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Be the Best or Step Aside

Here’s a given: the market is going to be tough for the foreseeable future.

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 School.

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 the best.

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 support.