ATM Sales and Service

By Story By Jan Falstad Photos By Larry Mayer - 09/13/2008

Jerry Magnuson, president and CEO, left, and national sales manager Bob Carr are shown above with ATMs at Wellington Technologies in Billings.

Home of the best business ideas come from fixing the glitches in an existing technology. In the case of automated teller machines, it's the repairs.

That's the philosophy of Jerry Magnuson, who used his experience programming and selling ATM systems at First Interstate Bank to start his own company, Wellington Technologies.

In 14 years, the Billings start-up has zoomed from a total income of $250,000 a year to income expected to top $4 million this year. Magnuson started his company in 1994 — with a $14,000 loan from his mother-in-law — because he was frustrated with not having a smaller, less-expensive and reliable ATM to sell.

In the early days, the machines that spit out cash cost between $20,000 and $30,000, and another $1,500 a year for a service contract.

"One technician drove from Missoula to Kalispell at $150 an hour, so the bill came to $1,000, and it turned out to be a phone line problem, not an ATM problem," Magnuson recalled. "So he left and the customer still didn't have a machine that worked." Wellington Industries, an unassuming business tucked away in a small suite off Overland Avenue, sells and services 700 ATMs, adding about 20 each month.

"We're a little bitty, local guy with some big accounts: Town Pump, Kwik Way, Stop and Go in North Dakota and Fearless Farris in Idaho," Magnuson said.

Fearless Farris was the name of the man who started the convenience-store chain. The polio victim was so named because he ran his business from an iron lung.

At the bank, Magnuson earned a hefty salary and was the only sales rep on commission.

"I just decided I wanted to run my own company," he said.

First Bank of Mom-in-law While complaining to his mother-in-law in Denver one day about not finding reliable ATM machines, she suggested that he start his own company. He said he would if he had the money. She said, "How much?" "She wrote the check right then, and I had no idea what I would do," he said. "It scared me to death." After months of research, he found Green Link Inc. in Dallas, which makes small ATMs that can be fixed by the owners most of the time. The Texas manufacturer has since added some custom features to the machines Wellington Industries sells: a tilt alarm and an uninterruptible power supply, to counter the increasing frequency of power brownouts or blackouts.

"If you can plug in an electric light, plug in a phone cord and use a screwdriver and pliers, you can repair this machine 90 percent of the time with the help of our tech services," said Bob Carr, Wellington's national sales manager.

The Odyssey 1000 ATM holds 1,000 bills and costs $2,874, including freight. The Odyssey 2000 holds 2,000 bills.

Businesses that buy a machine can make money on just 31 transactions a month. But that isn't what usually happens. ATMs sold and serviced by Wellington average 100 to 120 transactions per month. At an average transaction fee of $2.50, that means the merchant can earn $250 a month or $3,000 a year off ATM fees.

But for casino owners, those profits skyrocket.

Under Montana law, gamblers can't charge their bets on a credit or debit card, but they can walk over to an ATM and get cash. Casinos see on average 2,000 to 2,400 ATM transactions per month for a yearly take of up to $62,000.

"It's a huge revenue stream," Magnuson said.

And the fees vary widely. Safeco Field in Seattle charges $10 per transaction.

Folks who feed their plastic card into an ATM used to take out an average of $60 per withdrawal and then immediately spend 30 percent of that at the business. But that has changed.

"People are taking out more money. Not $60, but $100 or $200, which lowers the transaction cost," Magnuson said.

And by putting the ATM by the door, an owner can double the transactions, he said.

‘No blame' staff meetings Wellington employs eight full-time people, and one of the techs is on call 24 hours a day, seven days a week. Every Monday morning, the company holds a staff meeting that is "no blame, just identify and fix the problem." Since the techs will have to work with a customer for a minimum of five years, or the duration of the parts warranty contract, Magnuson said he turns down 25 percent of the businesses that apply.

"Some companies just treat all vendors rudely. Why would I put my employees through that?" he said, adding, "The (ATM) industry does have a reputation of having some not very nice people in it." When someone at one local business was rude, Magnuson responded quickly, telling the owner: "I'll buy your ATM back. This isn't working, and you're obviously not happy." Magnuson owns most of the shares in the company, and most employees hold stock as well.

His mother-in-law's grub stake of $14,000 has been paid back and then some.

See ATM, Page D3 "She's made a tremendous amount of return," he said.

Billings boasts another ATM business, ATM Express. This company was co-founded by Neil Clark and Marty Ambuehl, who started working at Wellington before going his own way.

"In August, we became the largest ATM provider in the United States, with 2,800 units covering all 50 states," Clark said. "We can live anywhere. We're just real good for the local economy." Eighty percent of Wellington Industries' sales are done over the Internet, and the ATMs are mostly placed out of state. In August, Magnuson signed a contract with Green Link to handle all of its service calls in Billings, so the Texas manufacturer can concentrate on making ATMs.

A screen tells the owner what part is broken or which system isn't working, minimizing on-site repairs.

"We process 9,000 transactions a day, and our guys are often playing basketball during work," Magnuson said. "And the more they play, the happier I am because I know I don't have any machines with trouble." Jan Falstad is the business reporter for The Billings Gazette. Contact her at jfalstad@billingsgazette.com or 657-1306.