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Becoming Parts and Smarts

Knowing when to outsource the non-profitable parts of your business.

Take a look around at your installation team. Do you have specialized crews who do one type of task all day long or can they handle a variety of projects? We have crews who specialize in new construction, finish-out work, and service. When it comes to commercial, we’ve re-trained some of the finish-out crews in the ways of office technology. All of this works pretty well except for one key area: commercial low-voltage cabling. When it comes time to price a project, we come in way too high because our technicians are universal soldiers. While that’s a great asset in most other parts of our business, we’ve had to slowly let go of the notion that we’re the fastest and cheapest at commercial structured cabling. We’ve (I’ve) had a blind spot since our humble origins 17 years ago that featured yours truly canvassing local builders and convincing them we were better at structured cabling than the electricians. While that may still be true, the commercial world runs on thinner margins and higher volume. That’s not who we are.

When I step back and look at the way we wire commercial projects, we’ve essentially applied our residential approach to office spaces. That’s bitten us in the rear end as we’ve stumbled through plenum ceilings, fire stopping, the need for scissor lifts, permitting, and a whole host of other challenges that we now understand courtesy of learning things the hard way. If I had to do it over again, we would’ve hired one of the many commercial low-voltage cabling companies who are only too happy to wire commercial spaces to our specifications at a fixed price. One of our operations leads, Ben Dalton, hit the nail on the head. “We’re parts and smarts,” he declared one day. Ben gave us permission to let go of commercial cabling with that simple phrase.

Ben’s Parts and Smarts philosophy is catching on at Livewire and beginning to shape our commercial business moving forward. Residential will stay the same. The same rules apply. Electricians hate the low-voltage cabling work and there aren’t any standalone residential cabling contractors around. That means we can still wire residences and maintain a 40-plus point selling margin. The commercial cabling world is incredibly competitive with selling margins in the 20’s. I don’t know about you, but I’m not a good enough at business to play that course.

Our new approach to commercial cabling reminds me of our business when we hired a lot of subcontractors in our early days. Fixed costs are a wonderful way to make predictable profits. Unlike last time, I don’t anticipate subcontracting our cabling work will produce competitors the same way our residential approach did. The commercial cabling contractors seem to be perfectly happy with cabling and don’t aspire to eat our lunch. We can demand and expect versus having to do the cabling work ourselves, bleeding cash like a stuck pig. The commercial world also feels a little more settled down, relying on solid processes and documentation. In other words, the perfect environment for our new Parts and Smarts approach.

We’ll continue to refine Parts and Smarts as we move forward, but so far, so good.

What should you outsource in your business?

Stay frosty, and see you in the field.