Defying the Odds - ResidentialSystems.com

Defying the Odds

Innovative Integrators Brave the Economic Downturn
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"A million-dollar home is the new half-million dollar home. Thats the way one fellow dealer summed up the new construction market to Home Technology Consultants president Rick Montgomery of Watkinsville, Georgia.

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ome Technology Consultants president Rick Montgomery of Watkinsville, Georgia, believes that the downturn is an opportunity to capture more marketshare. With home-building stats decreasing across the country and as more conversations are peppered with unpleasant terms such as downturn, mortgage crunch, and the dreaded R-word, even those integrators who are marginally affected by the slowdown are discovering innovative ways to ride out and prosper during the low economic tide.

Business has dried up for middle market and production AV dealers in the metro Atlanta area, Montgomery said. If I had to make a living in the up-to-$1.5 million new-construction range, the story would be different. But we work at the very high end, and were full speed ahead, expecting to see our normal 15-percent growth rate for this year.

The downturn, he added, is an opportunity to capture more market share. Were opening an Experience Center-style showroom, and we are also acquiring a nearby AV dealer, a competitor who has not maximized the value of his business but who has key pieces in place which we can use, Montgomery said.

Seeking Out Remodels
In Toledo, where close proximity to Detroits woes has hit smaller tool-and-dye companies and mill shops catering to the automotive industry as

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Ric Clark and David Jamieson, co-owners of Jamiesons Audio/Video, have led their company in other directions by tightening relationships with high-end builders for remodeling projects. well as the corporate giants, there is a substantial slowdown in new construction, said Ric Clark, co-owner of Jamiesons Audio/Video. In our area, the mid-range for new construction is from $300,000 to about $700,000, and even our high is a mid-high, not over the top, he said. Last year our new construction was down, but our overall year was quite good.

Jamiesons began heading in other directions by tightening relationships with high-end builders for remodeling projects. We asked our sales staff to focus on the filing cabinets that are filled with job folders, reaching out to existing clients with information about HDTV and flatpanels, Clark said. We started out as a stereo store, and weve reinvented ourselves. By the end of last year, after doing a lot of small but high-end remodel projects, we kept busy with calls about upgrading TVs to high definition and flatpanel TVs. One customer wanted all 27 TVs replaced for Christmas; and now were upgrading the TVs in his lake house.

Clark credits some of his companys recent success to becoming a dealer for the Sonos whole-house music solution. Understanding what Sonos can do got us excited again about music, Clark said. And I believe that anyone who doesnt have system remote control can benefit from a simple-to-use system remote control.

We have specificprocesses and departments that allow us to be efficient on both small and large projects

--Scott Sullivan, SoundVision


Jamiesons began calling customers who were getting hi-def boxes and told them about the simple-to-use Sonos system. We always wire for outdoor speakers, and weve started contacting clients who havent completed out door systems, he explained. We call them on Mondays after a nice weekend; its a way to get them back into the store.

Jamiesons recently renovated its store, inside and out, as an investment. It seemed risky but we want people who walk in to say, Theyre doing well, and to see that weve made a commitment for the future, Clark said. It did a lot for staff morale. No one has been laid-off from our staff of 22, even if we had to redirect some responsibilities.

Diversity Does It

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SoundVision's Scott Sullivan In the Bay area, SoundVision president Scott Sullivan, has watched the middle of the marketsuch as refi/line of credit funded remodels with media systemsdry up, leaving small and large projects intact. The middle market represented about 25 to 30 percent of our business, but we had enough diversification, Sullivan said. Were reaching out to our base, which brings in a lot of smaller jobs, and were going after the larger projects and working with our contacts in the trades.

The ability to service a broad spectrum of projects from larger full integration to small fast track projects had been an advantage, he said. Were focusing on making sure we are at full efficiency for our staff of 20. We have specific processes and departments that allow us to be efficient on both small and large projects.

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Phoenix Unequaled Home Entertainment's president Scott FuellingPhoenix Unequaled Home Entertainment of Memphis, takes a two-pronged approach to the Memphis market, according to company president Scott Fuelling. Phoenix is strictly high-end integration, and our sister/subsidiary company, AVC (Audio Video Creations) handles mid-level projects, $50,000 and below, he said.

Fuelling noted that business in the metro Memphis area, and as far away as 200 miles for larger projects, has been steady. We have new opportunities on a daily basis, he pointed out. We have 20 combined employees and weve done everything we could to keep everyone onboard, including partnering with several retrofit builders for additions and remodels. Were still doing many large custom home projects, but a lot of people are spending their money on upgrades for their existing homes.

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Fuelling said that he is doing everything he can to keep everyone onboard, including partnering with several retrofit builders for additions and remodels, such as this Control4 project. Phoenix started to prepare for the 2008 economic environment at the first of the year, he added. We spent some time setting up our client contacts and e-newsletter for targeted marketing. Were showing customers whats new in upgrades, such as those for AMX or Control4, as well as the latest software applications. The response has been very solid.

The company added new programs (generated by prize-winning contests among its employees) for maintenance and calibration tied in with upgrades during the first quarter of the year, including an off-site storage service to backup photos, home movies, and music collections. These are all set up to be formalized recurring revenue streams as we move forward, Fuelling explained. We had been talking about doing it and the fear of the unknown pushed it up on the timetable quite a bit.

Real Estate Reality Check
The real estate slump is an opportunity for the ready and able, said Home Technology Consultants Montgomery. Weve already had three existing clients call to tell us its time for them to pull the trigger on vacation homes, he said. They knew they would be able to build a house faster and cheaper in this economic climate. One high-end builder told me his customers can expect a minimum of a 10-percent savings across the board. So those who truly have money see the downturn as an opportunity. As a result, the high-end AV business, at least in our market, continues to thrive.

"We do the best we can to keep the team on a particular project so when customers say yes, even if the cabling is four months away, the whole team is involvedfrom the beginning"

--David King, King Systems


In Denver, where the city is abuzz with the upcoming Democratic National Convention, residential customers are readying their homes for an influx of visitors, said David King, president of King Systems. A lot of high net-worth customers are participating in the convention, and many will be hosting people, he said. Some are turning their homes into hotels, and even if they wont be there, they want to expand wireless networks, add TVs, and add speakers. Others want to get their homes ready to rent out by adding security systems with remote access so they can monitor whos going in and out.

The company, which also works on the commercial side, is now assigning individual projects to teams. We do the best we can to keep the team on a particular project so when customers say yes, even if the cabling is four months away, the whole team is involved from the beginning. That allows us to spend the time we need to get prepared for the job so we can deliver the promise to the customer.

When business is slow or there is not a particular installation to do, team members can follow up to ensure that everything is working, or stop by if that is appropriate. King noted that this approach keeps the relationship with the client afloat and has the potential to bring in additional revenue.

Getting the Word Out
Florida-based Atlantic Home Technologies started riding the new home construction wave in 2002 until that market hit a wall last year, said owner John Prince. The company has a good mix, according to Prince, playing in a couple of sandboxes from mid to high-end production and full custom. We just moved into a new custom-designed lifestyle showroom, and when people tour it, they spend money and they tell their friends about it, he said.

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AHT just moved into a new custom-designed lifestyle showroom in Jacksonville, which features Media Center and Life-ware technology from Exceptional Innovation.

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After relying on business through builders and referrals for the companys first few years, AHT has now made moves to take its story to a broader audience. We retained a well-known local public relations firm for the first time, Prince said. A week later, I was on a local morning news TV show talking about HD-DVD and Blu-ray. The idea had immediate value. Weve also been very pleased by the response to our radio spots. They ran for a week and I can point to several deals that came directly from [the ads].

AHT has staff of 25, and endured one layoff in 2005. "It was the hardest thing I've ever had to do as a business owner," he said. "Since then, we've scaled back through attrition. The challenge is always to respond in a timely fashion to our builders and customers as business picks up, and our goal is to pay overtime to our teams rather than hiring new staff just to get through a short term rush."

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Atlantic Home Technologies president John Prince refuses to participate in the recession. Everyone on the team has really stepped up this year, he adds. "They realize our industry is closely tied to the new construction market. We're trying to attract remodeling. The retrofit business is profitable if done right and people are still spending money on new systems."

Prince said that he hopes his advertising will continue to build brand awareness, and added that AHT plans to host open houses, family events, and other community happenings to underscore the companys position as a family-oriented, locally owned and operated neighbor.

Prince believes that there is still a lot of money in the economy, if you take the right approach. Weve chosen not to participate in the recession, he said. If you complain nobody listens anyway. Its all about the bottom line number you take to the bank. We place a high value on ASP, something we track as average selling price. If business from builders is down, we need to sell more to the customers they do send us. We divide the total revenue by the number of deals sold and that gives us our ASP. Thats the key metric. We watch expenses, dont use subs, make good buys from manufacturers, and have the right operations people to manage labor. This is our craft; we enjoy it even when its down, and if we can survive now well be poised well for the future when the housing market rebounds.

At Your Service

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Dennis Sage, Dennis Sage EntertainmentIn Phoenix, Dennis Sage Home Entertainment president Dennis Sage has seen his staff decrease from 85 to 51 over the last 20 months. The company serves every level of the home automation market from production builders to one-of-a-kind custom homes.

Weve added services, Sage said. One of the first was security monitoring systems. Its growing slowly and consistently and helps pay the bills. We have gone to each of our builders and leveraged to be more of a single source for all technology needs, such as central vac, security, lighting control, and automation. We had a captive audience, and builders want us to meet with their buyers to determine their needs because technology changes too often for them to keep up with it. We give them an edge on technology.

To become better partners with builders, and other trades, DSHE makes a practice of future proofing houses with structured wiring for high definition, networks, wireless Internet, phone, and TV, the whole infrastructure. In five years the company has gone from 80-percent production to 75-percent custom home projects and 25-percent production. We got involved in custom a few years ago, because we saw a rapidly advancing trend of the production builder not allowing us to make any money. Weve grown with Crestron and like products and were also doing lighting control.

"Networkinghas become our most reliable tool

Dennis Sage, Dennis Sage Home Entertainment


In five years, he added, his company has gone from 80-percent production to 75-percent custom home projects and 25-percent production. "We got involved in custom a few years ago, because we saw a rapidly advancing trend of the production builder not allowing us to make any money. We've grown with Crestron and like products and we're also doing lighting control."

Sage has lowered overhead by asking staff to take on additional tasks, including office landscaping and cleaning (pictured:Travis Stricler takes his turn.) DSHE remodeled its showroom, configuring it into good, better, and best sections, featuring Logitech, Honeywell, and Adagio systems. Weve really won over the builders whove seen it, Sage said. I approached several builders and asked them to tell other builders about us. Networking has become our most reliable tool.

In addition to adding a commercial license to its repertory, Sage has lowered verhead by asking staff to take on additional tasks, including office landscaping and cleaning. I communicate openly and honestly with our employees so that they are constantly informed about our situation, he said. None of us really likes cleaning toilets, but we all realize that unemployment is not a good alternative. They have embraced the additional workload ambitiously. I am a lucky man to have the great employees who work here.

Karen Mitchell is a freelance writer in Boulder, Colorado.

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