Expanding to Home Technologies, Part 2: Being the Right Electronic Systems Contractor

[Editor's note: This second part of a column series by Keith Davis of AVAD will continue to address the topic of how security-installing dealers can expand into the growing world of home automation. Look for Davis' regular installments in our Dealers' Columns article section and in regular issues of our e-newsletter for security dealers.]

Here's a simple concept that is critical to the success of your business: Home technology is worthless unless it is installed correctly by trained and motivated people with the skills necessary to do the job.

In this month's column, I want to explore how security dealers can take the skills they already know, learn new ones and transform themselves into Electronic Systems Contractors (ESCs).

Just as we identified the elements of Home Technology in the first installment of this column series, let's define what an ESC is. Simply put, an ESC is an industry specialist focused on simple home technology solutions that make good business sense for their unique abilities, skills and market. An ESC can also be defined as a security dealer who is also properly trained to install and service home electronics.

Before you begin thinking about adding the letters "ESC" to your resume, there are three areas of your business that must already be in place to create a foundation for this new growth. Failing to build on a firm business footing may save you time in the short term, but over the long haul, it will come back to bite you hard.

Every security dealer wanting to explore the field of home technology needs a dynamic and flexible business plan that must be reviewed and modified from the very beginning. Not having a plan will cause your company to fail by overwhelming the operation with demands that can't be met. If you don't have a written business plan for entering the home technology marketplace, do so now before taking another step forward or decide to remain what you are.

One critical element of the plan must address business growth. Your goal is to sell profitable technology solutions as demand skyrockets, right? To do that, you must be ready with an idea of where the people, trucks, materials and most importantly, the money, will come from. Create a scalable model that prepares your business now, not when you are in the throes of a cash flow and resource crisis.

Lastly, is your company managed well? In other words, are you directing and controlling every aspect of your operation to achieve a desired final outcome? Most small businesses are not managed at all, much less well, because they spend most of their time and energy reacting to whatever. Want your business to be the best it can be? Be proactive and manage the processes that define your company's direction, goals and ability to implement well.

Moving past the basics, a good ESC has several characteristics that set them apart from the competition.

First-class ESCs are focused on profit. Not sales revenue, not on trucks on the road, not on the builders you are working for, but on the bottom line. If you are not in business for profit, what are you there for? You don't have to be a CPA, but learn to read the balance sheet your accountant gives you. Know your cash position at all times and eliminate anything that does not add a fair profit margin to your business.

Successful ESCs focus secondly on relationships. Keep the human element in your operation and be customer-centric. Know about your employees too, for they are people just like you with their own wants, needs and fears. It's not what you know, but who you know and how you relate to them that will define the long-term success or failure of your business.

Next, a smart ESC will stay abreast of the latest home technology trends, but will also wisely choose to wait until the technology is proven and reliable before including them in their product mix. Do not become a manufacturer's beta test site and lose money and customers due to the inevitable glitches found in any product early in its lifecycle.

That being said, new products are key in the home technology market. The best solution to this paradox is to partner with a good supplier who will assist you in finding and using the correct gear that will perform at peak levels for a prolonged time period. Do not be fooled by the siren's call of low price for products that do not meet your needs. Find a good supplier who does more than move boxes. Look for training, a deep inventory and a company you can call for answers.

Training is another characteristic of a successful ESC. Yes, it takes time out of your busy day, but failing to be trained on proven technology can leave you left behind and run over by the competition. Train your people, and not just the top echelon. Training field employees builds loyalty and gives them a career path. Some people worry about training their future competition, but keeping untrained employees who harm your business is light years worse than losing a trained employee.

Let's face this truth too. You will not be the only company wanting to enter this lucrative market. Your competitors are out there, from different disciplines, with all of them salivating over this opportunity. Who are they? How do they operate? Knowing the answers to these questions is another characteristic of a successful ESC.

Traditionally, home electronics have been installed by custom dealers from within the CEDIA (Custom Electronic Design Installation Association) community. Basically a large trade organization, CEDIA members typically want to do the high-end, high-revenue custom install projects.

Another group you will meet head on in the builder market is electrical contractors. They have a distinct advantage because their work is required in every project. However, they are typically afraid of doing more than pulling wires, because their business model makes money on getting in and getting out as quickly as possible, which is not conducive to installing quality home electronic systems, no matter how simple.

Another force soon to be reckoned with are the IT firms entering residential audio and video. In their mindset, IT firms believe everything is going to IP anyway, so they think they have a natural advantage over other trades like security. Yes, IP knowledge will be an important part of the technology puzzle, but not all inclusive.

Retailers continue to push into home technology market as well. Best Buy and Tweeter are two good examples of large companies with lots of money who are trying with little success to make builders and the residential market theirs. But what they don't have is you, and unless they buy up a lot of small dealers (not likely), then they will never have a corps of well-trained and motivated installers.

And admittedly, the home technology marketplace does not offer much in the way of barriers for start-ups and spin-offs, so you can expect bright and energetic people with little knowledge of AV, security or other similar trades to look at this market as ripe for the picking. But just because they enter does not mean they will all survive. The landscape is littered with the bones of more than a few well-intentioned but ill-educated companies and entrepreneurs who tried and failed to make a big splash in the technology sea.

An ESC who can embrace these characteristics and educate themselves about their competition will learn a valuable lesson on branching into the field of Home Technology. Michel Gerber, author of The E-Myth Revisited says it best: Learn to work ON your business, not IN your business. Be the driving force behind the operation, not the person in the daily trenches and see how much more successful and profitable you will be. Every successful ESC I know takes this mantra to heart and benefits from the lessons learned.

So are you ready to enter this new trade with the skills and training required to be successful? It's not difficult to do; it's just new-to-you. Embark on a journey of growth and discovery and you and those in your company can become true ESCs, better than the competition, making real profit while creating a business that has true value and worth. Our topic next month will examine the benefits of contemporary home technologies and explore an installing dealer's relationship with home builders.

About the author: Keith Davis is Senior Dealer-to-Builder (D2B) Manager for AVAD, a leading U.S. distributor of custom home electronics. He can be reached via email at d2bmanager@avadd2b.com.