Kindred Spirits

How a Chance Encounter At CEDIA EXPO Led to the Merger of Complementary Bay Area ESCs
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You just never know whom you’re going to meet at CEDIA EXPO. It could be a new strategic partner, a future employee, or even a fellow residential electronics system contractor (ESC) whose company may just be the right fit to one day merge with yours.

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Adam Zolot, former owner and president of Bay Area-based Entertaining Spaces, was attending his first CEDIA convention when he met Randy Stearns, president of Engineered Environments, which also is located near San Francisco. “Why on earth are you getting into this business?” the veteran asked the new guy.

Stranger things have happened, but an introduction at an EXPO cocktail reception a few years back, set the wheels in motion for such a partnership.

That year, Adam Zolot, then owner and president of San Francisco-based Entertaining Spaces, was attending his first CEDIA convention when he met Randy Stearns, president of Engineered Environments, which also is located near San Francisco. “Why on earth are you getting into this business?” the veteran asked the new guy.

According to Zolot, the two were kindred spirits. Stearns was generous with his industry experience, and Zolot modeled his business after that of Engineered Environments. He admired Stearns’ strong focus on customer service and wanted to become a “mini-EE.”

Things went well for Zolot. With a focus on small-scale AV projects and revenues of $1.3 million, he soon saw growth opportunity resulting from relationships with Sonos, Control4, and eventually Savant that didn’t require the burden of extensive programming. He was able to take on small to mid-sized projects, and business was booming despite the hit that the industry was taking due to the slump in economy. Paperwork and operations headaches, however, also were becoming more and more cumbersome for the owner of Entertaining Spaces.

Zolot considered his options for the daunting task of scaling his staff and facilities to accommodate business growth. In October 2009, he was struck with an epiphany and contacted Stearns with his merger proposal. “There wasn’t another business in the region that fit the ideas of what I wanted to be associated with,” Zolot said.

Anatomy of a Merger
“It struck me as an interesting opportunity,” Stearns recalled about his initial meeting with Zolot. “Looking where Engineered Environments had been and was looking to go, our deep processes and deep infrastructure costs and knowing we’d work through our backlog by mid-2010, along with an economy that wasn’t willing to support large scale systems, we saw Entertaining Spaces as a model we could build on.”

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Stearns explained that he recognized the mass affluent retrofit market was a growth opportunity. With an average project budget of $400,000 and very few jobs coming in under $200,000, Engineered Environments did not count retrofits and small remodels among its areas of expertise. But those cash-flow-friendly projects were right in Zolot’s wheelhouse, and Stearns thought he could bring an immediate solution to fill this emerging need.

The two companies quickly struck a deal and by January 2010, Entertaining Spaces had merged with Stearns’ company, with Zolot placed in charge of Engineered Environment’s New Business Group, which now supports projects in the $20,000-100,000 range.

“It would have taken a lot for us to retool to get into retrofits,” Stearns said. “Now I can go back to the architects, builders, and designers and say, ‘You can use us for all of your projects.’ It was huge for us to fill this gap and do it instantly and at a steady pace.”

Now, through the merger with Entertaining Spaces, along with the acquisition of Jetson Systems, Engineered Environments can support AMX, Crestron, Control4, Savant, and Sonos projects.

Adjustments on Both Sides
Not surprisingly, the company’s evolution hasn’t been without hiccups. Zolot explained that Engineered Environments, a more established company, operated with more processes in place. Conversely, the Entertaining Spaces team tended to fly by the seat of its pants.

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Entertaining Space and Engineered Environments eventually struck a deal and by January 2010, Entertaining Spaces had merged with Stearns’ company, with Zolot placed in charge of Engineered Environment’s New Business Group, which now supports projects in the $20,000-150,000 range.

“We talk a lot at CEDIA about wearing all hats. Before, I was doing 20 percent sales and 80 percent everything else,” Zolot said. “But it’s a big pill to swallow to let go of the ego and control of the business. Now I have the support and resources to go after more and bigger projects with a full-frontal marketing attack.”

Today, Zolot can focus his efforts on what he does best–engineering and dealing with clients, because he has an entire support system to back him up. For example, when he sells a project and needs to provide documentation, he can get drawings within a day. “How major is that for me? We have guys dedicated to doing drawings,” he said.

With a staff of four, including himself, at Entertaining Spaces, Zolot served many functions. Committed to superior customer service, Zolot explained that smaller projects resulted in quicker turnaround and a larger volume of clients. And he had to coordinate service calls. But now, with a dedicated in-house client services departmenet, if a client needs a router reset, he just shoots an e-mail to the service coordinator and the workflow of his team does not get interrupted. “These little things can bog you down, but the proper resources make life a lot easier,” he said.

Proposal writing is another task that was removed from Zolot’s plate. Engineered Environments has a person who handles all the proposals. But this was an area that required some adjustments from the original Engineered Environments team. The larger projects that they were accustomed to supporting required detailed and lengthy (up to 50 pages) proposals. Zolot’s projects, on the other hand, are rarely longer than five pages.

Clients also have access to the newly enhanced showroom that was one of the centerpieces of Entertaining Spaces, and was retained by Engineered Environments. Now incorporating aspects demonstrating the large-scale capabilities of the company, it also boasts one of the first front projection 3D demo rooms in the country.

What seems to work well for this new division within Engineered Environments is that it still holds onto a boutique feel, but with the resources and capabilities of a larger organization. “There’s still one point of contact and that’s important for success. Clients don’t want to be bounced around and passed off,” Zolot said.

Karen Sussman is a freelance writer in Carmel, Indiana.

Merger Serves as Motivator

“Bringing Entertaining Spaces under our umbrella has served as an agent of change for us,” Stearns said. “Economic factors and buying habits have changed, and we have to comply with the new normal. We needed a kick in the pants, and this helped us turn a corner.”

Since joining forces in January under the Engineered Environments name, Zolot’s team has averaged two new projects a month and has recently doubled in size to accommodate growth. Looking ahead, they aim to bring on four to five projects per month by year end, and will continue to grow organically from there.

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