3 Reasons Fultech Solutions Will Remember 2009

A decade from now, when Dan Fulmer looks back on 2009, he'll think of a year during which his company changed a lot.

He'll know then whether it changed for the better or the worse. Right now, all we can do is marvel at the major changes 15-year-old Fultech Solutions underwent during a year that had the industry reeling from a recession:

• It launched a commercial division
• It hired a commercial staff
• It opened a state-of-the-art green showroom
• It rolled out a recurring revenue model based on service contracts

Changes during 2009 weren't uncommon. Lots of CE pros scrambled to reposition in an adjusting market, but that's not what Jacksonville, Fla.-based Fultech did, according to CEO and chairman Dan Fulmer. He says all these changes are part of long-term, strategic plans that happened to come to fruition during 2009.

Going Commercial

About 15 percent of Fultech's business was commercial prior to 2009. Now, with the advent of its dedicated commercial division, Fultech Commercial LLC, it's 50 percent.

Over the previous 10 years, Fulmer says he often considered getting more into commercial installations. It was the "coming together of several things in the universe" that led him to take the leap.

Fulmer ran into an old friend in 2008, a former commercial installer, who suggested Fultech would do well in the commercial market. This sort of reinforced a point Fultech's Crestron rep, Jason Fiveash, had been emphasizing to Fulmer. Fiveash, who died after a tragic car accident in February, "really pushed me to launch a commercial division," Fulmer says.

Fulmer presented the idea to Fultech's board of advisors — "five business guys who are older and smarter than me" — and they liked the idea, too.

One problem, Fulmer acknowledges, was that "I didn't know enough about the commercial market." So next came the search for "existing, experienced and qualified local people with existing relationships and reputations we could launch from," he says.

Fultech landed a buyer that had strong relationships with several key vendors. Then Fulmer hired "a complete team of experienced sales, buyers and general staff," he says. "We wanted to staff the division so it could take off at a running pace, which we were able to do."

Fultech Commercial LLC launched in early 2009 as a completely separate division, and Fulmer says the installers and sales associates rarely overlap.

So far, the commercial division is doing well — or poorly — depending on how you look at it. Commercial sales are a bit short of expectations, but those expectations might be skewed. "The commercial side has picked up for us during the last part of the year," Fulmer says.

It turns out, he says, that commercial projects tend to get done toward the end of the year. Meanwhile, "the end of the year is slow for residential even when it's good." So the addition of commercial has helped to stabilize Fultech's revenue stream.

Even with residential installations down for 2009, projects like integrating the commercial division and re-branding Fultech as a commercial and residential electronics integrator — Web site redesign, van wraps, etc. — have kept the small staff pretty busy. It hasn't had to lay anybody off, Fulmer points out.

Commercial Environment

Fultech didn't approach this commercial division launch half-heartedly. "We decided it would be prudent to have a showroom for our commercial division," Fulmer says, because it allows him to "show and sell."

The company had established a model home process for showing and selling residential technologies. It involves a willing client allowing Fultech consistent access to his home in exchange for discounts on products and installation. Fulmer says a typical model home is used for five or six years before Fultech upgrades to a new model environment.

With the launch of the commercial division, however, Fultech decided it needed a controlled environment to display and demonstrate B2B products — and it decided to conduct its own business there as well. The new showroom would kill two birds with one stone because Fultech had previously rented office space.

So Fulmer secured Small Business Association (SBA) loans to build a 2,500-square-foot showroom and office environment.

The build-out began in January and was finished in April 2009. The new showroom demonstrates typical commercial applications like digital signage, boardrooms, teleconferencing and classrooms with multiple systems at various costs. Plus, it's where Fultech reaches out to MDU (multi-dwelling unit) clients by showing its in-house-developed building management system.

However, it's not easy to get prospective commercial clients to visit a showroom. "The key was to have so much technology in there that it would get people to come and learn," Fulmer says.

The showroom is also "totally high-tech and green," Fulmer adds — another feature he hopes will encourage people to make the trip. "From flooring, to our glass walls, recycled glass bottle countertops, to dual flush toilets and water makers, our facilities are as green as you can get."


Fultech’s commercial showroom is filled with eco-friendly resources, such as (from left) glass walls, efficient water makers and recycled glass bottle countertops.

It has green electronics, too. For instance, Fulmer likes to demonstrate how the Crestron Smart Sensors adapt to individuals' habits and knows when to shut off his office LED lights.

"We can show people how little interaction is needed with our building management system. We can integrate a lot of their existing systems, make it much easier to use and save them energy."

Fultech's green showroom came about despite the fact that "I'm not a tree hugger," Fulmer jokes. "This is a resource management issue. We're going to have 9 billion people [on the planet] next year. We had 5 billion when I was born. It's about the need for things to be as efficient as possible."

Fulmer, who sits on the Consumer Electronics Association TechHome Division board, says it's also important to set an example. "I wanted to show that a business can be green while using electronics."

Recurring Revenues

As if implementing a commercial division and building a showroom weren't enough, Fultech also rolled out its Premium Service Contracts during 2009. Basically, clients can choose to pay $1,695 per year in return for as-needed service visits, two "well visits" per year (basically system checkups) that include necessary firmware updates and 15 percent discounts on most products (certain low-margin products are excluded) and services.

The operative word in service contract, though, is "contract," Fulmer points out. The company had been dealing with lawyers and tweaking the wording in the contract for months before it was finalized in January. Originally, Fulmer wanted the contracts to promise more service and charge less money than what is promised in the final iteration. "Over time that thought was eroded by the facts of business. You need to offer value, but if you promise too much, contractually it can easily be misinterpreted — and you will be obligated."

The result, though, allows Fultech to deliver more service than the clients expected, thus facilitating referrals and hopefully renewal of the annual contracts (that will have to be proven in 2010).

So far Fultech clients are gobbling up the service contracts, Fulmer says. Whenever clients call for service — resulting from blackouts, cable guy mishaps, something not working, whatever — they are told about the service contracts. Fulmer says Fultech "has been 100 percent successful with any clients who call for service" and "we have about 10 percent of our total client base on the program now."

The program is far less popular with new clients because Fultech includes a two-year warranty with all its systems. However, the company makes a policy of calling up people as their warranties are set to expire to let them know about the service contracts.

Beyond getting $1,695 per year from 10 percent of its client base, Fulmer says the real benefit for Fultech has been keeping in touch with its clients. The company is contractually obligated to the two "well visits" per year. Those provide opportunities to nip in the bud any issues with their systems, initiate updates, educate clients about any applicable system upgrades and more.

Fulmer says Fultech has updated a lot of touchscreens, for instance, with customers exercising their 15 percent hardware discount. He was careful to exclude low-margin components such as flat-panels from that discount, "since I don't make 15 percent on those anyway."

Getting Older and Wiser

At 40 and having founded Fultech 15 years ago, Fulmer feels like he grew up in the custom electronics industry. As such, he struggled along with the industry to figure out recurring revenues. When clients pay big dollars for a custom system it's difficult to ask them to pay extra for service, he acknowledges.

"But when you own a Ferrari or a boat, you expect to pay to keep it maintained. Quality things require maintenance," Fulmer says.

Another factor in adapting his business approach, Fulmer says, has been input from industry and business veterans. Fultech has its board of advisors. Plus, Fulmer has been teaching classes at EHX and other industry events for years. "I always seem to learn from the people in the class and I end up leaving with more knowledge than I brought," he says. Fultech has also enlisted a consultant.

In fact, many of Fultech's changes that came to fruition in 2009 are the result of Fulmer addressing what he calls problems with his business model of 14 years.

"I'm a semi-typical entrepreneur in that I'm ADHD and all over the place," he jokes. "I'm good at forethought but not good at organization and planning. I knew what I wanted but didn't know how to get there."

One day, Fulmer Googled "organizers" and found a company to help systemize Fultech's processes. "I learned the value of figuring out what I'm good at, and bringing in people to help in certain areas that I'm not good at," he says. "I ended up hiring a CFO."

That introspective phase was humbling, Fulmer acknowledges. "But over the years you realize that you don't know as much as you thought. You realize you can't do everything, you can't wear every hat. It was somewhat humbling but it helps me to do more of what I like to do — designing systems — as opposed to what I'm not good at — finance."

As a young man growing up in the industry, Fulmer says he paid attention to what the older company owners were doing business-wise. "How do you make this business work? How do you handle HR? How do you do this and that? If you shun that, good luck being successful."

After 14 successful years, Fulmer's openness to input and willingness to evolve paved the way for shaking things up in 2009. The company was debt-free for 14 years before taking on seven-year SBA loans to fund its new ventures. Fulmer expects to pay them off in four to six years.

It's not a gamble, Fulmer says, because the investments are part of a conservative effort to stabilize the company and stimulate growth.

Time will tell.