I recently met with a client for a project with a budget of between $50,000 and $100,000. While this is on the smaller side of projects for us, I am of the belief that no project is “too small.” You never know when a $5,000 media room upgrade can turn into a $100,000 whole-home system when a client renovates a few years down the line. So I was a bit surprised when the client informed me that other integrators they had called were not interested in the project. That got me to thinking about what the pros and cons are of large versus the small projects, and I began to understand why a business may focus and specialize on only one segment of the market.
Image: Thinkstock Large projects seem to be the whales that most companies aspire to land. Here are the reasons I came up with for why they are so attractive and why some dealers focus on them exclusively:
1) They are large! That means more revenue and more profit dollars per project.
2) Fewer service calls. Fewer projects are required in a given year to make revenue targets. That means that there are fewer projects out there in the market to maintain and service, which may translate to fewer service calls.
3) More personalized service. The dealer can provide more personalized and one-to-one service for the client with fewer projects.
4) Little or no legacy products. Typically these are complete tear-outs or new builds, so integration of legacy hardware is limited and often completely avoidable.
5) Prestige. The large projects are what win awards and often how dealers are judged in the market.
However, sticking with a mix of small to mid-sized projects can also have quite a lot of advantages:
1) Diversification of revenue. Not winning a project here or there has much less influence on your bottom line.
2) Lower complexity. There are typically fewer moving parts. You aren’t coordinating with the millworker, contractor, electrician, interior designer, architect, and mason to get everything done.
3) Less subject to the real estate market. Large projects are heavily tied to new home construction and large home renovations. Smaller projects are more often undertaken, regardless of the economic climate; if a system dies, people still “need” TV.
4) Less downtime. Smaller projects can be squeezed into the downtime between mid-sized jobs, keeping the team busy.
5) High profit margins. With less downtime and less complexity some $10,000-$20,000 projects can be knocked out in a day or two, providing a very profitable revenue stream.
Those are the reasons I was able to come up with and why we try to keep a mix of work in our pipeline. Which model do you prefer? What other reasons can you think of to focus on once size project or the other?