Dear Shareholders, Employees, Business Partners and Friends:
When reflecting on the past year, it’s not difficult to swell with immense pride recognizing that 2011 marked a true inflection point in our Company’s history. Moreover, it was a period of time during which we crystalized our vision for SilverSun and began executing a series of high growth initiatives that will undoubtedly serve to define and differentiate our Company for years to come.
To fully appreciate the fundamental progress we have achieved in just 12 short months, some historical perspective is necessary. At the end of 2010, here is a snapshot of where we were:
These were fairly distressing and uncertain times for our Company. So what changed? The simple answer: everything. Fast forward to the end of 2011, and the profile of SilverSun was significantly different and notably better.
It’s important to emphasize that I have the privilege of working alongside a team of amazing, dedicated and talented people, who, by their very nature, refuse to accept mediocrity, much less failure as an outcome to any challenge. We began our remarkable transformation by reaffirming our values and core strengths; evaluating and refining our business practices, our product and service mix and our sales strategies; and executing proactive growth initiatives that would allow us to realize our short- and long-term financial goals and objectives. Here’s the result:
Although we have much to be thankful for and certainly to be prideful of, there is still much hard work ahead of us if we are to fully capitalize on key emerging industry trends in the fields of enterprise resource planning, business intelligence and management applications, and on the numerous growth and expansion opportunities being presented to us on a regular basis. In fact, we are on a mission to grow our annual revenues five-fold from their current level of approximately $10.5 million to more than $50 million in the next 36 months. Here’s how:
Organic Sales Growth
A meaningful contributor to SilverSun’s revenue growth in 2011 stemmed from our principal operating subsidiary, SWK Technologies, Inc., selling and implementing Sage ERP X3 – a robust and scalable Enterprise Resource Planning (ERP) system that effectively integrates all management processes into a single, coherent information system and organizes all internal workflows, while managing exchanges with external partners, including customers, suppliers and subcontractors.
Today, SWK holds the distinction of being among the largest resellers of Sage ERP X3 in North America. We did not earn this distinction merely as a result of our superior sales and marketing efforts. Rather, we believe that it is a consequence of the level of skill and expertise we have mastered in the product itself. I would go so far as to add that our SWK team has the ‘highest’ level of ERP X3 skill and expertise in Sage’s entire reseller channel, as evidenced by the increasing number of consulting assignments we receive from other resellers – and Sage itself- to assist customers in implementing ERP X3 in their businesses
We are very proud to serve as a leading Sage ERP X3 partner with a strong sales and implementation presence in our marketplace, which is complemented by a scalable software development resource for customizations and enhancements within Sage ERP X3. Moreover, as a Sage Authorized Business Partner, Sage Certified Gold Development Partner, Sage Certified X3 Partner and Sage Authorized Training Center, SWK offers a full range of best-of-breed solutions for accounting and business management, financial reporting, ERP, CRM, job costing, EDI and warehouse management.
But our future success will not and cannot depend on simply reselling and implementing these solutions for both our and other resellers’ customers. Our fortune lies in continuing to develop smart, proprietary business management applications that effectively and efficiently integrate with existing business management systems, such as Sage ERP X3; and to continue developing turnkey business intelligence tools and solutions for niche markets that address unique manufacturing and distribution challenges and needs.
The crown jewel of our current proprietary product offerings is MAPADOC, an integrated Electronic Data Interchange (EDI) solution that readily integrates with Sage 100, Sage 500 and Sage ERP X3. Sold both by our direct sales team and a national network of independent resellers, MAPADOC is widely viewed as the highest quality EDI solution of its type, offering the greatest reliability and functionality when compared to other competing EDI products on the market. The number of small to mid-sized businesses using MAPADOC has more than tripled in just the past three years, and we expect that number to grow exponentially – particularly given our recent launch in late 2011 of MAPADOC for ERP X3.
Growth through Acquisitions
As one of the few public companies in our space – and the only public company in the Sage reseller channel – it is our belief that we are uniquely positioned to become an aggressive buyer of other Sage resellers. Underpinning our acquisition strategy are several important goals, including materially expanding our geographic footprint across North America; leveraging scales of economy and eliminating redundant costs in our combined business operations; and positioning our Company to take advantage of emerging trends and changes in the Small- to Medium-Sized Business (SMB) marketplace, such as continued penetration and broad industry acceptance of cloud solutions, which I will discuss later in this letter.
Our marketplace has numerous attractive candidates for our potential acquisition consideration. With some exceptions, the reseller business has historically been a “lifestyle” business. By this, I mean that the entrepreneurs who have founded these companies and operated them successfully have enjoyed comfortable lifestyles, but have not been able to create a liquidity event for themselves to monetize the value they have created in their firms. Because SilverSun is a public company with access to the capital markets, we have the ability to provide that liquidity event, thus providing those business owners with a meaningful liquidity event by paying cash, restricted stock or a combination of cash and restricted stock consideration for their companies.
Suffice it to say, SilverSun intends to aggressively pursue a growth-through-acquisition strategy, targeting both big and small companies that meet our defined acquisition criteria. We have already closed one small transaction in 2012, acquiring IncorTech; and we have announced a letter of intent to acquire HighTower – a much larger acquisition. These are but the first of what we hope will be several accretive acquisitions completed by our Company this year.
But what are the attributes of a compelling acquisition candidate? We are not interested in simply slapping together a hodgepodge of resellers for the sake of saying SilverSun is the “biggest” or “most profitable.” Certainly, geography matters, since we intend to go after and win leadership in underserved markets or those markets where we believe we can successfully compete. Culture matters, since we regard SWK as the finest, highest quality business management consulting firm in the country, and we will only want to acquire those organizations who share our same work ethics, commitment to excellence and passion for placing our customers first. But perhaps the most important criterion for acquiring a company is the fact that it must own proprietary and marketable products that complement our own product mix.
As I mentioned earlier, our proprietary MAPADOC solution is extremely profitable, and this has whetted our appetite to replicate that success with other proprietary products. One of the primary reasons we have pursued the acquisition of HighTower is its catalogue of proprietary enhancements to Sage ERP solutions, some of which enjoy a strong customer following and a well-established market presence. We believe that our experience and expertise in managing these types of proprietary products and bringing them to market, both directly and via a national network of resellers, can greatly enhance the sales and profitability of these solutions.
It should be noted that there are many publishers of SMB software solutions who are not resellers; so they, too, are of tremendous interest to SilverSun from an acquisition viewpoint. To that end, we will continue to seek out and endeavor to acquire those software publishers with quality products that we can then sell through our existing channels. Similarly, we will look to sell our existing catalogue of solutions through the channels that these publishers have created for their own products. In cases like these, 1+1 may very well equal 4.
Delivering Cloud-Based Solutions to Key Vertical Markets
Cloud computing capabilities combined with a Software-as-a-Service (SaaS) business model are fast winning favor with software publishers and end-users, alike. Utilizing this model, end-users are no longer subject to paying large up-front licensing fees – for example, a plain vanilla SMB ERP with ten users can easily cost $50,000, depending on functionality. Rather, under the cloud-based SaaS model, these same end-users might pay an up-front licensing fee of, say, $5000, and then pay a $1,000 monthly user fee. If the end-user elects to stop using the software, they simply stop paying (presuming contractual terms permit on-demand termination of service).
A key benefit of cloud computing is that the software is no longer installed on the end-users’ servers. Rather, it resides on the publisher’s server (or some other host’s server); and the software is accessed by the end-user via the Internet by using a browser on their desktop. This fundamental change in how software is licensed is creative destruction at its best. The software publishers that embrace these changes, like SWK, will be the winners in the coming years. And, those who don’t, or elect to stay on the sidelines, will be left behind.
At SilverSun and SWK, we are indeed cloud believers, and have already published a suite of cloud-based products that are being actively marketed nationwide. Our most successful to date is BeerRun (see www.BeerRunSoftware.com), which is a solution designed to provide craft beer brewers with fully integrated brewery management system. We have also recently introduced BrewPub, an easy to use, intuitive application that helps small brewmasters, producing 500 barrels or more per year, to effectively manage their brew pub operations with a single solution.
Our development plans for further cloud solutions are really very simple. We will identify those vertical markets where we have industry expertise and develop solutions specific for that industry’s unique business management needs to address the functionality gaps that exist within their industry-specific applications. In addition, we will continue to identify gaps in current ERP solutions, and we will plug those gaps with cloud-based products. We have already discovered many such gaps, and are actively conducting due diligence to determine which represent the most compelling market opportunities for us.
Managed Services to Drive Growth in Recurring Revenues
Our Network Services Group provides a full suite of managed services, including 24/7 remote monitoring, data back-up and disaster recovery. A key element of every managed service we offer is recurring revenue: receiving payment each and every month for services rendered, and to receive those payments for years on end. Recurring revenue, in fact, is and will remain a cornerstone of SilverSun’s growth platform. In 2011, recurring revenue stemming from all of our products – not just managed services – totaled $3.3 million.
Moving forward, our Network Services Group will soon be initiating a new recurring revenue stream: software hosting. What this means is that a customer will have its business management software installed on our servers or on servers we lease at certified data centers, or colocations; and they will pay us a monthly fee for doing so. What is the benefit to our customers? They have no hardware expenses. They don’t have to pay IT professionals to manage and support their own networks. And, they enjoy the comfort and peace of mind that comes from knowing their software and data are in the hands of experienced IT professionals who will provide them with mission critical reliability, stability and security.
SWK will be launching this new service in the second quarter of this year, and we are very excited about the growth opportunity it presents for our Company.
Wall Street Recognition and Support
SilverSun Technologies has long been orphaned, unnoticed and unappreciated by the investment bankers on Wall Street. That is no longer the case. Our growth curve, strong balance sheet, proprietary products and services, rational cap structure and our competitive advantages in the marketplace have culminated in winning us the attention of the professional investment community. Since the beginning of the year, I have met with several firms who have expressed interest in providing investment banking sponsorship for our Company, and I expect that we will engage one of these firms in the near future.
Why is this important? First, having a respected investment banking firm advocating on our Company’s behalf is expected to improve the liquidity in our common stock, and heighten awareness and visibility of our Company among both institutional and retail investors. This should, in turn, better position us to raise growth capital at fair market prices in the months ahead, thus empowering us with the financial resources necessary to accelerate our growth and fully execute our three year business plan.
Please note that we can and will execute our plan with or without outside funding. However, with greater capital resources at our disposal, we would be in a position to move quickly on possible acquisitions and support a much more accelerated track for bringing new, proprietary business management applications and solutions to market.
In early May, I’ve been invited to present at Wall Street 1-2-1 Spring 2012, a very unique and innovative conference where I will be meeting, on a one-to-one basis, with 100 institutional investment and investment banking firms. I believe this event, which will be held in Orlando on May 8-11, 2012, will prove to be very successful for SilverSun, and will position us for an advantageous equity funding later this year.
By building on our successes, effectively addressing any perceived weaknesses, and implementing new business development strategies with forethought and purpose, we are confident in our ability to accelerate SilverSun’s future growth and win enduring leadership in the business management solutions and consulting industry.
In closing, I just want to reemphasize how excited I am about the future of SilverSun Technologies. It has been a long, difficult road and we have suffered many challenges and setbacks along the way. Nonetheless, we have persevered and remain committed to nurturing a culture rooted in transparency and innovation; and we are implementing strategies that will empower us to continue scaling our business by attracting amazingly talented people who are inspired to think outside of the box and establish entirely new standards of excellence for our industry.
Finally, I’d like to use this opportunity to give my sincere thanks to our shareholders. We recognize that through your investment in our Company, you are expressing your confidence in our ability to execute; and we take that responsibility to heart and intend to be relentless in our efforts to deliver.
SILVERSUN TECHNOLOGIES, INC.
Chairman, President and Chief Executive Officer
This CEO letter may contain forward-looking statements, including information about management's view of SilverSun Technologies’ future expectations, plans and prospects. In particular, when used in the preceding discussion, the words "believes," "expects," "intends," "plans," "anticipates," or "may," and similar conditional expressions are intended to identify forward-looking statements. Any statements made in this CEO letter other than those of historical fact, about an action, event or development, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors, which may cause the results of SilverSun Technologies, its subsidiaries and concepts to be materially different than those expressed or implied in such statements. Unknown or unpredictable factors also could have material adverse effects on SilverSun Technologies’ future results. The forward-looking statements included in this CEO letter are made only as of the date hereof. SilverSun Technologies cannot guarantee future results, levels of activity, performance or achievements. Accordingly, you should not place undue reliance on these forward-looking statements. Finally, SilverSun Technologies undertakes no obligation to update these statements after the date of this CEO letter, except as required by law, and also takes no obligation to update or correct information prepared by third parties that are not paid for by SilverSun Technologies.