The 12 Beasts of Custom

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Hercules was a mythical hero in Greek literature who had to perform 12 labors. These were feats of strength that were impossible for normal men. One by one he had to defeat these terrible beasts set on devouring him. Against all odds he conquered all 12, and became a legendary hero.

While starting a custom installation business does not qualify you as a mythical hero, dont be taken by surprise when you have to confront these beasts that try to kill your young business.

Beast 1: Starting your Business. It seems temptingly simple to begin with your hard work, your vision, your enthusiasm, and your own money. Bootstrapping a cash-starved new business with sweat equity is a huge feat. Consider the risk: most new businesses fail within the first three years.

Beast 2: Dealerships. Major manufacturers will not allow you to become an authorized dealer unless you fulfill three conditions. First, you cant be a dealer if they already have enough coverage in your market. Second, you cant be a dealer until you have favorable financial statements. Third, you cant be a dealer unless you make large opening purchases and annual commitments.

Beast 3: Breaking into the Market. Open the yellow pages and survey the giants in the land. They have established infrastructures of storefronts, dealerships, trained employees, discounts, and happy customers. The builders and architects have working relationships already in place with your competitors. When you start out, you are a just a puny David with stones to hurl at Goliath.

Beast 4: Employees. Can you offer great money for experienced techs? Do you have time and budget to train newbies? After you find a great new hire and fully nurture him, train him, reward him, and praise him, how can you prevent him from leaving? Even with non-compete agreements, your best installer or salesman might go into competition with you and be a real beast.

Beast 5: Partners and Capital. At some point you will need more trucks, more employees, new dealerships, a better facility, etc. Growth takes capital. Money always comes with strings attached. Debt can cripple you, investors can take your business away from you and your best friend/partner can turn on you. After you work 80 hours a week, your wife may get fed up and divorce you, taking half of your business.

Beast 6: Bleeding Edge Technology. With rapidly changing innovations, its all in your timing. If you move too slowly, you are left behind in the dust. If you move too quickly and start selling unproven products your systems can crash and burn, cutting your business deeply. How long do you wait?

Beast 7: Falling Prices. The most expensive products that we sell dont bring us the most profits. A few years ago, if a client wanted a great home theater you could sell a video projector setup for $50,000. Now you can beat that for $5,000. Your customer can get a plasma TV at Costco for $2,000less than your dealer cost. Where is your markup to compete with that? How can you sell upscale systems in the years ahead?

Beast 8: Cashflow. Once you write a million dollars in business, you cant just pop for a new showroom. When you need to deliver $100,000 of gear to your clients, you had better be paid up with your suppliers. Carefully monitor your job progress and receivables and payables every week to keep this beast at bay.

Beast 9: Clients Who Dont Pay. After you finish installing a $250,000 system, your client doesnt pay you. You are helpless when he strings you along for 180 days, saying the check is in the mail. He has no intention of paying you at all. Have you ever filed a lien against a clients property? Good luck collecting.

Beast 10: The Accident. Your top installer falls off a ladder on your job. He needs back surgery and his doctor says he will be out for six months to two years. Your workmans comp fees go crazy. After a year he says he is still in pain. Is he playing you? How do you find closure?

Beast 11: The Unexpected. Fires, illness, break-ins, lawsuits, manufacturers discontinuing products, etc. One Sunday the sheriff called me to come get my company truck they impounded after chasing my installer for four hours. He may still be in prison. Anything you imagine can and will happen.

Beast 12: Selling Out. Most CI companies are very hard to sell at a profit. The operations are often centered on the owner. Most owners are too busy planning how to make money this year. Few know how to build value for a potential buyer.

Now you know the beasts. Arm yourself and prepare for battle. The rewards are there are they are worth fighting for. Just like Hercules, overcoming these challenges will bring you success and turn you into a real hero.

Rich Riehl (rich@bidmagicav.com) is a Los Angeles-based consultant to the CI business and creator of BidMagicAV.

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