CEDIA Management Conference Features Sobering Advice, Helpful Roadmap

Carefree, AZ -- During three intensive days at a desert resort here 30 miles outside of Phoenix, CEDIA’s slate of instructors, guest lecturers, and keynote speaker provided nearly 180 Management Conference attendees with business survival tips and sobering information about remaining viable as a business during a dee
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Carefree, AZ -- During three intensive days at a desert resort here 30 miles outside of Phoenix, CEDIA’s slate of instructors, guest lecturers, and keynote speaker provided nearly 180 Management Conference attendees with business survival tips and sobering information about remaining viable as a business during a deep recession.

The opening-night keynote featured Richard Tait (below, right), co-creator of the board game Cranium, who set the stage by offering insight into his company’s core values. He calls these his “10 Steps to the Next Big Idea”, and his point is the importance of creating standards for your company to adhere to as it conducts business. He encourages business leaders to establish their own values and to measure all-important decisions against this list to make sure you’re not getting off target.

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To read what attendees of the CEDIA Management Conference were reading on Day 1, click here for Residential Systems’ exclusive daily newsletter.

On the morning of the first full day of the conference, business valuation expert, John Mack, knocked the entire audience of electronic systems contractors (ESCs) down a couple notches when he offered a sobering message for anyone who thought they had a proper exit strategy set for their business.

"This is probably the worst time to sell your business that I've ever seen," Mack said.

Mack, of Imperial Capital LLC, was not all gloom and doom, but he certainly provided a reality check for ESC business owners about what they needed to do make their companies more attractive to potential buyers. The big message was establishing a recurring revenue model, similar to the security monitoring business.

"If you can come out of this economic downturn showing that you can grow, then the surviving players will be better acquisition targets in the future," he added.

Mack's conclusion seemed to be that most ESCs would find it quite difficult to make themselves attractive acquisition targets. He explained that acquisitions of sub-$10-million businesses aren't attractive for investors. He also said that the "disseminated nature" of ESC companies around the country made it hard to form synergies when trying to create roll ups for sale, too. If that's not enough, he said that growth rates of ESC businesses "aren’t terribly interesting" to buyers.

Mack said that despite these negatives, it's still important to consider hitting valuation targets to improve day-to-day operations. He went back to the recurring revenue theme. "Buyers like consistency in revenue mix and there are buyers interested in the home if you have recurring revenue stream," he said.

Closing out Day 1 of the conference was keynote speaker Tim Costello who analyzed disheartening U.S. housing numbers. Costello offered a “scared straight” assessment of the market’s boom and bust, even citing reports saying that before this latest “bust” is all said and done, 50 percent of all mortgages in the U.S. will be under water and the recovery won’t occur until 2013.

“This is not a half a million too many homes on the market,” he said. “It's really three million. We have one of the largest wealth destruction periods in our time, and that can’t help but affect the psychology of American consumers going forward.”

Costello said that the biggest issue for the ESC channel going forward is a huge demographic shift of baby-boomers (the ones who fueled the housing bubble with their second and third homes) as their peak-earning years end by 2015 and their needs change and home healthcare technologies become more relevant to them.

Another opportunity for ESCs, Costello said, is consider how to package technology solutions for the up-and-coming and constantly connected Gen Y demographic.


To read what attendees of the CEDIA Management Conference were reading on Day 2 of the conference, click here for Residential Systems’ exclusive daily newsletter.

The morning of Day 2 featured presentations from architect Jennifer Siegal, who focuses on sustainable, pre-fabricated, and modular housing designs and Rick Simpson, who gained prominence in the ESC channel when he served as the integrator on Chicago’s Museum of Science and Industry Smart Home project.

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Siegal encouraged ESCs to form co-branding partnerships with green technology providers such as solar panel suppliers. She also noted that architects like her, who serve as gatekeepers on these types of projects, love for their partners make it easier on them by offering a package of solutions. Although her work with AV technology has thus far been limited, Siegal’s modular homes are unique in that all installation must be performed at the factory where the home is being assembled. Her prefab designs are then dropped into place, fully formed, at the “construction site.”

The audience responded warmly to Simpson (pictured, left), who provided the most optimistic perspective for ESCs looking for a silver lining in the down economy. He explained the popularity with builders, at least in the “green-friendly” Chicago area of LEED-certified construction projects and how some of the most basic ESC offerings, like lighting, HVAC control, energy monitoring, and digital signage educating visitors about the projects environmental benefits can help a project gain as much as five LEED “points,” he said.

“It's nothing we haven't done before, but we have to present it differently,” he said.

Simpson said that it goes so far as having to present one Green proposal and one “regular” proposal for some projects. The Green one, in his experience, often catches the eye of the client more.

Branding, of course, is critical as well. Simpson’s company, 3G Applied Technology, has a Green-focused logo and slogan, which are featured prominently on his business cards.

LEED Gold and LEED Platinum, Simpson said, are the Holy Grail for Green builders, but the technology integration portion of those projects is not as well defined as would be expected. “They often slide us into a category called, ‘Innovation in Design.’ There are rules in these certifications about demonstrating a significant reduction in energy consumption. We’ve been able to fit into the Innovation in Design category by integrating efficient types of speakers, using products with amplifiers that draw less than a watt at standby, integrating IP control, and installing educational kiosks that educate about the differences between conventional concepts and Green design.”


To read what attendees of the CEDIA Management Conference were reading on Day 3 of the conference, click here for Residential Systems’ exclusive conference daily newsletter.

Jim Weber, a straight-shooting accountant, led off the morning on Day 3 with a session called “Fire Your Accountant.” Weber offered a series of rhetorical questions related to financial management of ESC firms, asking the audience specific question related to their tax reporting structure and other financial planning strategies that might be missed in their business.

Among his broader points, Weber discouraged real estate partnerships, but said if you must pursue this strategy, then you should never be the richest person in the partnership. Weber’s innovative employee loyalty concept involved a deferred compensation plan for an employee that remains with the company for 10 years.

“This help discourage your best guys from leaving and becoming your competitor,” he said.

The upshot of Weber’s session was, “Don't fire a good accountant, but challenge yourself to find a good one and challenge them. Let them go if you’re not the most important client to them,” he said.

Closing out the major presentations of the 2009 CEDIA Management Conference was famed boxer Sugar Ray Leonard (pictured, right) who provided a light-hearted memory tour of his career milestones, interspersed with reminders that business is a fight, and that to win you have to do your “road work” in preparation.

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“For me it was a five-mile run at five a.m. every day. Maybe for you it's going to work an hour earlier or leaving two hours later. Determination gives you a mental edge. You must do what your competitors aren't doing.”

The Olympic gold medalists and multiple title holder encouraged his audience to know their competitors’ strong points and weak points, and to be organized and specific.

Self esteem, he said, can be the most illusive ingredient of a successful fight, in the ring or in business. “It takes a holiday when you need it the most,” he said. “But, always believe in yourself.”

To illustrate his point, Leonard recalled a sparring injury just weeks prior to his historic fight with Tommy Hearns. His team was shaken by his sudden vulnerability, but because he was confident in his own ability, Leonard changed to a strategy that led to victory in the fight.