The custom installation industry–built on the kaleidoscopic experience of audiophiles, engineers and MBAs–doesn’t promote just one business orthodoxy. Ask 50 custom business owners how to run a company and you’ll be deluged with 50 different answers.
The story of a Thousand Oaks, California-based retail and custom firm, however, exemplifies how ingenuity, attention to detail and implementing specific PARA techniques have yielded unparalleled success.
Wilshire Home Entertainment was founded in 1954 as an A/V retail store, and purchased by current owner, Lyn Perry, in 1978. In the 1980s, under Perry’s leadership, the company thrived strictly as a retail storefront with various Los Angeles locations. Wilshire Blvd. was one of those locales.
In 1992, the deterioration of the Wilshire neighborhood diluted Perry’s business. Later that year the firm and many neighboring companies fell victim to the Los Angeles riots. In the defacement that raged during rioting, Perry’s company was burnt and looted.
He then worked out of his home for six months, supervising wholesale equipment accounts with local studios. Later in ’92, he decided to reopen his A/V store in Thousand Oaks with a few core employees. Now, Wilshire Home Entertainment is a thriving retail and custom installation business with 35 employees. The grand opening of its second location–a 6,000-square-foot showroom in Valencia, California–is slated for June 2003.
Myriad factors have influenced Wilshire’s immense success over the past 20 years, but Perry insists his staff has made the most significant contribution.
“There is tremendous value in our people, and they are what have made us as successful as we have been,” Perry stated.
For Perry, the key element to keeping personnel motivated is providing them with the right tools for success. “If they want a new vehicle and there is a sound reason for it, then they will get a new vehicle. If we need improved software or if we need more staff, we will make the investment,” he said.
Of the landmark management decisions Perry has made, hiring a full-time accounting manager was one of them. With an extensive background in operations management, as well as being Perry’s son-in-law, Mike McMaster was the perfect choice for the new position.
When he joined Wilshire Home Entertainment in 1996, overall sales were excellent, but McMaster discovered areas of improvement and set to work.
“The company then, like a lot of companies, had grown well on the sales side, but hadn’t established foundations underneath; it had not put some important systems in place,” McMaster stated. “So that was my initial focus–installing better systems. At the time when I joined the company, all of the checks were handwritten and we had only one delivery vehicle. We later put in a ‘point of sale’ integrated system for accounting, as well as added computers. We started merging into technology, and later [we] added communication systems like voicemail and email,” McMaster said.
Perry concurs that the fortitude of each department is reliant on capable managers. “We’ve been successful bringing in department managers such as Mike, and a strong accounting team. We have another gentleman who handles the booking and administration department with two assistants. We also have custom installation managers, a sales manager and a delivery manager. So we found people with strong attributes that can manage those departments; they all have profiles, character traits and personality traits that lend themselves to those areas,” Perry stated.
In the early 1990s, reselling equipment to studios within Disney and 20th Century Fox proved to be a viable revenue stream for Wilshire. But that business eroded over time, with most of the studios moving directly to the manufacturers. Currently, it’s less than two percent of Wilshire’s business.
The company, in mission and in practice, remained a strictly retail operation until 1997, a year which marked Wilshire’s nascent transition into custom installation.
McMaster asserts that evolving into custom was a matter of survival. “We got really into the custom business because when we referred jobs out [to subcontractors], we didn’t retain the customer. That was the biggest concern, keeping the customers with us and not ‘subbing it out.’”
Largely aiding the creation of a custom department was key industry insight gleaned from a PARA conference that McMaster attended.
During that 1997 conference, titled “Double Your Profits,” Chelsea Audio Video’s Ford Montgomery discussed the value of PARA vis–vis a measuring stick–a way to observe operations from the outside in.
“[Montgomery] talked about looking at your people, your showroom display and your product selections, and saying to yourself: ‘are all these areas the best they can be?’” That was a humbling moment for McMaster as he then acknowledged that Wilshire had a long way to go. It was at that conference where McMaster began strategizing about the company’s “next level.”
To retain more business, the Wilshire team joined forces with two installers, then hired an independent person dedicated to custom projects.
“Then our custom system started to grow. In 1997 we had an $11,000 sale and we were just blown away that we could sell that much to just one person. A mental feeling was broken,” McMaster stated.
As its custom system flowered that year, Wilshire’s team realized that not only were there people who would buy custom systems, but that there was great market potential. They then grew it from there; currently the custom department employs 10 people.
The company also holds strong overall sales, averaging 15-20 percent growth for the past five years. Concepts learned at PARA’s “Double Your Profits” formed some of the action plans responsible for this astonishing achievement.
McMaster believes that sustaining growth is contingent on airtight management and self-reflexivity. To that end, he’s developed key indicators to examine monthly, such as inventory turns and labor utilization, to see if he’s on or off track.
McMaster also depends on PARA for an infusion of new managerial ideas, as well as his forum to measure Wilshire against nationwide dealers and its own forecasts. “A big goal for us is to become a better business within the PARA bubble.”
The annual PARA conference also provides unique opportunities for fruitful exchanges with other industry players. “The value of the association is that you can talk with other members that are one rung on the ladder above you and one rung below you and still get great ideas,” McMaster said. “You are not competing with each other in most scenarios, so you’re all friends and you all have the same issues. And I honestly believe I learn more at the annual PARA conference than at any other show or conference,” he said.
With that sentiment, Perry agreed. “We think so highly of PARA. Frankly we think it is the most important association that we belong to. While we are clearly members of major industry groups, we think, as far as business principles, we get the most out of PARA because it truly helps us run our company.” It is PARA’s special focus on the retail/custom hybrid that makes it particularly pertinent for Wilshire’s managers.
Wilshire’s custom department most routinely accepts retrofit projects, rather than new home construction jobs. (Its fort is in the $5,000 to $20,000 system range.) “We have realized that our niche is specializing in existing homes, because that is what we are surrounded by–existing homes,” McMaster stated.
Changes are forecasted in Wilshire’s near future, however, which will add more new construction projects into its repertoire–another testament to its overall strength. “We are opening a second location in a high-growth area [Valencia, California] about 30 miles from our existing store,” McMaster said. The company has become involved in the National Association of Home Builders (attending its first home building show this year.) Wilshire is also working on a project with an interior designer, setting up a home theater in its showroom.
Maintaining two unique identities–custom installation and retail–which work symbiotically, as well as separately, is critical to the hybrid structure. “Last May, we decided that we would dedicate two of our sales people strictly to custom,” McMaster said. “So we put two people in and now divide the sales as they come in the door. And in terms of credit, both the custom and retail departments are on the shared program. Our computer is set up to have two sales person’s numbers–one for the retail and one for custom. Now people can track how much they do in both areas.” Right now Wilshire sees a 35 custom/65 retail split, including equipment and labor.
Generating new business is no problem for Wilshire; it advertises in newspapers and on TV, and engages in direct mailings. 13 percent of business is new while the vast majority–87 percent–is comprised of previous and referral customers. Fastidiously tracking every customer invoice lets McMaster ascertain how business is generated.
Intense customer loyalty–a result of lavish customer treatment–significantly impacts its referral base. Every customer who makes purchase in excess of $500 receives a specially designed “thank you” card; customers who make referrals receive “thank you” cards equipped with Blockbuster gift cards, gift certificates for dinner and movie tickets. “We are devoted to acknowledging every customer and every customer who makes a referral,” Perry stated.
Wilshire also sends about 1,500 welcome letters to new local homeowners, offering a free gift to them to visit the store and introduce themselves.
With over 16,000 active customers in their database, Wilshire does what it takes to exceed expectations in every way. “We want every experience to be a great experience for our customers,” Perry added.
As behemoth chain retailers encroach on smaller, independent custom territory, the Wilshire principals don’t seem threatened. In fact, McMaster is confident that customers who seek quality will always call on Wilshire. “For a large expense [customers] are willing to do their homework, and they are willing to drive 20 or 30 miles if they know they are going to get a better system in the end. You have to be competitive, but people are willing to pay for service.” he said.
Another unique strength, which keeps Wilshire on top of its game, is the dynamic relationship between Perry and McMaster. Marketing the Wilshire name, maintaining company culture and creating sales programs are Perry’s major concerns. The onus for accounting operations is on McMaster. “We suit the positions that we occupy,” McMaster said. “We put the company first and when the company is taken care of, then everyone else is taken care of.”
Perry’s personality as an outgoing individual complements his drive to make Wilshire a community name. “I am an active member of the Rotary Club and the Chamber of Commerce,” Perry added. “We set a budget every year for charity and we sponsor a number of youth organizations.”
Perry sees his charitable involvement as paramount activity to improving social texture and further branding Wilshire. He is excited to sponsor local “hole-in-one” golf tournaments, donating up to five large screen TVs. He also donated half of last year’s allocated charity budget to firefighters, police officers and families affected by the 9/11 tragedy.
Maintaining a narrow and deep focus on product lines is another important strategy for the Wilshire inventory buyers. The team keeps a fine focus on 14 major manufacturers, though most custom/retail operations carry threefold. “We feel that we are very important to the 14 [manufacturers] that we do business with and it keeps our turns up and our inventory fresh,” Perry stated.
Wilshire’s confidence in its future is evidenced by faith in its company culture and a non-apologetic attitude. “The mistakes we’ve made along the way we are not going to duplicate–we outgrew them,” Perry stated. “We know how to identify clients and we know the strategies that work and don’t work.” The company also prioritizes ongoing company training and industry-specific education, like PARA, CEDIA and TEC, all year.
McMaster concurs that there is never a reason not to perform at a top level. “A lot of retailers make excuses for their business not doing better,” he stated, “things like the economy, September 11th, war jitters…all of those things are issues now. But September 11 was a year and a half ago and to say it is affecting your business today is an excuse. When you are Wal-Mart or Kmart or Sears, you’ll feel the impact of an ‘overall economy’ when you are a national tenant and you have large marketshare. We think that in our small marketplace of a 30-mile radius, we have 10 percent marketshare at best. So if you have small marketshare you can always grow, even in down times.”
For Wilshire, the secret to that particular growth is doing it better and different than the major league players like Best Buy and Circuit City. “It is about providing competitive products with additional services at a one-stop solution for customers. Making the decision-making process easier for them is the key to that.”
Jeremy J. Glowacki contributed to this article.
Margot Douaihy is managing editor of Residential Systems magazine.