CE Pro Summit Panel: Different Builders Require Different Business Models
Integrators cannot expect to treat builders and developers of MDUs, semi-custom homes, luxury homes and production homes the same way. Each niche needs a separate approach. Here are 10 tips.
Establishing and maintaining partnerships with homebuilders might be more art than science. And according to a panel of integrators who spoke at the CE Pro Summit in Atlanta, a different style is required to work successfully with each type of homebuilder, from multi-dwelling unit (MDU) developers and builders to semi-custom homebuilders to luxury builders to production builders.
Here are 10 pieces of advice that came from the various panelists during the discussion. In many cases, the panelists took a totally different approach to the market.
Target Developers First
One piece of advice that the entire panel agreed on was how it is better to target a community developer than just the homebuilder.
According to Richard Millson of Millson Technologies in Vancouver, Canada, “For condos, you need to get in at the developer level. If you only go in at the builder level, you are at risk of being manipulated. We create a detailed specification for the project that is presented to the developer and then followed by the builders,” he notes.
Offer a Turnkey Solution
Over the years, Millson has done 20 high-rise towers, each of which has been a three- to four-year project. He says condo developers want a turnkey solution.
“We do not want their salespeople selling the technology. We must take the meetings with the individual buyers. We incentivize the developers’ sales team to set up the appointments for us,” he says. Before that can take place, however, there is a lot of education of the developer that Millson must do.
Use Dedicated Staff
Michael Cogbill of ETC in West Palm Beach, Fla., had to rejigger the company structure to work with production builders. The company generally works with ultra-high-end luxury homeowners, so it wasn’t easy to shift a portion of their energy to work with production builders.
To do it effectively, ETC set aside separate staff just for its builder business, which accounts for about 15 percent of its total revenues.
Install Technology in 'Common Areas' at Cost
One effective technique to get developer business in MDUs is to offer to install the “common areas” in the condo complex at dealer cost. That means the Wi-Fi, multiroom audio and flat panel TV in the downstairs lobby or rec room. That is what ETC does in exchange for a guarantee from the builder that it will be the first integrator to meet with the condo buyer.
“We don’t close them all, but we get most of them,” says Cogbill.
Millson uses a similar technique, calling it the “base building” portion of the job. It usually includes the access control system, structured wiring and even motorized shades for every unit.
“I know some of you will not believe this but we have never given a dime in kickback to a builder,” he says. “We tell them that they can make the money on the real estate and we will make our money on the technology. By putting in the technology, it is going to allow them to make more money on the real estate because it will be more valuable,” he says.
Offer Aftermarket Service
One of Millson’s key selling points is the guarantee of aftermarket service.
“We offer a three-year unconditional warranty on every system we sell… no asterisk. We offer full concierge aftermarket support so the builder will never get a service call. That is key,” he says.
Clifford agrees, noting that Livewire tries to sell a full service plan for every project.
“We lead with the service discussion. Customers appreciate that we are proactive in talking about service. I have had builders tell us that we got the job because of our service plan,” he says.
Build Trust with All Stakeholders/Partners
Henry Clifford of Livewire in Richmond, Va., tries to establish trust early in the process with every stakeholder possible.
“We try to go up the entire food chain,” he says using an analogy. “We want to align with the architect, homeowner, design and specifier … we want to make it hard for the builder not to work with us.”
One way Livewire ingratiates itself to builders is by co-branding the technology with its company name and the builder’s name. “It helps them feel like they are part of the technology solution,” he says.
Sell Only the Design First, Not the Entire Project
One fundamental shift that Livewire undertook a few years ago was totally enlightening to its sales team: Instead of trying to sell the entire project, Livewire’s “first sale” is for a conceptual design retainer.
“We only ask for 4 percent of the entire project cost for the design and specification. That mindset changed everything for us,” says Clifford. From there, the builder can take the specs and bid them out if he wishes. In most cases, Livewire will end up getting the installation job.
Be Prepared to Scale Up
If you are not able to scale your business, you should shy away from working with production builders, advises Cogbill. He says it is very common for a builder to change the timeframe on a project, often compressing it.
If the integration company is not able to scale quickly to meet that demand, it will be difficult to work with a production builder. ETC, for example, has 110 employees and can shift employee resources if needed.
Millson told the story of one builder who initially gave him a six-month timeframe only to change it to six weeks. “We were able to do it by hiring just two more guys,” he notes.
Create Standardize Processes
The only reason Millson Technologies was able to meet that compressed timeframe is because the company has standardized efficiency in place.
The company is able to do a $17 million tower project over a four-year time period with just 17 installers because it has those processes in place.
Proving there is another way to approach the builder market, Robert McDonald of Vintage Security focuses on working with 100 different semi-custom homebuilders. The business model he has in place is very different in that Vintage’s main target is to get the recurring monthly revenue (RMR) from the projects.
“The builders mark up everything we do. We are all about RMR. If we can get into 3,500 homes in a year, we get the monitoring revenue from those homes,” he says.
Jason has covered low-voltage electronics as an editor since 1990. He joined EH Publishing in 2000, and before that served as publisher and editor of Security Sales, a leading magazine for the security industry. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He is currently a member of the CEDIA Education Action Team for Electronic Systems Business. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at [email protected]
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