Home Is Where The Profit Is

With networking and IT-based technologies becoming as prevalent, if not more, as AV in residential installations, the home market is continuing to demonstrate considerable profit potential not only to those already working in this arena, but to those systems contractors who are exploring it as a source of new revenue.

So says Rob Gerhardt of Group Gerhardt, LLC, which offers design, consulting, training, and support to a network of residential custom installation companies across the U.S. Instead of installing the systems themselves, the team at Group Gerhardt acts as a "virtual architect," providing those out in the field with drawings and feedback. When the company was founded four years ago, Gerhardt projected that each "transaction" would average approximately $30,000, most of which would be derived from the implementation of audio/video technology.

"What we are seeing now is the average is more than three times that," Gerhardt said. "Those numbers are not being achieved by selling more DVD players. They are being achieved because more and more systems are being installed into the home as an essential part of the infrastructure."

"There is a continued expansion of our disciplines," agreed Aaron Carmack, director of business development at Progressive Audio in Columbus, OH. While Progressive Audio is rooted in AV, Carmack acknowledges that, thanks to the proliferation of HVAC, lighting, window shades, and control, audio and video make up less than 50 percent of the company's business.

Simultaneously, Carmack notes a significant upswing in residential projects over the last year and a half, especially in the multiple dwelling unit (MDU) market niche, where owners of condominiums are calling for the same systems that have been traditionally installed into larger homes. "Being in central Ohio, it is something that's part of a bigger residential trend, which is the revitalization of urban cores and MDU buildings, condo conversions, and these sorts of things," Carmack explained. "For us, it's a different market than what we were used to seeing in the past. We were more accustomed to dealing with large suburban homes."

Carmack notes that while the actual contracts are smaller, the general concept behind residential systems integration remains the same. "It's taking the core values of using high-quality products, good integrators, and technology, and scaling it to the building," he said. "We are still installing shades, lighting, and control systems, but we are only doing eight windows, for example, rather than 30." The disciplines transfer; it's just the size of the system that changes.

The key to Progressive Audio's success in the MDU market is its alliance with a production company, and its ability to accommodate strict building schedules. "They are trying to turn a profit to build these buildings and sell these condos, and the only way that they can do it is by getting people into these residences quickly enough," Carmack explained. "They rely on subcontractors like us to keep up to their schedule and not hold them back so that they don't miss any closing dates and lose money."

Per Forsberg, president of Audio Architects in Chippewa Falls, WI, heads up an organization that caters to the commercial world 90 percent of the time, while the remaining 10 percent of the company's revenues hail from residential projects. Forsberg believes that his team's commercial experience is an asset in the home. "We are comfortable in the construction environment and scheduling around other contractors," he said. "Here, we also have a good understanding of acoustics and we have access to acoustical analysis tools."

The popularity of high-end residential technology can be attributed, in part, to the increase in the use of media servers, according to residential insiders. "The ability to get it from that centralized location to various parts of the house and at various levels of resolution is becoming easier and easier," Gerhardt said. "Now you can choose between digital and analog, and there are so many ways to get video out to a room. These are choices that we didn't have 10 years ago."

Coupled with this is the fact that homeowners-many of whom are already acquainted with iTunes, MP3 players, the internet, voice over IP, and videoconferencing-don't always need to be sold on the "concept" of the custom installer anymore. "When we started this 20 years ago, the idea of having different music in different rooms at the same time while emanating from a central location was unfathomable," Gerhardt said. "The home theater didn't even exist, and lighting and dimming control existed in commercial buildings and stage productions. Now this is pretty commonplace, and it has reached the point where it is about to explode."

And, as electricity bills continue to skyrocket, the implementation of energy-saving systems will become a higher priority. "Energy is not going to get cheaper, so we need to come up with ways to turn the air conditioning down and manage the lights and the shades so that we can block the Western sun and all of those sorts of things," Carmack noted.

While they may embrace the concept of residential installation, homeowners still require more handholding than the average commercial facilities manager, something that those accustomed to large-scale commercial projects need to adjust to. "With homeowners, you don't get to use words that your clients don't understand, or they will simply choose someone else to work with. They are emotionally involved; it's their personal income that is making this happen. They are part of it," Gerhardt acknowledged. "You must be immersed in the entire installation process. It's nowhere near as well run as large commercial projects, because commercial facilities tend to run on better schedules than peoples' houses."

Forsberg noted that residential clients, while increasingly tech-savvy, want to know what installers can do for them. "We are used to working with pretty objective clients, such as facilities managers, architects, and electrical engineers," he said. "We don't tend to work with price shoppers. What we need to do is to be able to demonstrate what value we bring to the table."

The profit potential offered by the residential market is attracting new players every day, increasing competition. Carmack believes this to be a positive development, since, he believes, the level of competition is becoming more refined. "We are continuing to see good competitors in our market, and probably in everyone else's market, because the growth curve is so strong both residentially and commercially," he said. "I am seeing some good competition, and I embrace it. I would prefer to have good competition. This presents its own set of challenges, but I am excited about it."

Audio Architects...www.audio-architects.com
Group Gerhardt...www.groupgerhardt.com
Progressive Audio...www.progressiveaudio.com

Carolyn Heinze has covered everything from AV/IT and business to cowboys and cowgirls ... and the horses they love. She was the Paris contributing editor for the pan-European site Running in Heels, providing news and views on fashion, culture, and the arts for her column, “France in Your Pants.” She has also contributed critiques of foreign cinema and French politics for the politico-literary site, The New Vulgate.