Logic Integration: Constantly Refining Business

Here's the good news: According to a 1979 study by Harvard University, businesspeople who write down their goals will earn 10 times more money, on average, than their counterparts who do not write down their goals.

Here's the bad news: Only 3 percent of businesspeople actually write down their goals, according to the same study.

You can count Shawn Hansson of Logic Integration in Englewood, Colo., as one of those savvy businessmen who has taken the time to articulate his goals in the form of a seven-page, written business plan. In fact, Hansson has been continually refining all of his processes -- from installation techniques to marketing to product mix -- as the company steadily grows from a start-up three years ago to $1.3 million in revenue in 2006.

Among the unique processes that Logic Integration has developed are "cluster" installations using multiple technician teams on site at once, elaborate vehicle paint jobs, large (and more profitable) commercial installations, expansion into key disciplines like IT networks and CCTV surveillance systems, a new showroom, takeover jobs and selling extended service contracts.

IT Integration Is Big Differentiator

Hansson first started doing custom installations in 1995 in Los Gatos, Calif., where he worked for a retail chain that sold and fixed computers. One day a customer asked him to fix his office PCs and office network that two other companies had previously tried to fix.

Afterwards, the client offered him a job on the spot. Over the years he applied his sound engineering and music backgrounds to sharpen his craft. After 9/11, he moved to Colorado and started Logic Integration.

From that beginning, Hansson set his sites on continued growth as defined in his written seven-page business plan. "I want to be a well-recognized brand. I would like to be between $4 million and $5 million with a net of 10 percent in the next three to five years," he says, estimating that it took him no more than 20 to 40 hours to write the business plan.

Information in the document includes an analysis on the fastest-growing parts of the market, the average company size in Colorado, profit margins, sales patterns, and even an entire paragraph devoted to why December and January are such slow months. Hansson uses the plan to motivate employees but keeps the physical document under lock and key … password protected on his server.

The written business plan is, in essence, Hansson's business philosophy, defining the company's place in the market and longterm goals. For example, IT integration is a competitive advantage for the company in terms of differentiating its proposals, getting more commercial work, and in selling extended service contracts.

"I am pretty IT savvy and another person on staff is skilled at designing virtual private networks and sharing music servers between houses," says Hansson. "We even have a couple of restaurants that share the same music database over a secure network. Overall, we try to be a one-stop shop. One of the things that clients love about us is that they can use us for all their computer and A/V needs, including upkeep, setup, and even helping them get the right IP addresses."

One big edge to the company's IT background is its ability to include IP-based surveillance systems in proposals while most competitors cannot. "We actually build the computers, put in the cards, configure everything for the client, name all the cameras, set it up on the Web and let them pick their passwords. We always leave a small 'hole' that allows us to remotely troubleshoot the system."

The cameras can be accessed on touchpanels and TVs -- all at once or one at a time. The troubleshooting capabilities are Logic Integration's entrée to selling an extended service contract, which is a much easier proposition when complicated home and business networks are involved.

"We push extended service contracts hard, saving the customer service-call dollars and saving lots of time for us," he says. "We really want to start picking up more recurring monthly revenue (RMR) from alarm monitoring and extended service contracts/warranties. We offer all of our clients a one-year service contract and then quarterly come out and update their system, clean the fans, dust off the equipment, load firmware updates, realign and adjust the projector and recalibrate the sound system."

The sale itself is done subtly. The company's salespeople mention the availability of an extended service contract during the sales process but don't push it until the job is done. During the final walk-through in the home, the extended service contract is once again discussed.

"There is usually some sort of question that arises from the customer, like 'What if this stops working? Does this equipment still work if it gets dusty?' That is our opportunity to say, 'As we mentioned earlier, we do offer a service contract where the technicians will come back every few months, recalibrate everything and retrain you.'"

Hansson advises integrators to particularly push service contracts for jobs that include iPods and music servers, because he has noticed that many clients either forget how to use their music server or how to download music to and from their iPod.

Logic Integration prices the service contracts at 5 percent of the total job cost (not just labor cost) per year, excluding sales tax. So far, the company is not increasing the cost of the service contract as the systems get older, but then again, Logic Integration has only been around for three years. Also with the service contract, customers receive a 10-percent discount on labor and product on any future system upgrades.

"They love that," says Hansson. "It's sounds odd, but even though clients want us and other contractors out of their homes real bad while we are there, they are glad to see us come back later, especially if it's the same technicians, which we always try to do."

To go with its goal of increasing its RMR, Logic Integration recently started offering burglar and fire alarm systems.

Commercial Work Nets 15%

Most of Logic Integration's commercial networking work is in the restaurant, retail and church markets. Hansson says that the sales process for selling networks is still pretty painstaking. "Most customers don't know what they want in terms of networking. We listen to what they want to do and point them in the right direction.

"Overall, commercial jobs are more profitable … plain and simple. You are in and out. For a lot of the jobs we are the sole bidder, and if it is a competitive bid, we usually get the job based on our referrals. I know the commercial world very well and I enjoy it," says Hansson. He estimates that the company averages 40 to 50 points on its commercial jobs with a 15 percent net compared to 10 percent net for residential work.

There are several other differences between commercial and residential jobs. For one, Hansson calls commercial systems "workhorses" because they last a long time. Logic Integration technicians typically use commercial-grade equipment, such as Crown amps vs. residential brands, but the rest of the equipment can be used in both markets.

Timeframe is another issue that must be handled with commercial work. "We have done some retail stores in the middle of the night. That can be difficult. We've had some technicians missing during the day and we call them on their cell phones because we have forgotten that they were working all night. But if you plan the job right and you get the job going, including getting the wires run cleanly before they paint, it can be fun with great results."

Again, extended service contracts are well suited for commercial jobs, especially a restaurant or sports bar with multiple TVs fed from a cable or satellite system. Most notably, the service contract covers the customer when the channel lineup changes.

Lastly, Hansson says that most commercial clients are easier to work with because they tend to be more knowledgeable. In many cases, one person or one company owns multiple restaurants … all with the same physical design and wanting similar systems in each.

Of course, commercial work can have drawbacks, such as competitive bids and keeping up with tight timelines. "There is always crunch time at the end. General contractors are framing one minute and painting the next minute," says Hansson.

Overall, Hansson says the larger jobs are his favorites, especially where you are able to do the "abnormal stuff," like hidden racks, TVs on lifts, custom-made cables, active subwoofers suspended in the ceiling, static IPs with the Internet and integrated CCTV cameras with Crestron control. For those jobs, Logic Integration has two D-Tools licenses and three people with D-Tools design experience.

"We enjoy putting together a detailed design and the best system for the budget, and make the customer awestruck at the end," says Hansson.

'Cluster' Installation Cuts Time by 50%

One business process that Logic Integration learned from its commercial experience is what Hansson calls "cluster" installation. In these jobs, "clusters" of technicians -- both commercially and residentially -- attack the job.

"Instead of sending two guys to the job, I will juggle other sites and send five to six technicians and three decked- out Sprinter vans to one jobsite," he explains. "We will break into two-man teams. It works well for the first 70 percent of the job. Then for the last 30 percent we will have one or two guys finish it. We experimented with it first in commercial because that's where you see it a lot among the other trades. It cuts the installation time by 30 percent to 50 percent."

Hansson says the key is to make sure the teams are working and not "chit-chatting about the baseball game from the night before."

"When we do the cluster installs, we have a lead tech on site and completely plan out the entire day. So two guys know they are cutting in speakers in one location while two others are running wires in another location, and two others are hanging TVs," he says.

There are a lot of variables on whether or not he chooses to use the cluster-installation technique, including size of project, what the company's schedule looks like, the budget, and the timeline. Hansson says most jobs over $20,000 are candidates. "But if we are tight on the schedule and we want to sneak a quick two-day project into the schedule we might use the cluster technique with four guys on a smaller job," he adds.

The cluster-installation method is a big sales advantage for the company because it allows the technicians to finish a job much faster than a smaller company could. "And the customers like it. We've had some of our customer's neighbors mention to them, 'Wow … I saw three Logic Integration vans in front of your house. You must be having a big A/V system installed!' That makes them feel good.

"Plus, we are one of the last trades on the job in a residential situation, so the homeowners are weary from all the contractors. So they love the fact that we can get it in and out quickly.

"We stage the system and deliver the racks pre-made and mostly pre-programmed. So when one day we are cutting in speakers and then they hear music the next day, the customers cannot believe it," says Hansson.

The retrofit market is another strong point for the company. "We have a section in our brochure and on our Web site saying that we are good at system fixes. Last year we did $230,000 in just takeover jobs," says Hansson.

Showroom Adds 30% to Sales

Logic Integration has had its own showroom for about 9 months, spending about $100,000 in gear and signing a three-year lease. Hansson says it has boosted his average sale between 10 percent and 30 percent, with the biggest gains in sales of loudspeakers, control systems and projectors.

The showroom includes several Crestron panels and the conference/closing area has three flat panels. Hansson keeps all three televisions on during sales presentations, so the clients are always looking at the images. One is a loop of a high-definition feed, another runs high-resolution images of previous jobs fed from a PC and the third screen has images from security cameras around the showroom, van parking area and warehouse. According to Hansson, that technique helps sell more high-definition, media servers and CCTV.

In the showroom, the company hosts catered open-house events, inviting manufacturers' reps, employees, builders and new and existing customers who might be ready for an upgrade. The showroom itself is decorated with large 18-inch x 24-inch photos of installations, and a one-page spec sheet listing all the components on the job accompanies each photo.

Another strong point of Logic Integration's business plan is marketing. The company uses a six-vehicle fleet that includes three full-length panel vans, two 14-foot box panel trucks (one for prewires and one for deliveries of larger systems), one project manager pickup truck, and one roamer trailer. Each vehicle has an eye-catching $4,000 paint job.

"Most of the marketing ideas are mine," admits Hansson. "I get them from seeing what other companies are doing and from my experience with other companies. My philosophy is that presentation is everything. I have always wanted to be big and bold. Having bright, annoying trucks with big pictures works. On the back, we have a snow skier inside the TV. We get so many calls from people who said they saw our trucks."

Logic Integration also produces a nice proposal binder with full-color printouts of all the equipment and tabs dividing the binder by technology, like lighting, speakers, controls, etc. In all, the company has three different brochures: one that is a "really nice one" that costs $4 apiece to print, another smaller brochure aimed at builders with technologies divided into easy packages, and a third brochure for prospective customers. Hansson also produces a quarterly electronic newsletter for clients, featuring applications/installations, products, news, etc. For 2007, the company has earmarked about $15,000 for marketing costs.

To garner referrals, Logic Integration rewards clients with a free- or discount-labor coupon, perhaps a free product, gift cards, wine, and many other goodies (depending on the size of project).

How to Find, Keep Employees

Like most integrators, Logic Integration's growth is sometimes restricted by the fact that it cannot find qualified technicians. The company puts great credence in obtaining CEDIA credentials, and takes care not to hire quickly, preferring to check references and background. Employee-recommended candidates are preferred.

To reduce turnover, the company holds bi-yearly company parties for employees, maintains top-of-the-line vehicles and tools, consistently reviews employees' goals and achievements, and offers benefits like bonuses, 401(k), health and dental.

The company has its own server for technicians to access wiring diagrams, specs, files and drawings from the office or in the field. About 60 percent of the company's Crestron jobs are done internally, with the other 40 percent farmed out to certified programmers. Having a great operations manager (Brian Thompson) helps ease some of the burden.

Finally, having detailed job descriptions is critical.