Can We Save the Custom Install Business?

John - You have just seen what I have been dealing with for years. Back in the 80's we had a profitable business model - currently not so good. We have to do 10 times as much business to make the same profit we did in the 80's. The manufacturers are at the root of the problem as they are always chasing volume and the internet and mass market is the only way to achieve those huge numbers quickly. We chose to use mfg. who do not allow internet sales and are not in the mass market outlets. We only sell TV's when we can make a decent profit. Otherwise we tell clients to purchase where they like and we will install the specified sets (at a profit). Same w/Apple TV. On a whole system we will include Apple TV at a markup. We don't recommend Apple devices as primary remotes only secondary access units - at this time. It will take a major change with mfg. to change the market and I don't see that happening. In the meantime we do business with people who want a finished high performance reliable system and personalized service.

Can We Save the Custom Install Business?

Many of your points are true. Stop crying, and do something about it. Custom installation corporations can beat the big outlets by creating a one stop portal/website for the good of all. You can do this by using generic hd home theater domains to consollidate all the worlds of HD. They are up for acquisition. Let the big guys come to you. This will not only save the custom Installation business, But it will prosper in the new worlds of Internet TV. Richard Roberts Twitter username: ushometheater

Can We Save the Custom Install Business?

John, Very well said. Hopefully, there will always be a small group of people that want the service and expertise of experienced CI, but it's getting more and more difficult to make any real profit on equipment. Combine that with the economy and it's no wonder that so many companies are closing their doors.

Can We Save the Custom Install Business?

Coming at this from the opposite point of view (a manufacturer), this is an interesting topic for me to see play out. Because we design particularly "high-end" products, I run into a lot of resistance from potential dealers (both traditional storefront retail and integration) to bring our prices down or receive a lot of feedback from these same people that they "have no customers that would buy things" in our price range. This fear of larger price tags and the potential buyers that go with them seems odd from a group that has been bemoaning shrinking margin for the past two or three years. Years of demand for less expensive products that are “easier to sell” or spec have resulted in products that naturally offer lower price points at the expense of margin. Add to that the expectation of a new feature set or technology year after year and you’ve also got a customer base that won’t spend a lot of money on anything that they expect will be obsolete in a year. Yet these same people are often willing to spend more for a product that isn’t perceived to be a commodity if they’re simply exposed to it. A decade or more of trying to broaden customer appeal and growth by offering bundles of less expensive product solutions has resulted in a customer base that has grown to expect low prices because that’s where the industry has pointed them. The lower the price point, the less room for margin for the manufacturer, so the Big Box store that can move hundreds of units in a specific locale each month is preferable to the local integrator/retailer who can possibly move a dozen and thus justify and pay for the R&D necessary to produce the over-performing product to begin with. Because the Big Box store has more than just that one locale – they’re national – they have both the quantity buying power to dictate or negotiate very low retail prices in order to earn market share as well as the sales numbers to insure that a tiny margin on each will still equal a good overall profit in the long run. You can’t compete with these guys and shouldn’t try. I understand that in the world of expensive electronics as an alternative, we occupy a space that's near the very, very top as regards price points, but we’re not the only company out there offering a channel for potential profit: a number of other companies are more affordable than we are yet still upscale enough to offer a good margin per unit. A number of manufacturers exist with substantial margins outside of the flat screen TV world, but because we’re in a different product category that’s not video-based we’re disregarded as frightening and unsaleable at our price points. Why would the customer who once purchased a $15,000 plasma TV now be unwilling to purchase an $8,500 or $24,000 amplifier or any other like product? These products have good, stable margins and the upscale end of business has been affected MUCH less than the entry- or mid-level. In addition, we also intentionally limit distribution in order to discourage discount and mail order retailers from killing margin for our chosen partners. We have a much greater customer loyalty and retention rate because what we offer is perceived as unique or special and makes the customer feel catered to rather than one of 10 appointments on a Thursday. And we won’t be changing SKUs on you every 10 to 12 months. Just a little food for thought….

Can We Save the Custom Install Business?

I very much admire your willingness to tell it like you see it, John. Like you I am a grizzled veteran (34 years) in this business. I clearly get where you’re coming from. But, I recently experienced something that both inspired and prompted me to recall the start of my career. I would like to share it with you. At last month’s CEDIA Expo I again paid my dues to the business that helped me put my kids through college while allowing me to do the work I love, by teaching a couple of classes. While walking from my hotel to the convention center early on Wednesday morning I found myself thinking, “I can’t wait for my 100 level Home Theater class to be over.” I couldn’t imagine there was anyone in our community that didn’t have the material permanently embedded in their head. I was certain that even if there was someone who didn’t know this stuff, no one could possibly want to learn about (what felt like) an outdated discipline. Hell, as I opened the door to the convention center I just wanted the week to be over. So imagine my surprise when I got to the room at 7:25 AM, 35 minutes before the start of the class, only to find half a dozen fresh faced students already seated. By the time I was set up and ready to start there were close to 60 excited people looking up at me! As I polled the room I learned the longest tenure in our business was one guy with five years under his belt. There were a couple in the two-to-three year range, and the rest were under 18 months! I couldn’t just ignore it, so I said: “The majority of you entered this business AFTER the recession started with a clear knowledge of the home building business being under water. What is wrong with you?” The clear and resounding answer offered by one attendee was echoed by the others. “We saw opportunity and excitement, and we’re making a decent living – that’s more than a lot of people can say.” I then spent the following three hours having my eyes re-opened to the power of enthusiasm and being re-charged up by the boundless energy that flooded the room. Every one of those folks was certain they were in the best place they could possibly be. They all saw nothing but opportunity in front of them. Not one of them expressed any concern whether the business model was sales of goods or services. Lest you think the room was filled with kids packing little or no experience in the real world, my students that day had all enjoyed previous careers as bankers, HVAC specialists and other fields before deciding that custom installation had something to offer. So I’ll ask you this: what is it that allows two people to look at a desert and one sees barren land while the other sees an orange grove? And, with the above experience fresh in my mind I’ll gladly play the contrarian and answer your question with this: many of us “veterans” seem to have lost the feeling we had at the beginning. Along with that positive emotional involvement, we’ve let slip the energy and enthusiasm so essential to success, replacing it with a misplaced nostalgia that can only beget negativity. Perhaps the way to save our business is for old worn out guys like you and me who have lost their zeal for the business to step aside. Maybe we should make room for a new generation of energetic, hopeful entrepreneurs who see only opportunity, regardless of the odds. Or, perhaps, in spite of them. For my part, I’m going to embrace my epiphany of September 22 and spend more time connecting with the optimists among us. I’ll gladly leave the fretting over “it ain't the way it used to be” to those content with failure.

Can We Save the Custom Install Business?

The business plan must change, but there is still CI business to be had. And that business can still be quite profitable. No one is going to gross 5K to 7K on a 50" PDP ever again though.... Sad, isn't it.

Can We Save the Custom Install Business?

Thank God Finally someone is finally seeing and saying the same thing I am... Manufactures are lowering margins and quality. They are throwing less tested and standardized equipment at us and saying,"here, install this...it should work!" Consumers are hunting for lower prices and getting them from desperate "companies" taking anything to get money and not really pricing the jobs correctly and then hacking the job up. This is completely devaluing what we do by ruining the consumers experience with our services and making them unwilling to "do it right" with better companies. We fall in the middle of all this crap trying to make sense of it all and doing the countless hours of service calls and troubleshooting WITHOUT GETTING PAID A DIME FROM EITHER. We do it because it's a challenge or because we like it but in the end, that doesn't make money. I'd rather throw my money away at a strip club getting drunk and pretending the girls "are into me" than to have a nagging customer standing over my shoulder looking at me like I am an idiot because I can't get his HDMI picture to work when his "friend did his own system by himself and had no problems!" I was in the field for years and now I have been in the office for years. I get the excitement of "getting it to work" and seeing the excited look on the customers face...but now I see the more important side of MONEY! We can't make money when the conditions are as they are now and getting worse. The industry is imploding on itself and soon it will be like any other trade industry. I use electricians as an example...There are only a few big, reputable, reliable companies that focus mostly on the bigger jobs and not so much the smaller residential, move an outlet, jobs. Then there are the "Chuck-in-a-truck" guys that don't have the structure or organization, constantly missing appointments, leaving the last 5% of the job undone, not returning phone calls, and pissing people off. All because they HAVE to pack in as much as they can just to cover bills and put gas in the tank. I have worked with both during my years in this business. I am not picking on the quality of their work...I just see how the monster eats you alive! I have whined enough, See you at the strip club!

Can We Save the Custom Install Business?

I was part of the Custom Electronics industry for over 13 years. Six of those years I owned my own business. For the last 2 years I've worked as a business analyst in a completely different field. Although the industry is different the issues facing the custom electronics industry a very similar to those facing dentist. Yes, that's right, dentist. Most dentist like most owners of custom electronics and installation business are enamored with the technical side of the business. This is what they know and understand. They often believe that new technology is going to save the day. The problem is that they know nothing about the business of dentistry. They measure the success of their practices by the number of new patients (customers) and the amount of production (revenues) the practice is producing. As John mentioned, many custom electronic dealers are realizing what many dentist are now realizing, they are having to work harder and harder to make the same or many times less. One of the most fatal flaws for any small business is the that revenues/production = profitability. Without truly understanding their numbers, most dentist believe if they just produce more they will make more. The truth is that unless they have a solid cash flow system and really understand their numbers, a dentist with revenues of 1 million will make less than a dentist with revenues of 600K. This scenario is no different for custom electronics industry. Commodity is another term effecting both dentistry and custom electronics. Everything is based on price first and value often times doesn't even make the top 3. Patients and customers think everyone does the same type of work and they just want the cheapest price. Of course Apple doesn't have this problem. Apple has loyal customers because they concerned about the ownership experience, not just another transaction. Apple isn't setting records numbers for profitability just because they make great products. They deliver an exceptional experience. There are four ways you can grow the profit of a small business. 1. Decrease Expenses. (How well do you know how much it is currently costing you to run your business?) 2. Work more hours. (Ever hear anyone brag about working more hours? If you are not controlling expenses than you are working harder and making less.) 3. Increase Price. (Ever tried doing this without increasing your value?) 4. Increase Value. (What can you do to increase the experience or emotional take away customers have when working with your company?) Start with 1 and then work on 4 each and every day. If you are not working on your business, than your just working in your business. You end up owning a job not a business. (E-Myth, Michael Gerber). There is always room at the top for those willing to provide and exceptional, reliable, and predictable experience to each customer they choose to work with.

Can We Save the Custom Install Business?

Tissue please. I have been in the A/V industry for 30 years and have seen many changes as well. I don't fully agree that the only people that will be interested in our expertise will be the uber-wealthy. If the only choices for in home services will be the cable guys, phone company or geeks, then there is obviously room for some sort of step up entity. I think there is room to build a servicing entity that is considered a step up from the other guys. Band width, accessibility and speed will become key in residential systems as more and more services are delivered via the internet and someone needs to be able to shuffle, configure and educate. Maybe our new business model is less equipment oriented and more "personal technology consultant" based.

Can We Save the Custom Install Business?

Thank God Finally someone is finally seeing and saying the same thing I am... Manufactures are lowering margins and quality. They are throwing less tested and standardized equipment at us and saying,"here, install this...it should work!" Consumers are hunting for lower prices and getting them from desperate "companies" taking anything to get money and not really pricing the jobs correctly and then hacking the job up. This is completely devaluing what we do by ruining the consumers experience with our industry and services and making them unwilling to "do it right" with better companies. We fall in the middle of all this crap trying to make sense of it all and doing the countless hours of service calls and troubleshooting WITHOUT GETTING PAID A DIME FROM EITHER. We do it because it's a challenge or because we like it but in the end, that doesn't make money. I'd rather throw my money away at a strip club getting drunk and pretending the girls "are into me" than to have a nagging customer standing over my shoulder looking at me like I am an idiot because I can't get his HDMI picture to work when his "friend did his own system by himself and had no problems!" I was in the field for years and now I have been in the office for years. I get the excitement of "getting it to work" and seeing the excited look on the customers face...but now I see the more important side of it, MONEY! We can't make money when the conditions are as they are now and getting worse. The industry is imploding on itself and soon it will be like any other trade industry. I use electricians as an example...There are only a few big, reputable, reliable companies that focus mostly on the bigger jobs and not so much the smaller residential, move an outlet, jobs. Then there are the "Chuck-in-a-truck" guys that don't have the structure or organization, constantly missing appointments, leaving the last 5% of the job undone, not returning phone calls, and pissing people off. All because they HAVE to pack in as much as they can just to cover bills and put gas in the tank. I have worked with both during my years in this business. I am not picking on the quality of their work...I just see how the monster eats you alive! I have whined enough, See you at the strip club! Dean

Can We Save the Custom Install Business?

John, I have followed your articles over the years, but this one really hit home. Your points and observations are dead on. I have been in the business for about 20 years and have watched the business I love steadily move in a direction thats makes it increasingly difficult to make a living in. We are always looking at ways to deversify, but our core business has been hit hard for the reasons you pointed out. If you discover a solution, I'm all ears.

Can We Save the Custom Install Business?

John, I have followed your articles over the years, but this one really hit home. Your points and observations are dead on. I have been in the business for about 20 years and have watched the business I love steadily move in a direction thats makes it increasingly difficult to make a living in. We are always looking at ways to deversify, but our core business has been hit hard for the reasons you pointed out. If you discover a solution, I'm all ears.

Can We Save the Custom Install Business?

John, You bring up a number of great and valid points, points that are dramatically affecting the custom installation industry. I was at the CEA Industry Forum for the past couple of days and from most folks perspective, the future is in connectivity and interoperability, not necessarily selling product. According to one source, less than 10% of connected TVs are actually connected. I would be willing to be that those 10% were connected by a custom installation professional and not the end-user. What do you think the solution(s) is? How can suppliers, distributors, etc. help the installer? What can they do to keep the industry alive?