A Sense of Scale

A Sense of Scale
  • Get a group of AV managers together and the conversation will always come back to three themes. Where do you find good people? Will owning this particular piece of gear be a good choice? And, how can we reduce mistakes and be more profitable? When the group leans towards large companies, then we also talk about needing more capital, complain about price erosion, and reminisce about the days when we had more control over all the details. Conversations with smaller companies revolve around looking for ways to compete for bigger shows, managing overhead costs, and developing more business allies. Of course, both groups would like to have all the answers--and some mid-sized companies appear to have just that, which just makes everyone envious. The reality is that we all have the same issues. The only real difference is scale. Here are some things I have learned from my networking experiences.

Big companies get all the new toys and small companies have to wait till next year, right? That's not necessarily so.
How we face an opportunity is not just a matter of culture, it is often dictated by our size. Scale defines the choices and drives the decisions of all businesses. To a small company scale means turning down core work when you are too busy. One extra job could turn a profitable month into a loser. Scale to a large company means that you sell more jobs than you think you can handle and then try to move things around fast enough to stay on top. Being bigger means you have more options to massage schedules and deeper resources to do a good job while making money.

Scale can affect decisions in unexpected ways. For instance, when AV managers discuss worker's compensation insurance for freelancers, the subject can be quickly boiled down to how much risk your business can afford. It would seem that a large company could absorb more risk, but because of scale the opposite is true. If for instance, one in one hundred freelance workers will get hurt and file for worker's comp in a given year, the big company could face dozens of claims while the small company might have none. The small company can't imagine handling the extra cost for coverage and the large one can't imagine taking that kind of risk.

We all buy new equipment, but again scale dictates when, how and what we purchase. Big companies get all the new toys and small companies have to wait till next year, right? That's not necessarily so. Buying the latest, greatest widget can be a big boost to a small shop and often buying only one will cover their needs. Plus the risk is fairly low even if the product turns out to be a dud. When it takes hundreds of a product to satisfy demand an unwise choice can have far-reaching ramifications for the big shop. Large companies must also contend with the sales, marketing, and public relation initiatives needed to promote the product--not to mention the training and support required for salespersons, technicians, and operations staff in multiple offices. Small companies can benefit from moving fast while big ones need to do more homework and planning. Just ask any AV company that has added a lighting department. It is not just about adding gear; you have to add infrastructure.

Scale also means a different way of looking at costs (isn't most revenue the same?). A small company might be mistaken if it doesn't track costs on a show-by-show basis because there is not enough business to absorb mistakes in planning and execution. Having to sub-rent a video projector because you forgot to stock a new lamp might erase all the profit of that show. Likewise, throwing in a piece of gear for free because "it is just sitting on the shelf" has an associated cost to it that we often forget about. But tracking costs by project is an expensive and time-consuming process usually reserved for the largest of companies, and it has some major pitfalls. A large company that makes decisions solely based on job cost might jeopardize a big piece of business or a long-term relationship over a few dollars. The irony is that small companies are better equipped to make cost decisions on the fly and have a clearer picture of what their costs are while large companies are often bogged down with layers of process that mask their true costs.

One big development that large and small AV rental and staging companies have in common is the growth of wholesale equipment rental vendors. These companies provide discounted equipment rentals to the trade making it possible for small and large companies to easily source extra gear. This has had a tremendous financial and social impact on the industry. It has allowed small players to field equipment that they are not ready to own and lets them compete on a higher technical plane. The big guys can dispatch more shows, smooth out their delivery hurdles, and make their overall product more consistent by supplementing with wholesale rentals. But the wholesale AV trade has significantly reduced the interaction between the large and small AV shops as sub-rentals now mostly take place between wholesalers and those businesses. Wholesale rentals have also cut down on the collaboration between similarly sized companies who now spend all their time as competitors rather than occasional allies.