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What Could Happen Next? - AvNetwork.com

What Could Happen Next?

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CONTRACTORS FOCUS ON THE YEAR AHEAD

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It’s no secret that for most companies, the conclusion of the first decade of this century has been tough. But it’s become a bit of a moot point whether you classify the current economy as a downturn, recession, or even a correction; for systems contractors, there are still opportunities out there, and it’s just a matter positioning your firm to take advantage of them. Easier said than done? Sure, and there’s no doubt that a lot depends on geographical markets. Even so, survival—and, in some cases, record-breaking success—happens thanks to a strong entrepreneurial spirit and a continued emphasis on the value that systems integrators are capable of providing.

“People need and want what we’re doing,” said Brock McGinnis, CTS, sales manager in the systems division at Westbury National Show Systems in Toronto, ON, Canada. Not only have performance expectations increased—largely because consumer audiovisual technology has progressed to the point where the delineation between professional and consumer equipment is increasingly blurry, but because systems integration equipment is no longer a novelty, it’s a must. “Our technology has become necessary for other people to do what they do.”

Admittedly, it’s easy for McGinnis to be positive: Canada’s relatively conservative banking regulations helped prevent the country’s economy from taking as significant a nosedive as its neighbor to the south, and financing for construction didn’t, and hasn’t, dried up. As a result, McGinnis relayed that Westbury has enjoyed another profitable year conducting a number of large-scale projects, including one for the Toronto International Film Festival and a distance learning deployment between the University of New Brunswick at St. John and Dalhousie University in Halifax.

Todd Lucy, president of South Western Communications in Newburgh, IN, admitted the times are challenging: Projects in the education and detention markets in his area are few, and margins have grown smaller, a trend that he believes will continue until state budgets rebound. On the flipside, however, he noted that there is definitely pent-up demand in both of these markets. “When funding returns there will be ‘shovel-ready’ projects already planned,” he noted. There is also opportunity for margin growth in the healthcare sector.

Per Forsberg, president of Audio Architects in Chippewa Falls, WI, recounted that 2010 has been a good year. Forsberg attributed this in part to his market’s relatively conservative economy, as well as its tendency to feel both busts—and booms—less violently than other areas of the country. He noted that there are a number of high-tech firms that benefit from defense contracts, which helps to drive business. Houses of worship are showing continued demand for systems, as is the education market, especially K-12, which requires upgrades to nuts-and-bolts systems such as intercoms and clocks. For the coming year, Forsberg and his team will focus more on corporate clients to address the need for audio- and videoconferencing systems for meeting and training rooms. He noted that the convergence of AV and IT has required both he and his staff to grow accustomed to a different way of doing business.

“We have learned to speak a different language and offer our expertise to people who really aren’t as familiar with our bread-and-butter systems,” Forsberg said. “We’re still valuable to them, but they are a different group of people.” He noted that there is also increased competition from major IT vendors, who often offer bulk purchasing discounts to school districts directly. “For projectors and things like that, they actually buy them for less money we do. There is a whole new breed of people we need to develop relationships with so that they know what it is that we can do for them.”

Up in Toronto, McGinnis said that the combination of ongoing new construction and government stimulus funding for the education and healthcare sectors will continue to drive business for the coming year. He acknowledged, however, that new construction will eventually slow down, which will likely produce more price-based competition in the bid arena. To counter this, Westbury is concentrating on mining its existing client database in an effort to sell upgrades. “We have a number of these projects already under way, where we’re upgrading videoconferencing from standard definition to high definition, 4:3 projection systems to 16:9, and analog signal distribution systems to digital ones,” McGinnis explained. In addition, the firm is approaching those clients that use video- and audioconferencing extensively with bridge solutions. “A lot of them have been paying outsourcing, fee-for-service videoconference and teleconference bridging and the return on investment for them if they do decide to purchase their own bridge is really good. It’s a six-figure decision, but when you’ve got clients that are paying $40,000 and $50,000 a year to use an outsourcer, the payback is very quick if they have their own bridges.”

Finding alternatives to pricebased bidding wars is extremely important if contractors want to remain competitive in the salaries and benefits they offer their employees. “If we can’t provide comparable pay and benefits, we can’t expect to retain people, and we are not going to lose them to our competition, we are going to lose them to other industries,” McGinnis underlined. To retain employees, companies must provide good pay, which, in turn, demands that they charge adequately for design, engineering, project management, and customer training.

And, while charging for customer training is important, so, too, is investing in employee training—even if the knee-jerk reaction to a tough economy may be to hold back. “Everybody I talk to says it’s hard to find quality employees. I find it very easy to find quality employees, I just can’t find trained employees in my market because they already work for me,” Forsberg said. Without a properly trained staff, it becomes difficult to take advantage of new opportunities, not to mention that untrained employees eventually look elsewhere for work. “The cost of an employee keeps going up, but you have to walk the fine line of paying them well enough so they stay, and it takes so long to train them at first that you really have to keep them and continue training them.”

Margin Builder
It’s a business basic, but one that needs to be revisited from time to time: It’s easier to sell to an existing client than it is to find a new one. Brock McGinnis of Westbury National Show Systems encourages contractors to mine their existing client databases for leads prior to cold-calling new prospects. “They may not be able to afford to do anything, but they are still going to need somebody to keep their existing equipment running,” he said. After all, there’s significant money to be made in servicing systems and even more potential revenue in upgrades.

As customers tend to be more conservative about capital expenditures these days, it’s also necessary for contractors to be more flexible in how they propose upgrades. “There are still opportunities, and they can be taken advantage of a little bit at a time,” McGinnis said. “If it’s one meeting room upgrade a month for a corporation, it becomes part of an operations budget rather than a big capital budget.”

More About Our Commentators

Audio Architects
Eau Claire, WI
audio-architects.com
Specialties: Audio, video, and acoustical analysis for education, worship, sports venues, business, and residential markets.
Regions Covered: Wisconsin

South Western Communications
Newburgh, IN
swc.net
Specialties: Offering integration communication technology and security systems for healthcare, education, business/commercial, detention, justice, and other applications.
Regions Covered: Four offices in Indiana, Tennessee, and Alabama.

Westbury National Show Systems
Toronto, ON, Canada
westbury.com
Specialties: The installation division provides audio, video, entertainment lighting, and control services for corporate, gaming, hospitality, institutional, performance, sports, worship, and retail clients.
Regions Covered: Primarily Ontario, with some international work.

Carolyn Heinze is a freelance writer/editor.

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