Focusing on the Future - ResidentialSystems.com

Focusing on the Future

Back in 1987, Jason Carnahan had recently graduated from college and was working with his dad, selling insurance and investments. His computer proposal software program at the time happened to generate a "quote a day" from someone famous like Abraham Lincoln or Ben Franklin, while it slowly calculated a formula.
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Back in 1987, Jason Carnahan had recently graduated from college and was working with his dad, selling insurance and investments. His computer proposal software program at the time happened to generate a "quote a day" from someone famous like Abraham Lincoln or Ben Franklin, while it slowly calculated a formula.

On one particular day, as Carnahan twiddled his thumbs waiting for his calculation, up popped a phrase from the Chinese philosopher Confucius: "Choose a job you love, and you'll never have to work a day in your life." At that very moment, the future president of Washougal, Washington's Premier Home Theater knew it was time to chart a more focused course for his future.

"I thought about what I like to do," Carnahan remembered. "I played football in college, so the first thing I considered was sports. I wasn't confident enough that I could go pro, so I thought about the other thing I liked and that was electronics."

Carnahan's first foray into the business was a startup rep firm, primarily for 12-volt electronics. This business proved to be a struggle because he product lines consisted of speaker brands that nobody else wanted to sell. After six months of that and another six months for a different rep firm, Carnahan got a job with a Portland, Oregon, distributor for Pioneer and JBL home electronics. Having cut his teeth on home electronics during next 2 1/2 years, and having logging about 70,000 miles a year on a van driving all over Oregon, Washington, California and Idaho, Carnahan finally had had enough.

"At the time, I had some customers who were doing 'custom' (at a much smaller level than we do now), but they were doing installations and hooking things up for people. I just got it in my mind that I could do that too," Carnahan said. "So I started the company, just hooking up stereos for people, and one thing led to another."

Very early on, Carnahan met his future business partner, Rick Sant, who started pulling wire with him while off from college for the summer of 1993.

"We got into some housing developments where they would pay us $20 per phone run and $20 per cable run," Carnahan said. "We had this little pre-packaged surround system that we'd wire for and hopefully if the customer wanted to buy something at the end when they bought the house, we could go back in and put in in-wall speakers and hook up the equipment."

Growing up, Sant had always tinkered with car stereos and his own home electronics. While studying biology/pre-med. in college, he met Carnahan through a mutual friend of his wife.

"It was summertime for me and I saw it as an opportunity. After three months of working together, I decided to forego the last quarter I had left and go after this as a full-time deal."

Carnahan bought a new house about that time and with the help of some "seed money" from Sant decided to turn the home's unfinished bonus room in a theater.

"Rick had a little bit of money to invest--he was working for me at the time, and he wanted to be a partner," Carnahan explained. "I took that money, made him a partner and we put a theater room in my bonus room."

The theater consisted of a Runco 750 projector, a Kenwood THX preamp receiver and a JBL speaker package. The new business partners didn't have much money, so they did the drywall themselves and built a bar and a candy counter into the room. About that time, they inked a contract for what Premier considers its first theater room.

Like most custom installation companies in the beginning, Carnahan and Sant took any business that came their way. They were also their only employees, so the two did everything from installation, to taking orders, to cutting invoices. Eventually, more staff was hired, and strengths and weaknesses were accounted for in the roles the two owners would play.

"Jason's background was more fit for sales and marketing," Sant explained. "I was better suited to system design and project management."

Over the years, Carnahan and Sant began realizing the advantage of avoiding lower-budget projects and, in turn, set a simple standard for the level of projects they would design.

"Around August, 1998, we did a Street of Dreams in Portland where we put in a theater system and it went so well that we actually got too many leads from it," Carnahan remembered. "That was when we made a company decision that we were no longer going to do systems that involved volume controls or universal remotes. Every system from that point forward was going to have a Crestron system in it and a keypad for distributed audio, or we weren't going to do it."

During that same period, Premier hired Ryan Prentice, who would eventually become the company's third partner.

A "young kid with lots of ambition and some existing skills," Prentice ended up helping the company move beyond its Washington State roots and into more out of state projects.

"We did our first job in Montana and though didn't go very well, we just started to get more referrals over there," Carnahan explained. "They kept coming there and in California and other parts of the country where we didn't live. Over the past five years, we've really developed a good process for doing remote jobs. That's a really big part of part of our business right now. A lot of our clients do their house in Montana, then their house in Pasadena, then their house in Indian Wells..."

Prentice had worked for another installation firm prior to Premier. After proving to be an integral component in the company Carnahan and Sant rewarded him with the opportunity head their Montana Division in Missoula and become a third partner in the company.

"I liked the area and wanted to move here to raise my family and a quieter place to live," Prentice said. "It turned out that it also involved a partnership with the company, so it worked out great." The Montana office may have set a precedent for Premier as it explores other markets around the world. It has allowed the company to provide a local presence and faster service to jobs that are generally quite bit larger and more demanding than they are in Washington.

"Most of them are second, third or fourth homes...or fifth or sixth for some," Prentice noted. "A lot of our clients come from California and Arizona, but many are now making Montana their full-time residence after September 11."

Premier's idea is to eventually duplicate their whole office in Montana, other than accounts receivable and purchasing, in its branch office. And in the future, they may provide full installation, programming and sales in other offices around the world. However, Carnahan is quick to point out that he's never been one to jump too far ahead in his business.

"We tried to build this thing real slow. I mean, I haven't ever put a bunch of money into it," he explained of his 10 years in business. "Then in Montana we did it the same way, basically growing out of cash flow. Just back in August I leased some office space, and we are only now finishing up a showroom over there."

The showroom, basically built around designer vignettes, has helped Prentice close larger contracts because clients could see or touch the products they were previously unwilling to purchase. "We have it set up to show a column, a theater chair and maybe a rendering of what the theater might look like," Carnahan said. "We have an active Lutron lighting system in there, motorized shades, a motorized plasma screen on a popup lift, all in1 a small space.

Despite this setup in Montana, Premier still stages their entire project in Washington before crating it up and shipping it directly to the job site. "We like to get 90 days of running out of it before we ship it to the job site," Carnahan added.

Though Carnahan has been involved every step of the way, he says he's been trying to work on the business more and in it less. To that end, he recently completed a full business plan, with the help of one of his newest employees, Anish Button.

"I've known Anish for years because she worked for a rep firm in Portland while she was going to college," Carnahan explained. "She helped me write a business plan a couple years ago. It was during her last year of college and it was one of her senior projects. She did a great job with that."

In fact, she earned an "A" on the project and, in essence, the title of "controller" when she went to work full-time for Premier after graduation.

"The class was the business administration capstone course, called 'BA495 - Business Strategy' at Portland State University," Button recalled. "I worked hard researching, writing and calculating the financials. For me, it was the most involved college project I had, and I was personally very attached to it. I learned a ton, and the professor was very impressed!"

Beyond simply providing focus for the company's owners and employees, the main advantage to having a real business plan, is that it finally opens the company's doors to outside financing.

"We've done this all without outside financing," Sant said. "In the end it may have taken us a little longer to get to where some other companies who basically just start off with a bunch of cash and not much experience, we've gained experience with a little cash. Now we're in the process of trying to expand into other areas, and feel like we've got the background to go into some of these other markets and be able to show what we do."

The other indirect result of Premier's business plan is the company's effort to brand their name internationally by marketing to upper echelon clients. Specifically, the company has sponsored a charity yacht cruise from Newport to Nantucket, Rhode Island, to benefit the Boys and Girls Clubs of Broward County, Florida. Through that event alone Carnahan met new clients who have multiple homes around the country.

"We made some good contacts and developed some good relationships," he said. "Since that time I went back and attended the Ft. Lauderdale boat show and met a lot of those same people again. Then I sponsored another event for the Boys and Girls Club in Broward County down in Miami at Fisher Island. The people that were there raised over a million dollars in one night off of an auction for the Boys and Girls Club. Many of the people who were there are my friends now. "Really we're trying to become their design firm for everything that these folks do."

Having ideas like these and others has helped make Premier Home Theater become a developing success during its first decade of business. Sant calls it an "open-minded business plan that's more proactive than reactive." That characteristic has helped Prentice fit right in with his fellow owners.

"Fortunately, all three of us have hit it off from day one. We all just kind of work off each other," he said. "To find three people who just interact so well is really encouraging and promising. To me there's a lot of egos and arrogance in this business. To find three guys who can do that and work together it's a pretty unique thing."

Jeremy Glowacki is editor of Residential Systems.

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