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Was 2013 Worthy of Festivus Celebration or Just a Lump of Coal?

As 2013 winds to a close, it seems fitting to look back and see how the year treated the three of us: us the individual, us the company, and us the industry. Are we better off as 2013 draws to a close and are we still moving forward?

If you can’t fly then run, if you can’t run then walk, if you can’t walk then crawl, but whatever you do you have to keep moving forward.
—Martin Luther King Jr.

As 2013 winds to a close, it seems fitting to look back and see how the year treated the three of us: us the individual, us the company, and us the industry. Are we better off as 2013 draws to a close and are we still moving forward?

I came to custom installation with absolutely no background in the industry. At 28 years of age, I was leaving my previous career after eight years as a golf professional and hopefully starting a new endeavor that would allow me to support myself and my wife and hopefully have some fun while doing it. (People ask how we ended up in Myrtle Beach from Northern California. The truth is partly because this is the golf capital of the world and offered a safety net, fallback plan in case this whole custom install thing didn’t work out…)

My timing was fortuitous in that I started with my company, Custom Theater and Audio, in 1998. This was right on the cusp of the booster rockets being engaged and things really taking off, and started a long period of explosive growth period for the custom installation industry.

It was a perfect storm of growth for our industry; construction starts were off the charts, the economy was booming and flat panel and HDTV was just being launched. While President Herbert Hoover may have promised a chicken in every pot, CEDIA installers were delivering TVs in every room. And for my first 10 years at the company our sales numbers looked like the launch angle of a high, soft-fade 9 iron. Or “/” for you non-golfers. Every year was significantly up over the last, and we had as many jobs as we could handle.

But then 2008 hit and, well, things changed. And they changed fast, and not in a good way. And for the past few years we’ve been riding the dark side of that inverted-V and, like many of you, have been trying to figure out the best way for our company to change and adapt and move forward.

In our area of the country—the Grand Strand of South Carolina—things appear to be back on the uptick. We are seeing some new construction again. We are seeing an increase in upscale remodels. And we are having an up year that hopefully won’t turn out to be a dead cat bounce (it’s a Wall Street term.) In fact, we’re in the midst of the biggest job in our company’s history (you can follow the latest installment of my coverage of that project here).

During slow periods, our goal was to do whatever it took to keep the doors open, to keep moving forward, basically to survive until the economy picked up again. For us, that meant branching out into doing security and fire system installations to offer another revenue path. We really went after those “small” service calls of hanging TVs purchased at Best Buy, Costco, Wal-Mart, and Amazon. We embraced Sonos and started doing a lot of quick two- and three-zone audio installs and adding Sonos to our legacy systems to provide iPhone controls and streaming audio options. We started showing soundbars, in three different price levels, in our showroom and went after those add-on sales. I tell my installers all the time that a truck out on the road is a truck out making money, and a truck in the driveway is a truck that isn’t doing anything.

As an industry, it seems like things are looking up as well. Not only was attendance up at CEDIA EXPO this year, but the show had a more upbeat vibe and feel to it. Walking down the aisles, people seemed… happy. And it wasn’t just the free beer in the afternoon! There was an optimism that had been missing from recent shows. Both manufacturers and installers alike seemed to have a positive outlook about where things were headed.

And according CEDIA’s “Size & Scope of the Residential Electronic Systems Market” survey, it looks like things are definitely improving for most of us across the board. This survey was taken between June-August of 2013 and had responses from 579 companies. And thanks to CEDIA’s Olivia Sellke and Erica Shonkwiler for supplying the research.

2013 Gross Revenue

This is probably the most telling of the graphs, as it shows that systems integrators/AV installers are looking for a 16-percent increase in revenues. Also, the median revenue is increasing 28 percent or a very real-world, take-it-to-the-bank, $124,000-plus.

Looking at the 5-percent decrease in the companies making sub-$250,000 likely means two things: 1) Those companies with low revenues have started doing better and have moved into a higher revenue bracket or 2) They have gone out of business. I know in our market, we saw many of those throw-a-magnet-on-a-truck, instant-audio-professional companies spring up overnight. They signed on with a distributor, then went out and grabbed those quick jobs, but often left a wake of destruction and bad work in their path that really just tarnished the reputation of what real professionals did.

But the best of the good news on this graph to me is the other big increase in the $1MM-2MM area. This is where many of us small to mid-sized companies live, and if we are doing well, I really feel that it is the healthiest outlook for the entire industry. And it looks like above the $1MM mark, every company is experiencing growth, meaning that the big projects are likely coming back into play.

2013 Projects Completed.

As an industry, we’re also busier this year than we were last year. This graph shows that across the board, everyone involved in residential installations is doing more jobs. We know that there is always a need for good employees in our industry, and the median number of employees has remained flat from 2010-2012 at six employees per company. However, companies surveyed were looking to increase their staff by 14 percent in 2013.

2013 Avg Project Revenue.
This graph tells a similar story in that the percentage of smaller jobs making up the bottom line is decreasing— down from 33 percent to 26 percent at the sub-$5,000 level—while medium and larger sized projects are on the rise. This confirms that people are loosening their grips on their wallets and checkbooks and deciding to go forward with the larger projects that had been on hold. Integrators also expect average project sizes to increase 12 percent, and the median-sized project will increase a whopping 25 percent!

2013 Home Theater Revenue.
While soundbars, cheap flat panels, and lower priced projectors and screens look to be eroding the sub-$15,000 segment of the market a bit, the $15-30,000 home theater installs have seen good growth, as have the ultra-high-end theaters. Also, the average-sized theater install has continued to increase in size from $20,800 in 2011 to $23,645 in 2012 to $26,392 in 2013!

So, looking back, how was 2013 for you and your firm? What has helped you to continue moving forward? And looking ahead to 2014 and beyond, what do you see propelling your business into the future?

John Sciacca is principal of Custom Theater and Audio in Myrtle Beach, SC.