Forced to Reinvent

Forced to Reinvent

UPDATE by Sean Roth | Real Estate Editor

Ask Peter Turo what it's like when your professional service becomes a commodity. He knows first hand.

It didn't happen overnight, but Photo-Tech Inc., the Sarasota business-event and corporate-incentive photography company, experienced just such a transformation. From 2004 to 2005, the company's revenue fell from $6 million to $4 million. The 20-year-old company took on full crisis mode, and Turo, Photo-Tech's president, needed answers.

A little more than a year later, the company is still adjusting to increased competition. What's more, still more changes lie ahead.

In general, the advent of cheaper and cheaper digital photo equipment has made consumers devalue the services of professional photographers, says Martin Turnau, Photo-Tech vice president and chief administrative officer. Simultaneously, with that shift, Fortune 500 companies started cutting back on motivational events, for years a staple of Photo-Tech's sales. Turnau says that business fell 50%.

"Early in the year, one of our main clients that we had worked with for almost two decades slashed its budgets," Turnau says. "We also started noticing that instead of the dealing with the creative personnel, who were designing the promotions, when it came to the final discussions on price, the purchasing department had final approval. I'm not sure if it was strictly related to spending problems at Enron or WorldCom, but companies started looking at their spending extremely closely."

How do you reverse such a free-fall?

Photo-Tech's executives decided to reinvent the company as less a provider of photography into more of a full-service sales incentive company, one that helps create a company's incentive awards, plans incentive events and trips and provides all of the trophies, plaques, photography, videos and other mementos that are part of the package.

Internally, this means Photo-Tech has been redeploying its staff out of post-production photography and photo-album production and into learning all aspects of incentives planning and management. It also means Photo-Tech is likely to have staff stationed beyond Sarasota.

In turn, this shift produced another byproduct: Turo decided to sell the company's 24,000-square-foot, glass-encased headquarters building on Fruitville Road in Sarasota. Ian Black Real Estate is listing the award-winning glass-walled and exposed-metal building for $7.7 million, or about $321 a square foot. Photo-Tech officials say the company likely will relocate into one of four smaller buildings Turo plans to develop on land less than a block away from its current offices.

"We aren't downsizing, even though we are moving the staff," Turo says. "We use about 8,000 square feet in this office, and we will take about that same amount in the building next door."

On-site images

"Because of the move to digital photography," Turo says, "we find that our clients want instant gratification. Maybe it's something to do with the hamburger generation; they want everything to be immediate. But with smaller printers we are able to send a technician to print the photos at the location. The photos are also uploaded to our server via a Web site so they can be shared back here, or anyone attending the event can download the image and e-mail it to people."

Having an employee at its customers' sites to handle photo processing - a function previously performed in the company headquarters - adds to Photo-Tech's costs, but Turo says the cost is fairly negligible. As technology improves, Turnau says, labor costs will be decreasing because the company can hire less-skilled workers. A more significant expense is actually shipping the image manager's equipment to the client's site. Shipping printer equipment internationally also adds a layer of logistics.

"A lot of the countries find it hard to believe we would spend as much as we do to ship in these commercial printers for just a few days of work and then ship them back," Turo says. "They think we're importing them. The hardest country right now is Mexico. But that's the cost of doing business."

The shift to being more of a mobile provider appears to be worth it, Turnau says, because the on-site services are bringing in more clients.

Expanding in Europe

One area showing particular promise is Europe. Turnau says the company is considering pushing up its timetable to open a European office.

"It may be the perfect time," Turo says. "We are especially attractive because of the exchange rate; [European clients] get the equivalent of a 30% discount. It is really the perfect climate to expand there."

Certain European countries also offer the company access to labor far cheaper than it can find in the United States for trained industry specialists such as graphic designers. Later this year, Turnau expects to register a public entity so the company can do business in Poland, Turo's birth-country.

Domestically, Turo says, the company is considering opening offices in such markets as Philadelphia, Atlanta, Phoenix and New York. In its first year with 10 offices, Photo-Tech estimates the company could generate about $20 million in revenues. By the fourth year, the company is projecting gross revenue of $26 million to $27 million.

People powered

But such growth will require people, including more photographers. Turo says to this point the company hasn't decided how many new photographers it will hire, but even as the digital era is making photographers more of a commodity service, he still sees that his firm will need between five and 15 per location.

"We are still trying to determine how we can best find these people," Turo says. "We are already training people in our existing facility that we think will eventually train people in each field [office]. It really makes no sense to bring them here."

Altogether, Turo expects his company's staff could grow to 250 employees. Today, Turo says, "I can walk out my door and make sure everyone is on the same page. Larger organizations can be a headache."

But the choice is either that or watch his traditional photography business go the way of the buggy. "We are no longer in the photography business," Turnau says. "We're in the business of helping corporations motivate employees. We will just use photography as a skill to do that."

And likely, he says, they'll do that under a name that is more about motivation than photography.

The Office Next Door

Peter Turo, president of Photo-Tech Inc., owns about 4 acres on the east side of the Julie Rohr Academy on Fruitville Road in Sarasota. Turo says he has permits to build four buildings totaling 35,000 square feet of office space. Photo-Tech will likely occupy just one about 8,000-square-foot building.

"Right now we are looking for enough pre-sales to take it to the bank," Turo says. "Otherwise the buildings are all pretty much ready to go."

Tampa architect Angel del Monte of Alfonso Architects, the same architect that designed the existing Photo-Tech building, designed the four buildings. They also will be in a similar glass-heavy modern style.

By the Numbers

PHOTO-TECH INC.

Year Total Revenue

2002 $3.8 million

2003 $5 million

2004 $6 million

2005 $4 million

2006 $4 million*

* Estimated