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Expanding Universe - ResidentialSystems.com

Expanding Universe

There is no secret formula for growing your custom firm, but there are key considerations.
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Whether you love it or loathe it, Starbucks has become the de facto word for coffee. From Times Square to Piccadilly Circus, youre never far from the familiar green logo promising a skinny grande Toffee Latte. Beside how not to furnish your living room, Starbucks is a new lesson in the old hat franchise business, and proof that on the global playing field, product consistency plus market saturation equals margins.

The custom installation industry exists on a significantly smaller scale, but it is linked by an interest in next-level growth. The channel is maturing, product categories are evolving, and companies of all sizes are approaching their next evolutionary stage.

There is no business standard uniting custom install companies, thus there isnt one governing formula for expansion. Growing your firm or adding satellites is as much about common sense as it is about individual taste, creativity, and unconventional thinking. CEDIAs annual Management Conference offers key strategies and techniques for tightening management structures and growing operations, but the message may get lost in the sea of information. (There are more than 100,000 different management conferences hosted annually.)

Signature Media Group (SMG), headquartered in Woburn, Massachusetts, is technically not a collection of satellite operations; rather, it is a formidable national brand of affiliated residential installation companies. Through strategic acquisitions, SMG slowly is linking the major geographic markets in the U.S. Eventually, we will cover all significant major metro markets in the U.S., company founder Jim Monroe has stated.

SMGs most recent acquisition was Residential Systems Inc. (RSI), in Wheat Ridge, Colorado, serving Denver and neighboring ski resort areas. Its aggregated number of affiliates makes SMG the largest residential systems integration company in the U.S. It currently has operations in top U.S. markets: Chicago, Washington, DC/Northern Virginia, Sarasota, Tampa, Naples and Boca Raton, Denver, Oakland, San Francisco and Los Angeles, and Westbury, New York, and is the only nationally branded residential installation company.

For independent firms not interested in merging operations or being rolled up into a parent company, diversification is a practical way to increase project scale and add more bang for your clients buck. The addition of a new product or service offering enhances a dealers skill set and lets him/her enhance their value in a clients home.

The remodeling or creation of a showroom is contingent on capital, but for dealers experiencing steady growth, it can be a great way to bring new clients into the magic and experience of your product mix.

Partnering with a respected distributor is another way to offer clients more without spreading yourself thin. Distributors such as AVAD, TAG, EDGE Group, and many others, provide dealers with regular product training, access to technology right off the mint, and networking opportunities with other companies.

To tackle new territories, on the other hand, establishing satellite operations seems logical for some dealers. Its a solid way to consolidate buying power and build branding. So what should dealers be aware of when adding more arms? And, in a channel created by specialty boutiquesa culture that still prides itself on a custom ethosis it OK for business owners to clone their management structures to open a new shop? Or, is it better to tailor each arm to the particular demographic?

While there is probably no single answer that applies to everyone, my initial reaction would be to encourage custom installation firms to clone their existing management structures and operating procedures, stated Glen Mella, chief marketing officer at Control4 (www.control4.com), the Utah-based home automation manufacturer who has invested significant resources into management seminars for its dealers.

The challenge with starting from scratch is that you essentially undertake the start-up risks of a business all over again, Mella said. A custom installer who is planning to expand has demonstrated their viability and success to a degree. By applying the principles that led to that success, and mirroring their managerial structure and systems, they have the best shot at duplicating a winning model in a new market.

After experiencing successful growth in his Timonium, Maryland, headquarters, Brian Hudkins, founder of Gramophone, decided to open a satellite office in a neighboring Maryland city.
Hudkins established Gramophone in 1976 as a specialty hi-fi boutique, added video products in the 1980s, and then broadened the mix with control and automation products in the 1990s. It now offers a full suite of residential low-voltage services and prides itself on a soup-to-nuts approachfrom concept design to artful integration.

When we opened a second office we retained centralized scheduling, design, programming, warehousing, delivery, field/in-house service, and job staging at the first location, Hudkins stated. We do have separate sales management and installation teams working at the second location, and we transfer all materials needed for upcoming jobs and retail sales three times a week. The satellite expansion has proven to be extremely successful for Gramophone; business is showing no signs of slowing. Between its Columbia and Timonium locations, Gramophone maintains 50 full-time employees.

Even for the savviest companies, adding satellite operations may not yield results because of the territory itself. While Gramophone opened its second locale in the same state, other firms want to invest their resources into more remote regions. The highly successful design-only firm Axiom Design, based in California, tried to establish a satellite in Texas, but later decided that the market wasnt quite ready.

We expanded operations briefly into Dallas, stated Axiom founder and president Robert Kranson. We ultimately pulled back from this region after finding the market not as mature as we anticipated. I had a designer/project manager on the ground there acting as our eyes and ears, however all production work was generated at the home office. This enabled us to use our production team more efficiently and gave us a local presence.

Expansion may be too far down the line for fledgling companies to consider, but everyone agrees that it is never too early to lay the groundwork for growth, especially when business is healthy.
Furthermore, the middle market is being tapped more aggressively than ever, in part due to new product development and efforts by manufacturers like Control4 to concentrate dealers emphasis on mass-market projects.

Last year, a CEDIA member survey indicated that business for distributed A/V, lighting control, home automation, and dedicated home theaters is expected to continue to grow. Seventy-four percent of the survey respondents reported their intention to hire more employees. Additionally, the same data revealed that 71 percent said their businesses improved in 2004.

Indicators such as these, and a general appetite for custom technology that grows more voracious each season, suggest the residential systems universe is boundless.

The Little Guys, a Chicago area custom install firm, wants its companys success to continue as the trade evolves, but it doesnt see the need for opening a second location.

According to Evie Wexler, The Little Guys vice president and secretary, We have no plans for new locations, although we talk about it often. Our eyes get big and our imaginations go into overdrive, thinking of all we could do. Then realism steps in and we discuss all the reasons we should not open another office. Quality of life is a big one. We dont really want to have to double our time on the job, even for a year. Customer service is the second big one. Its almost impossible to
coordinate multiple jobs from multiple locations, and we feel we are just getting our act together at one location.

For Wexler, as long as The Little Guys are willing to drive (which they are), they can canvass a large metropolitan area that covers four key states. This fact alone makes opening a satellite or second location unnecessary. Our customers are willing to come to us in most instances, and we are always happy to go to them when necessary, Wexler added.

There is another benefit, Wexler says, to keeping the companys troops under one roofthe firm can function as a team. We are better able to work as a team when we are all together and have the convenience of walking into the next room to plan, discuss, change, and come up with new ideas at any time.

Margot Douaihy (margot.douaihy@gmail.com) is a freelance writer living in London, England.

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