdown caused NEBS to divest itself of its Devoke subsidiary by the end of the decade. In addition, the company worked to restructure and adjust its product mix in an effort to battle the increasingly stagnant office supply market that characterized the late 1980s. In 1986, for instance, after a year of relatively flat earnings, NEBS implemented several programs to make its order entry and production processes more efficient. An automated order entry system was initialized, thereby decreasing the turnaround time for customer orders. Combining this with other restructuring and cost-containment measures and a 7 percent reduction in staff, the company was able to report another banner year, increasing earnings by 30 percent to $16.89 million.
In addition to expanding its product line, the company continued to expand its market. Its Canadian subsidiary entered the French-speaking Quebec market in 1985, offering a line of bilingual forms modeled on the traditional NEBS line. In 1988 NEBS opened an overseas division, entering the office forms market in the United Kingdom as NEBS Business Stationery. Headquartered in Chester, England, this division marketed a complete selection of forms and other office products throughout Great Britain and Northern Ireland. Domestically, DFS Business Forms, a network of independent dealers, was implemented as a means to further increase visibility and market share among very small businesses.
Small retail operations proved to be an especially lucrative niche for NEBS, which provided everything from bags, tags, and signage to preprinted sales slips, company check systems, and labels. Products also were made available on recycled paper. Another cause for optimism was the continuous increase in government-imposed regulations of small business enterprises in both the United States and Canada. An increasing bureaucracy would generate increasing numbers of forms, some of which NEBS could provide. As accounting software systems began to be adopted by small firms, NEBS created and marketed compatible forms under its NEBS Computer Forms division. Checks, invoices, statements, and purchase orders were designed for compatibility with software vendors such as Quicken, Peachtree Accounting, Open Systems, and DacEasy. Estimating its potential customer base at approximately five million small businesses in 1980, NEBS would see its share of that base grow to almost 25 percent by the end of the decade.
Personal Computers Posing a Threat to the Future
Ironically, the computer technology that had sparked NEBS's expansion in the early 1980s was threatening to undermine it by the 1990s. The proliferation of desktop publishing software, color laser printers, and "designer" papers allowed even simple home-office businesses to produce sophisticated letterheads, forms, business cards, and labels on a PC, bypassing the need for the custom printing services that NEBS provided.
In response, the company began to enter the software market in the 1990s. In addition to continuing to offer forms compatible with the major accounting software packages then on the market, NEBS developed Form Filling, a software package designed to eliminate tedious setup of computer-generated forms. Form Filling was competitively priced and marketed along with a broad range of forms that included payroll check systems with detailed stubs, all of which were available as laser or dot-matrix forms.
Early in the decade, NEBS acquired SYCOM, Inc., a Madison, Wisconsin-based marketer of custom business forms to professional offices. Marketed both by mail and phone, SYCOM forms provided the company with a specialized product geared for accountants, attorneys, dentists, and other professionals in the healthcare field. In January 1993 it also would acquire rights to the One-Write Plus software developed by MECA Software, Inc. Through this acquisition the company gained both a distributor network and a skilled sales and service staff for the popular, easy-to-use general ledger software package. One-Write Plus would be managed through NEBS Software, Inc.
Fluctuations in the nationwide small business economy, which had boomed during the 1980s, would tend downward in the early 1990s. During 1991 alone a Dun & Bradstreet report showed that small business failures had reached 43 percent, and the number of new small firms opened during the year rose only 3 percent from 1990. In 1990 NEBS reported net income of $20.6 million; only two years later it would see that figure shrink to $15.47 million. By 1993 net income reached a record low: $14.2 million on sales of $237.1 million to more than one million small businesses.
In an attempt to combat lackluster sales and dropping earnings, NEBS developed a new product line, aggressively pursued its custom forms market, and reorganized its distribution network. Although the market for manual forms had begun to contract, due in part to both the adoption of computerized accounting systems and the proliferation of technologically enhanced electronic point-of-sale equipment, management also recognized the need to more actively promote these forms, which they viewed as a "point of entry" into the NEBS product line. The DFS Business Forms dealer base, expanded to include the growing number of office supply "superstores," renewed their efforts to market NEBS software to computer peripherals retailers. The company also began a telemarketing program, combining catalog mailings with customer contact by phone. In 1993 the company's 2,217 employees were able to serve the needs of more than 1.2 million small business customers, with a 48-hour turnaround time between order receipt and shipment.
More Colorful Palette Revitalizing Lackluster Sales in the 1995
NEBS achieved banner success in 1995, with sales for the company's domestic operations alone reaching $241.8 million. Net income for 1995, which had begun a slow rebound from its 1993 low, reached $16.3 million on total sales of $263.7 million. Part of the reason for the turnaround was a cost-reduction program implemented by the company that resulted in the layoff of 100 employees. In addition, the company decided to close its SYCOM subsidiary, integrating that company's operations into their NEBS counterparts.
Much of the credit for the company's financial turnaround also was given to the introduction of "Company Colors" forms and stationery. Responding to customer demand for more image-conscious printed products without the expense of custom printing, NEBS created desktop papers, as well as coordinating letterhead, business cards, and forms, all using a palette of the five most popular two-toned color combinations. This program would be modified into NEBS Colors in 1996. Another factor contributing to overall growth in 1995 was the introduction of the Page Magic desktop software package, along with a line of coordinating paper products. In addition, many of NEBS's most popular manual forms were redesigned to achieve a more contemporary look.
During 1995 the company also formed an alliance with Kinko's, Inc., a successful photocopy center with more than 750 branches located throughout the United States. In an effort to generate new forms business for the company, NEBS placed custom printing consultants into 22 selected Kinko's copy center locations, where they could help customers design custom business forms, brochures, and other stationery items. These orders could be immediately sent to company printing plants for quick production and delivery. Unfortunately, the partnership did not produce the desired results and the company closed these custom-printing desks in September 1996.
Looking to the Future of Small Businesses
From its beginnings as a producer of preprinted business forms, NEBS continually transformed itself to meet future challenges. Rededicating itself as "The Small Business Resource" in 1996, the company released several CD-ROM products designed to help entrepreneurs plan, structure, and finance their fledgling business operations. Increased resources were channeled into the expansion of mailing lists and development of Success Reference Guides, an enlarged catalog and small business resource system that includes the company's complete product line. Reengineering was begun on NEBSnet, a computer graphics workstation that enhanced retail customer orders. The company furthered its future focus by introducing www.nebs.com, a web site organized around business advice and product promotion.
During fiscal 1996 NEBS continued its efforts to adapt to a changing small business climate. Meanwhile, the December 1995 retirement of CEO Richard H. Rhoads ended a combined 25 years of leadership by the Rhoads brothers. Under the new leadership of incoming CEO and President Robert J. Murray, the company effected a new organizational structure and rededicated itself to the direct marketing of forms and related office products for small businesses. Such refocusing efforts included directing NEBS resources toward software distribution rather than more costly software development. Selling its One-Write Plus software to Peachtree Software Inc. in early 1996, NEBS retained distribution rights and an exclusive marketing agreement for One-Write Plus-compatible forms.
The company's organizational restructuring would prove costly in the short run. By the close of its fiscal year in June 1996, NEBS reported net income of $11.929 million; further setbacks were suffered after the company was ordered to pay a pre-tax charge of $5.2 million after closing its satellite sales desks in Kinko's retail copy centers. But the establishment of a Business Management group to engage in strategic policy and product development and an increased level of operating efficiency boded well for the future. By 1996 the company had a working relationship with more than 25,000 retail dealers, representing only 10 percent of the total private label business forms reseller's market. NEBS's decision to grow retail outlets through its DFS units marked this market as the focus of future growth for the company.
During this time period, NEBS continued to be aware that its overall performance was directly related to the health of the small business community, both in the United States and elsewhere. And that community was ever changing. The ubiquitous PC streamlined accounting methods, while shifting consumables caused NEBS to refine its product mix continuously. The increasing sophistication with which small business owners planned their promotional strategies--through creativity, professionalism, and the development of a striking and unique image--directed the company's efforts in promoting its forms business. Continuing to market its products to the ten million small businesses and more than 20 million in-home offices throughout the United States, Canada, and the United Kingdom, NEBS increasingly focused its marketing efforts on retail, although the direct mail of repeat orders continued to be the company's primary area of profitability. With almost five decades of experience within this expanding market, NEBS remained uniquely qualified to profit from the long-term trend toward increased small business ownership.
A New Owner in the New Millennium
During the late 1990s, NEBS diversified its holdings through a series of acquisitions. The purchase of Chiswick Trading and its industrial packaging products line in 1997 was expected to bolster sales by $45 million. NEBS also purchased U.K.-based Standard Forms Ltd., McBee Systems Inc., and RapidForms. In 1997, profits increased by 56 percent over the previous year. Two years later, the company partnered with WebNow.com in a venture to offer its customers web site design and web hosting.
The company's strategy to add new customers, increase its product line, and branch out into new business areas continued in the early years of the new millennium. In 2000, NEBS added promotional apparel manufacturer Premium Wear Inc. to its arsenal in a $38 million deal. The company also purchased a stake in Advantage Payroll Services. By increasing its interest in the company over the next several years, NEBS was able to add payroll services to its burgeoning array of business services. Safeguard Business Systems Inc., a company that sold business products to more than 600,000 small businesses in North America, was purchased in 2003 for more than $70 million in cash.
In order to cut costs and shore up profits, NEBS made a series of restructuring moves during this time period. It combined the operations of McBee Systems and RapidForms to create the Integrated Marketing Services Group division. It also consolidated its offices in Canada, closed a plant in Virginia, and cut approximately 45 jobs. By this time, NEBS had caught the eye of Deluxe Corp., a check printer and marketer. Deluxe had left the catalog industry in 1998 to diversify into electronic payment services. Its expansion efforts had failed to pan out, and it was looking to gain a foothold in the catalog sector of the business market once again. Sure enough, Deluxe made a play for NEBS and acquired the company in June 2004 for approximately $745 million in cash and assumption of nearly $160 million in debt.
For NEBS, Deluxe served as an anchor for long-term growth. At the same time, Deluxe hoped to capitalize on NEBS's product line and its large customer base. Overall, Deluxe was able to serve an additional three million customers as a result of the union. Deluxe chairman and CEO Lawrence Mosner commented on the purchase in a July 2004 Catalog Age article, claiming, "There are 23 million small businesses in the U.S. The combined Deluxe/NEBS business serves almost 25 % of that number, plus there's tremendous opportunity for growth."
After completion of the deal, NEBS was positioned as the cornerstone in Deluxe's Small Business Services (SBS) group. Deluxe sold NEBS's operations in the United Kingdom and France and also set plans in motion to sell the PremiumWear subsidiary. Overall, SBS supplied more than six million small business customers with a wide variety of office products and services. While long-term success of the NEBS/Deluxe union remained to be seen, NEBS appeared to be well positioned for future growth.
Chiswick, Inc.; McBee Systems, Inc.; NEBS Business Products Ltd. (Canada); NEBS Payroll Service Ltd. (Canada); PremiumWear, Inc.; Rapidforms, Inc.; Russell & Miller, Inc.; Safeguard Business Systems, Inc.; Safeguard Business Systems Ltd. (Canada); VeriPack.com, Inc.
John H. Harland Company; Office Depot Inc.; Staples Inc.