AV Matters
The Stimson Group Newsletter
September 2009
Vol 3 Issue 9
In This Issue
R&S Roadshow
AV Trends Survey
Future Planning
AV Matters Blog
AV Best Practices
About The Stimson Group
Quick Links
Welcome Back,

Many of you have commented about how busy I've been this summer. I have helped a record (for me) number of companies this quarter. These have been what I consider the best kind of projects - getting under the hood and planning the next steps. These companies want to make a tangible difference in their results, and I am proud to be able to help.

In this month's Best Practices column I talk about key issues facing Systems Integration companies. If you are struggling with any of these topics, go back up to my first paragraph then give me a call.

It's R&S Roadshow season again. We had a fantastic turnout in New York and are gearing up for Chicago and Toronto! Don't forget to register in advance for free to save onsite fees.

The August AV Trends Survey contains some pretty interesting comments about the biggest issues facing the industry. We also learn that while growth is important, most folks would be thrilled to see a profit again!

Thanks for reading,

Tom (TR) Stimson, CTS
My Direct Email

R&S Systems Logo Rental & Staging Systems Top 50 Rental Companies

You are five minutes away from a year of free publicity and public accolades! The deadline to submit your company to be listed in the Rental & Staging Systems Magazine Top 50 Rental Companies is this week!. Submission only takes a few minutes and will pay off for years to come. Get the recognition you deserve and share it with your clients, suppliers, bankers, and family. Follow this link to the submittal form.

Roadshow Header
Chicago Rental & Staging Roadshow
Registration is Open

Hosted by Production Plus
The Rental & Staging Roadshow is returning to Chicago September 23rd. I will once again be providing the keynote address and will share some highlights from my Best Practices series. Andre LeJeune from InfoComm International will be on hand to present some of InfoComm's extensive new Live Events curriculum.

Register NOW! Use CODE: RSTS to attend for $FREE

The Roadshow is a day of training, seminars, and exhibits presented by the folks at Rental & Staging Systems Magazine - the definitive publication for AV Stagers. The Roadshow is a great opportunity to get some training for the team and for your CTS holders to earn Renewal Units from InfoComm. Learn more and reserve your ticket here.

Mark Your Calendar for Wednesday October 28 in TORONTO. Details to Follow.

AV Matters Monthly Business Trends Survey
Thinking about the future?
We asked some unusual questions in the August Survey. We got some interesting answers. For instance, we asked, "What is the biggest issue, trend, opportunity facing the audiovisual industry over the next five years?" Here's a small sample of the replies:

"Customers choosing the least expensive solution rather then the best."
"Companies are slashing their profit margins just to keep their employees working...This is a difficult trend to reverse when the business rebounds."
"Customers are beginning to devalue the role of the integrator because they've been led to believe systems are becoming so simple they can do everything themselves."

Many responses were interesting stories about survival and retooling. See the complete results here.

September Survey
A year ago we did a survey about how small businesses position their customer-facing employees. Over the past year many firms have had to change their Sales and Support profiles. Our September Survey revisits this question to see how firms are trending in the new economy. Take this five minute survey.

If you have an idea for a survey subject, just email me.
2009 is Almost Over - What Will 2010 Mean for You?
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This year has been tougher than most business owners imagined. Many audiovisual companies - whether in Live Events or Integration - have had at least one round of layoffs and I know of cases that have had as many as four. Some of you are now working for companies that are 50% smaller than one year ago today. Staffing levels are not the only costs that have been cut. Companies have reduced services, slashed margins, and purged product lines. Many of you have also attempted to reach new revenue streams. Some have been successful, and others have hurt the bottom line.

It's time to stop for a moment and take stock in where you are now and where you hope to go. The two questions you should be asking are "Have we done enough?" and "What should we do to move forward again?"

In the next couple of months you will be reviewing your 2009 results, answering for your choices this past year, and explaining next year's plan. Now more than ever, companies can benefit from external expertise and a fresh point of view. If you have ever wondered what a Management Consultant does, this is it. We help companies determine where they are now so together we can figure out the next step.

The Stimson Group starts by reviewing your financials and benchmarking against the industry. This is not as simple as saying whether your results are better or worse than someone else's. This is about understanding why you have the results you do and what can be done if you wish to change them. Next, we understand what your assumptions are about the industry, your competition, and your opportunities. We introduce industry knowledge that you may not have access to. Finally, The Stimson Group assists you in interpreting all this information and formulating a business plan with attainable goals and realistic measurements.

The depth of our contribution is based on your needs and budget. Even our smallest planning projects have yielded big results. Contact Tom Stimson to learn how you can get a jump on your competition - or at least keep up.
Business & Social Networking
Sometimes I have things to say that won't wait for the next AV Matters newsletter installment and won't fit into my Twitter character allotment. This is why I started AV Matters Blog - a place to expand on my thoughts about the issues I come across each week. Take a look and feel free to share your comments.

People often ask me what Linkedin is good for. Last week I saw (on Linkedin) that an industry Sales professional had just been laid off in SoCal. I had just walked out of a office in the same zip code that was looking for someone with the same profile as my contact. I sent a quick email and while the salesperson found an even better opportunity - the system worked.

My Facebook has grown with a lot of new and old friends. This is way more fun than working! Come on in. It's OK to have a life outside of work. People often ask me if there's a business reason to use FB. Absolutely, but if I tell you what it is then you will mess it up for the folks who just want to have fun. ^_^

Audio manufacturer Biamp Systems has featured Tom Stimson and AV Matters Blog on their new industry outreach website,
AVConnect.org. AV Connect was created to help AV Integrators and IT end users learn how to better work with one another and maximize the power of AV for business communication. This is an informative website and the case studies are excellent examples of a converging audiovisual and information systems.

AV Best Practices Series
Systems Integration Top Ten Business Challenges of Today
Do any of these sound familiar?

As many of you already know, I spend half of my total consulting time working with Systems' Integration companies. Summer of 2009 has been especially busy for a number of reasons. In particular, integration companies are trying to understand the new economic reality and what adjustments they need to make to survive the downturn. In case you are one of those firms still evaluating your future planning, there are some key issues you might want to discuss. The bad news is that there are few definitive solutions - everyone has a slightly different situation. The good news is that these challenges are very common, which means there are plenty of good examples of how companies have successfully solved the puzzle:

Clearly there has been a reduction in the number of available design-build projects forcing integrators to look at large bid projects they may have passed over in years past. When a Design-Build firm bids on contractor jobs, three things tend to happen:
1. The AV Integrator ties up valuable engineering resources applying a design-build process to the estimation.
2. The team settles on a 15-20% gross profit and submits their proposal.
3. The job is awarded to a company whose bid came in at 8-12% gross profit.
Contract bids may dilute your focus, but in the current economy they may also be the key to your survival. If you choose to take on a contract proposal, then you need to understand how contractors can survive on such low margins.

Digital Signage
The pundits continue to tell integrators they need to be in the DS business, but the opportunity is still unclear. What we do know is that there are some cool-looking projects out there, but the margins seem painfully low and the market channels are very fuzzy. In addition, the sweet spot on these jobs seems to be in the content development, which most integrators are loathe to take on. Bottom line is DS is a great opportunity but a huge investment in intellectual capital.

Capturing Project Data
There are CRM products to track the front end of an opportunity and accounting products to manage the back end. Where integrators really need help is in managing the planning, purchasing, scheduling, and costing of jobs.  Considering that most profit is won or lost in the project management phase, it is amazing that so few companies have taken the time to create or apply comprehensive software to this problem. Whiteboards, spreadsheets, gannt charts, MS Project, and a dozen additional ad hoc solutions still fill the gap. I do not want to insult anyone, but it looks like a lot of companies believe what they do is so unique that a packaged software won't fit their needs. Even if that were true, the case for some sort of proprietary solution is very strong. With today's margins, no one can afford to misuse resources - people, time, or money. 

Sales Commissions
The short story is that commissions need to promote the behavior you want, but they must also be tied to something that sales folks can control. The most common measures are commission on revenue or gross (or even net) profit. Neither one really works. The better systems use a combination of metrics, but the key is that management has to set minimum margins and gross profit (projected or estimated) at the time of contract. Sales should be commissioned based on how the job was sold. Operations is responsible for bringing the job in at the projected profit. If you are not happy when you write a commission check, then there is something wrong with your system.

Change Orders
The Design-Build industry was built on Scope of Work proposals and one critical word: Yes. When the customer asks for a change, they usually get it. They rarely see an additional charge for it - at least not from Design-Build integrators. As a result, many companies have no process or culture for capturing change order information. The difference between profit and loss on a job is often only a few man-hours of time. How do you get your team excited about asking the customer for more money? If you commission correctly (see previous section) then capturing change orders becomes a higher priority for both Sales (commissioned on the margin) and Operations (bonused on the gross profit). When something really matters to the team, they will find a good system for keeping up with changes.

Service Agreements
Industry pundits (including me) all say that service contracts are important to the integration industry. Yet, it seems that very few integration companies include service agreements in their proposals unless they are specifically asked for one. The potential profit is huge and the risks are fairly low. The typical integrator could add 5-10% to their existing revenue at 50-70% gross profit. For a $10 million company that could mean as much as $700,000 additional profit (or as little as $250,000 but that's not chump change either). Your results may vary, but consider that over the next two or three years that design-build projects will continue to disappear. Integrators that are managing service agreements will have first crack at renovating existing installations.

I think we can all agree that it doesn't make sense to tie up capital in inventory if you don't have to. I find two common mistakes in this area. The first and most egregious, is the practice of ordering product as soon as the job is confirmed. There are some good arguments for doing this, but they apply in only a small percentage of cases. Too many companies do it out of habit. The second big mistake is keeping the inventory on your balance sheet until it is delivered or installed. As soon as you open the box or take it to job site, I think we can safely say that it is committed to the customer. While we are on the subject, another key issue is the fact that we are still losing (misplacing?) a LOT of inventory. This is a critical issue that is worthy of immediate changes in process and policy.

Customer Relationship Management
Even the smallest integrator can afford access to a web-based CRM product. The trick is getting sales folks to use one. The common mistake is to position CRM as merely a sales management tool, which has little direct benefit for the sales person. Key sales folks - especially the ones that sell a dozen large projects a year - often prefer to use their own system. Another mistake is to not use the data, which further reduces the team's willingness to comply. The solution: Management has to understand the features of the CRM product and commit to using them. CRM can then be part of sales meetings, progress reports, performance reviews, marketing campaigns, and data analysis.

Getting Sign-off
If you do not explain to the customer what a finished job looks like, then how will they know when you are done? Managing client expectations is an art form, but it is also a critical business function. Many companies do not have a formal sign-off process (see "Yes" in the Change Order section) and therefore struggle to get off the job and paid. We could have labeled this section "Job Completion", but too often integrators confuse finishing the install with being done. Bottom line: Do not submit a final invoice without an accompanying signed confirmation that the project is finished.

Organization Charts
If I could spend an hour on any of the above topics, I will then need to spend two hours talking about a company's org chart (or lack thereof). Most of the charts I come across are what I call evolutionary org charts. They are merely a snapshot that reflects how a company hierarchy generally works rather than an intentional plan. Rarely are org charts used as a tool to clarify and streamline processes. The biggest sticking point is usually a longtime employee that has been promoted and titled beyond their relevance to the business. Cleaning up the reporting structure and business titles is an important first step for a lot of companies.

We could spend an entire day talking about any one of these key issues. In your next management meeting, bring up one of these topics and ask if your firm has done its best work in that area. If not, then you have your agenda for the next meeting!

Thoughts? Comments?
email me!
PresenterAbout Thomas R. Stimson, MBA, CTS

Tom Stimson is celebrating over twenty-five years in the communications technology industry.  As a Consultant, Tom helps companies figure their next step and then execute their plan. For more information visit the website.