04.04.2008 — If you poll integrators and hybrid dealers for a list of things that keep them up at night, profit margins are a common refrain.

Margins, as has often been said before, are fickle, elusive things. You can't rely on a brand or a product category to carry you forever.

Sometimes your exclusive vendor takes their distribution national, typically two weeks after they issue a glowing, weepy press release thanking all their independent dealers for their years of support, and suddenly, you're faced with big-box pricing.

Sometimes they just pull the rug out from under you by packing up and leaving the business.

If you own or run a small company, you know full well that you're not a big-box store, nor do you want to be. No matter how great your top line revenue is, getting a bottom line number that pays the bills with something left over is critical.

You'll be hard pressed to find a successful custom integrator who based his business strategy on Amazon.com's infamous dot-com-era sound byte that "we lose money on every single transaction, but we make it up on volume!"

Find Your Niche and Cultivate

One thing is clear: carving out a profitable niche for yourself in the business requires creativity, and a willingness to be unique.

Bryan Taylor, who owns The Gramophone in Edmonton, AB, has watched his business evolve and grow beyond anything he imagined twenty years ago.

Originally a retailer of high-end 2-channel HiFi and esoteric, often hard to find Classical and Jazz recordings, Taylor has grown into custom installation to cater to his existing, often well-heeled clientèle.

Asking him about his business, he makes it sound like a balancing act, keeping the plates spinning in the air, and making sure he knows their strengths and weaknesses.

CDs and vinyl have been good to him over the years, and he posits that as long as there is demand for audiophile hardcopies, he'll keep selling them. But he recognizes that the sun is slowly setting on them, and that one day they won't necessarily be a major profit center.

Turn Customers Into Clients

When it comes to hardware, he emphasizes the importance of building relationships, and converting customers to clients.

"People who want to be looked after understand the need to pay a little more," he says.

"When a comparison shopper comes in looking for the 'best price' I gently offer them two options: the price that comes with our support answering their questions after the sale, and the price to take it and never come back. Most people want service, and take the first option."

However, he underscores the need to know your target market. "You can't sell to everybody," he says.

Discounting is part of striking a deal, but you have to do it when it makes sense. It's probably not worth throwing yourself under the wheels of a prospective customer's car so they can't leave until they make a deal.

Focus instead on taking really good care of people who will reciprocate.

When it comes to product lines, Taylor says that some give or take is inevitable. He retails Panasonic flat panels simply because they're good products with brand recognition.

He has to sell them for the market price, but looks toward installation labor, accessories, and audio equipment to make up for it. In video, he remains upscale in projection products, but has opted to not fight the current in flat-panel pricing.

Clearly, a key part of having a successful small custom company depends on focusing on what you can do well.

By staying realistic about the different aspects of your business, you can maintain the flexibility you need to shift gears as the business changes.

Lee Distad is a freelance CEDIA Certified Professional Designer who offers design and process consultation to firms in the Custom Installation industry, as well as copy writing and other professional writing services. Lee's business and industry blog can be read at http://www.leedistad.com