Why Custom Integrators Can Still Thrive Without Mega-Rich Clients - ResidentialSystems.com

Why Custom Integrators Can Still Thrive Without Mega-Rich Clients

Perusing the June 2013 digital edition of Residential Systems, I came across a column by Ira Friedman, titled “Targeting the Mega Rich: Why Ultra High Net Individuals are the Best Custom Integration Clients.” Ira had some interesting points in his piece. For one, he defined Ultra High Net Individuals (UHNI) as households with over $30M in disposable income” saying they “represent your best potential clients.”
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Perusing the June 2013 digital edition of Residential Systems, I came across a column by Ira Friedman, titled “Targeting the Mega Rich: Why Ultra High Net Individuals are the Best Custom Integration Clients.”

Ira had some interesting points in his piece. For one, he defined Ultra High Net Individuals (UHNI) as households with over $30M in disposable income” saying they “represent your best potential clients.”

Ira also claimed, “The $1M client has all but vanished, and if you haven’t realigned your business to attract and service the $30M client, you’re probably not doing so well.”

As someone whose company has been around since 1995 and doesn’t “attract and service the $30M client,” I took exception to some of the things that Ira had to say. While I’m sure that UNHI are the perfect clientele for some companies, I’m not at all convinced that they are “the best custom integration clients” for everyone.

So, I figured I would offer a different take on this and assure those of you with companies like mine that you can continue and even thrive without targeting the UHNI clients. Here are seven reasons why you should think long and hard as to whether or not UNHI clients are right for your firm.

Market Opportunities

According to Ira, these mega-rich live primarily in California, metro New York, Florida, and Texas. (Interestingly, coinciding almost exactly with what Prima Cinema told me where the majority of its systems are located.) So, if you live in one of those four areas, congratulations! You might have a shot at these big-money clients. For the rest of us, we might stumble across one once a year if they decide to build a second (third, fourth…) home in the geographic area that we cover. (And even then, I can’t tell you how often I hear, “Well, I have a lot of this stuff in my main home. This is just a vacation house and when I come here I just want to relax and don’t care about any AV or automation. Just a flat screen in the family room with a small surround system…”)

Ira’s company—Bay Audio—sells speakers to custom installers all over the country, so it is much easier to have a reach that extends hundreds/thousands of miles beyond your base. For the remaining 99 percent of us, we realistically remain within a 100-mile radius of our home base.

Project Risks

One large difference between a typical homeowner and a UHNI is the depth of their pockets. And if something goes wrong—even through no fault of your own—these are the people that can literally sue you out of business. A legal team with nothing better to do than to tie you up in court while you pay your own legal representation at hundreds of dollars an hour will not only be out-of-pocket expense, but a huge drag on the focus of your company. Oh, and you also will have all of the outstanding money on the project until it comes to a resolution. I have personally seen a client tell another contractor—the pool installer—“I have a lot of money and time. I will take out a full page ad in the newspaper telling everyone how bad you are and then make it my goal to put you out of business!” Think it could never happen to you? Think again. I know of another high-profile Southern California custom firm that was embroiled in a lengthy—and costly—legal battle when a customer claimed the speakers they installed used toxic materials that were making him sick. The UNHI often have eccentric, volatile Type-A personalities that might not always respond, um, rationally.

And no matter how great you might hit it off with the UNHI, the likelihood is that you will frequently find yourself in the position of not dealing with Mr. or Mrs. UHNI, but rather one of their assistants or staff. And I’ve been told that these intermediaries “are more than willing to have you fall on the sword if it means they don’t have to.”

Ultra High Demands

These types of clients are not used to being told “No” or “Wait” or “I can’t.” Ever. They fire subordinates that can’t get it done or make excuses. Day or night, weekday, weekend, or holiday, if they have an issue, they are going to expect you to be there. Immediately. In fact, five minutes ago. Unless your staff is significant, this might be impossible for you to accommodate. And even if you have the, “I’ll just jump on a plane and be right there!” attitude—which, you absolutely should—what happens if two of these clients have an issue at the same time? Or three? These clients think they are the most important stars in the galaxy, and don’t care about anyone else’s problems. The first time that you aren’t able to instantly accommodate them, expect a meltdown. When a single client holds that much sway over your firm’s financial future, they own you.

Stratospheric Expectations

When you install a $20-50,000 theater, you are probably used to blowing people away. In almost every case, this will be the most incredible audio/video experience these people have ever had. When you install a seven-figure project, however, you almost can’t meet—let alone exceed—their expectations. The expectations are so unbelievably high because of the money involved, even if you produce the most amazing thing the world has ever seen, it still likely won’t live up to what the customer had envisioned. At the best, you can hope for a, “Well, it should be good. I mean, look how much it cost me!” Also, these clients have often heard other mega systems that will be constantly compared to your work. Even if you did everything perfect, if in their mind it doesn’t sound as good as their friend’s system—who, heaven forbid, spent less money—then danger, Will Robinson, danger!

Project Timelines

These mega jobs typically go on… forever. Projects measured in years are not unusual. And these jobs dragging on can become a real drain on cash management and other resources. Also, you can deal with the very real issue of product models and specs changing, possibly throwing off some key element of your design. By contrast, look at the jobs that you more typically do. From start-to-finish, most construction projects are generally completed in less than nine months. Even better are the one- to two-day home theater retro installs, where your crew goes in and knocks out an awesome theater and then walks away with a decent check. If your firm could consistently do two to three of these installs a week, you’d be the envy of every custom install firm on the planet.

Competition

These jobs are often not going to go quietly into the night and expect them to be submitted for multiple bids. Plus you will have to deal with people that are willing to shave pricing to land the big job—and not just to local firms but to companies from miles away. And then expect to your bid compared and contrasted against others. This is a fiercely competitive market, and those that are successful have carved out a real niche for themselves. And they didn’t do it overnight.

All Eggs in One Basket
Handling these jobs and giving them the attention they deserve and require often means turning away other work, or at least back-burnering or not as aggressively pursuing other projects. While the big job will hopefully have a big payday, very few firms can survive serving a single master. Rather, the life of a custom install firm is having a large reservoir of clients and a steady stream of projects in the pipeline. The mega-jobs keep you from filling this pipeline—and servicing previous clients—and can result in a real lag in business after your finish the big job and find yourself looking for other work.

Sure, the rewards with working with UNHI clients can certainly be large, and if you can get in with this crowd, and consistently deliver, it can be a path to install superstardom. But the risks are every bit as big and the downside might be potentially even bigger. Ask anyone that has done a mega-install… it is the big jobs that can put your company out of business.

John Sciacca is principal of Custom Theater and Audio in Myrtle Beach, SC.

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