Trm Makes Millions A Nickel At A Time

People thought Edwin S. Chan was crazy. In 1984, at 52, he was managing more than 80 branches of Copeland Lumber Yards Inc. But he had no equity and little room for advancement. So Chan ended his 27-year career to take over a struggling business that ran about 100 copy machines in small Oregon stores. For Chan, who received equity--but no salary--for the first six months, the transition was a shock: "I had been managing a $100 million business, and now I had to make money a nickel at a time," he recalls.

This year, his TRM Copy Centers Corp. should earn more than 50 million nickels, or more than $2.5 million, on revenues of $30 million. Portland-based TRM now has 14,000 copiers in 34 cities in the U.S. and Canada. After it went public last November, raising $13.7 million, its stock shot from 8 1/2 to 16. It now trades at around 14 1/2, 31 times expected earnings.

The concept is unlikely: Small retailers pay TRM $95 to install a used, refurbished copy machine in their stores. Customers make their own copies at 5 each. TRM provides repairs and supplies and collects a percentage of sales. On average, the retailers keep 24% of the proceeds and benefit from increased traffic.

NOT SO SIMPLE. CEO Chan, who immigrated from Canton, China, at 15, brought sophisticated operating systems to TRM. He automated billing and started rebuilding copiers in-house. By 1988, he had turned the company around and launched a rapid expansion that led to 30% annual growth. High volume keeps costs low. In fact, TRM buys paper, toner, and parts at lower prices today than it did in 1984. It centralizes billing, collection, and service-dispatching, and uses only two models of copiers, so repair personnel carry just a few parts.

TRM's only competitors are local stores, which can't match such economies, and coin-operated machines, which are more expensive and less convenient. "The company looks pretty simple on the surface, but it's really a rigorous, tough business," says Seattle investor Frederick O. Paulsell, who is its chairman and largest stockholder.

TRM is No. 74 on BUSINESS WEEK's 1992 list of Hot Growth companies, and Chan is targeting 50 additional U.S. cities for still more growth. He estimates the total U.S. market at more than 40,000 copiers. TRM is also experimenting with color copiers, charging 39 a copy. That's risky, because new color copiers are costly, and used units are still rare. He also plans to put copiers in London.

Of the three founders--whose first names begin with T, R, and M--only one remains with the company. Matthew J. Shawcross, 29, was 19 when he and his friends stumbled across the 5 copy idea as a way of using surplus trade-in machines from their dealership. His TRM stock is now worth nearly $3 million. Chan's holdings are worth $8.3 million. No doubt about it: Leaving the lumberyard was the right move.

Before it's here, it's on the Bloomberg Terminal.