Print this document
By Ira Friedman August 3,2011
Simple Strategies for Companies That
are Shrinking, Stagnant, or Growing
Ira Friedman is the CEO of Bay Audio, a
manufacturer of custom speaker solutions.
He holds an MBA from the Harvard Business
Here’s a given: the market is going to be
tough for the foreseeable future. Now
what? Let’s split the problem into three
segments based on the recent history of
your company, and I’ll offer a simple
strategy for each.
Sales Down More Than 30 Percent?
If your company revenue has dropped
more than 30 percent in the past 24
months, and you’re no longer making a
profit, I seriously recommend a dissolution
plan. Not too many companies can
withstand that amount of loss, and the
ones that do are usually bailed out by a
kindly investor. While this occurs in the
automotive world, the electronics industry,
and even among your suppliers, AV
companies rely primarily on the owner’s
largesse rather than corporate debt.
If you are this type of owner (I figure nearly 20 percent of all dealers fit
this description), and you’ve graciously subsidized your company for more
than 12 months, do yourself a favor and shut down. The market has too
many AV companies, margins have diminished due to overcapacity, and
most likely, you’ve reduced the quality of your service during your first
round of cost cutting.
Stagnant? Start Worrying.
If your architect calls for three proposals for every job,
then rest assured that you are not the undisputed market
leader. More likely, you are starting to stagnate.
I hate to tell you this, but real companies must
grow to survive. Sure, if you’re a
consultant or small business with a
handful of employees you can exist
on consistent sales year to year. But
midsize organizations will lose top
talent without growth. Maybe the
owner is satisfied with taking home
the same pay year after year, but middle
managers aren’t. And increases in pay are hard to
come by if the company isn’t growing.
A stagnant company is a dying company. And a
company stagnant for the past two years is pursuing a sales
strategy that just isn’t working. So if your sales haven’t grown in the past
24 months, then chances are you haven’t been innovating.
Innovation in the AV business may come through pursuing new
disciplines (lighting, shades control, cameras), focusing on a very specific
discipline (becoming the best theater designer), re-imagining core
disciplines (specializing in aesthetics-driven whole-house audio systems),
reaching new locations (reaching past your market to where the work is),
and exploring new markets (MDUs, commercial, etc.). Now is the time to
seriously address innovation in your business plan, because doing nothing
hasn’t been all that successful for you.
If sophisticated architects,
builders, and designers view your
company as a leader, then your
strategy should be to remind them
why you are the best by being
And what if you have tried to innovate but your sales are still weak? I’ll
be blunt: you’re doing something wrong.
Growing? Figure Out Why
If you’ve seen consistent growth over the past 24 months, then you are
either a start-up or you are doing something right. Start-ups are so cocky,
especially when gaining market share, but they are small businesses with
low overhead, no ongoing service nightmares, and are focused solely on
making the next sale. There’s little consideration for process and long-term
customer support, which are costs associated with an established business.
If you were brazen enough to have started in the AV business during
the past two years, and you’re successful, then good for you. But be
prepared for a shocking drop in profitability as your service costs mount.
If you are an established business and you have seen growth, then take a
moment to understand the source of your growth.
The financial world refers to “safe harbor” when talking about a lowrisk,
higher cost place to park money during financial unrest. We see
safe-harbor decision making in the AV world by sophisticated architects,
builders, and designers. Instead of experimenting with new
suppliers, they play it safe by consolidating their business
with proven winners. If you are on the receiving end of
this phenomenon, it is probably because the better
specifiers view your company as a
leader. Your strategy is simple:
remind them why you are the best
by being the best. That means
reinvesting in your skill set, improving
your performance, and acting like the
winner that you are.
You should aggressively invest in
improvement, using your position to catapult
yourself to the next level. By the time the
economy turns around, you will be miles
ahead of the competition. Most importantly,
eschew the actions of a wanna-be. Innovate,
don’t discount. Focus, don’t cheapen your
offerings. Create process, don’t reduce