AudioVisions: Doing it Best

Two years ago, Best Buy surprised many in the custom installation industry when it purchased AudioVisions, a high-end integration company based in Lake Forest, Calif., in Orange County, just south of Los Angeles.

Of course, the burning question ever since the buyout took place has been, "Why?"

In actuality, Best Buy got a lot more than an individual company when it plucked up AudioVisions for $7 million. It purchased the company's sophisticated, repeatable business process that can be used to sustain long-term growth in the custom installation industry.

In essence, the company's operational structure consists of separate "mini-custom installation companies," each of which uses certain shared resources, such as programming and engineering.

Those mini-companies (or project teams) breed extreme efficiency and profitability, highly satisfied clients, motivated and incentivized employees with career paths and, most of all, growth.

The AudioVisions business model, which also incorporates software that provides real-time cost analysis for every job, is the scalable platform that AudioVisions plans to use to expand its high-end custom installation business nationally (AudioVisions has already expanded to Northern California and the Palm Springs areas).

Lastly, the advantages garnered by AudioVisions from the acquisition are almost too numerous to name, including increased education, access to a large labor pool, an awesome benefits package for employees, support for the company's laid-back "Client Centricity" culture, and the ability to expand into IT service with help from one of Best Buy's other companies, The Geek Squad.

Creating Project Teams

AudioVisions executives did not just instantly invent its business model; it was honed over 18 years.



It was worked on by the company's executive team: Mark Hoffenberg, president; Robert Walpert, vice president of operations; Ted Taylor, vice president of sales; and Terence Murray, vice president of strategic development.

Founded in 1989, the company took years to develop its own proprietary design and project management software (called ProIntegrator) that supports its systematic approach to engineering, installing and integrating complex electronics.

For a short time, AudioVisions even sold the software to other dealers.

"Operationally speaking, we have developed a scalable business model built around project teams. In essence, we have created mini custom installation companies, if you will, but with the significant resources of Best Buy behind them," explains Hoffenberg.

The structural details of this scalable operation are simple. The company operates in "project teams." Each team has four to seven members, including a project manager, prewire/trim-out technicians and a finish technician.

The individual teams are expected to each deliver between $1.5 million and $3 million annually in revenue. Conceivably, the teams stay together from job to job, even though AudioVisions might move some people into different teams from time to time.

The project team stays on an individual job from start to finish, even through warranty. A job does not transfer to the service department until a year after completion.

Every morning, the project manager meets with his team, according to Walpert. Even if it's the beginning stage of the job, the finish technician is involved in the meeting because he might have specific wiring placement plans that he needs to mention.

Each team constructs its own racks. While the teams are their own individual "mini-companies," they share engineering and programming resources.

Depending on the size of the jobs, each team could be managing up to a couple dozen jobs at a time. There are incentive programs for employees based on project team performance and overall company performance.

"Best Buy did not acquire us for our incremental revenue. Even if they purchased the top 30 CE Pro integrators, it would be materially insignificant to them. Best Buy acquired AudioVisions because it recognizes the long-term focus and vision of the market opportunity that our team processes bring," says Hoffenberg.

"Our total focus is on building the business for scale, but there is no pressure to grow at a certain rate. We want to do it right, not fast."

The scalability of the operation also allows for flexibility. For example, the programmers and engineers are based in the Lake Forest office, but could be remote if necessary, according to Murray.

Purchasing is also centralized in the headquarters for all three locations.

According to Hoffenberg, the project team organizational structure eliminates a common problem faced by most integrators: uneven resource management.

"A typical integration company with seven to 10 employees will find that its business is lumpy at best," says Hoffenberg. "They may have 10 jobs on the books at any given time, in various stages. If two or three of the jobs are big, it can create a logjam."

He adds: "Our software allows us to look at upcoming labor resource needs with actual available labor hours. This helps the management team assign projects to the appropriate team. It also allows us to accurately predict when we need to hire additional talent."

Software Links the Processes

AudioVisions' proprietary software system, ProIntegrator, is almost like glue that helps seamlessly bind the various departments of the company.

AudioVisions documents the entire sales, engineering and design process in a detailed workflow diagram, which is periodically reviewed, reassessed and revised.

Then, that workflow is linked to ProIntegrator, which has the ability to handle thousands of simultaneous users.

Other ProIntegrator functions include:

• Drag-and-drop proposal design.


• Automated labor and materials calculations.


• Project management.


• Change order integration.


• Integrated work order and punch list tracking.


• Powerful report generation for all levels of management.


• Bar-coded inventory control for multiple locations with real-time status.


• Web-based timecard module.


• Labor-tracking.


• Installation efficiency metrics and reporting.


• Cash flow projection.


• Resource allocation projection.


• Integrated scheduling and calendar management.

The software also features time clock functions, tracks all labor, monitors efficiency and manages and tracks all project flow-related functions.

"The software gives us full visibility of our project backlog and sales funnel, and the complete construction schedule for each job so we can manage six to 12 months out," says Murray.

"The software also has a resource allocation tool in it that allows us to allocate our installing, programming and engineering labor. Each project team makes a request for engineering or programming services between 60 and 90 days out."

The high level of detail in the software is apparent in every department at the Lake Forest headquarters. For example, in the warehouse, nearly every box (valued over a minimum cost threshold) that comes in (and goes out) of the building is slapped with a bar code.

"It tells you when it was received, the project number, project name, inventory location, what room it's going in," says Paul Self, director of marketing.

The efficiency of the system is also apparent when you glance at any of the company's detailed client proposals. Before anything goes out the door to a client, it is thoroughly reviewed.

"ProIntegrator allows us to dial in detail on every nut and bolt in a proposal," says Self. "That means we have to have the system designed properly."

The process goes like this: The salesperson meets with the client and completes a client consultation form that itemizes in detail the scope of the job. He also typically gets floorplans and brings it all back to the office.

From that initial meeting, the salesperson prepares a "discovery phase document" designed to identify the scope of work and determine the client's budget.

That non-technical document is a broad brush-stroked document loosely outlining the parameters of the system's disciplines for the customer.

Once he gets the go-ahead, the salesperson initiates the more detailed "proposal" process, which AudioVisons' labels internally as a "fixed bid engineered solution."

The engineered solution is developed in conjunction with a sales engineer who produces a detailed proposal, broken down by discipline and by room. That proposal is then kicked back to the salesperson, who makes any necessary alterations.

Next, the sales manager and operations manager (and installation manager and programming manager on large jobs) review the document before it goes to the client.

"They all have to commit that we can deliver this," says Self.

Clients are charged for those detailed engineering documents. For example, a client might be charged $2,000 to $6,000 for a 30-page engineered proposal for a $300,000 job, depending on the complexity.

The goal of the entire process is to deliver an engineered solution that the company knows will work exactly as bid, while increasing the revenue per salesperson.

Real-Time Revenue Recognition

The real-time reporting aspects of the software are also vital to the success of each project team.

"Finishing the jobs on time, on budget and exceeding our clients' expectations is the key," says Murray.

Another key factor, from a profit and loss standpoint, is labor efficiency. Project teams have real-time visibility to the labor hours bid versus actual hours spent for every phase of the project (prewire, trim, final, engineering, programming and project management). This drives accountability and performance.

The software also tracks inventory movement in real-time. With that in mind, the software provides yardsticks to measure the efficiency of every job in progress, or "percent-completion revenue recognition."

"[The software] allows us to accurately recognize the revenue, costs and gross profit as a percentage of the project in the correct period at any moment in time," says Walpert.

"This gives us true cost accounting. We can check progress payments, measure real revenue recognition. Lots of companies don't accurately recognize their real revenues and costs as a percent of a completed job. Therefore, their project P&Ls [profit and loss statements] do not provide a true picture of what is happening.

"They often take in cash payments, and business looks great when the bank balance is high. But most do not have the tools to accurately manage all the costs against the revenue, on a project-by-project basis -- usually until the end, when it is too late to correct."

The efficiency of each job is measured not to browbeat the project teams, but as a learning yardstick.

If a job does not hit its profit target, among the questions that might be asked are, "Did we design it properly? Did we install it properly? Do we need to adjust our estimates?"

Within the programming department, which consists of four control programmers, one lighting control programmer and one technician, the company is also streamlined for efficiency.

Clients are presented with a standard operating system, where the touchpanel skins are already in place. Custom programming can be done, but is not typically recommended.

"We don't ask the clients how they want the system to run. We sell them our operating system," says Self. The system allows the company to deliver a consistent, timely solution for customers.

"We actually bring in $1 million jobs under budget," he adds. "It's like buying a laptop that comes with Windows. We can always do custom programming, but we always recommend that they install our standard and bring the house live first because we know it works.

"It's easy to skin things differently, but redesigning the entire user interface is a bad idea, especially on a client-by-client basis. I advise all integrators to sell known solutions with supporting hardware."

Future Growth Plans

The Best Buy acquisition has also been a boon in several other ways.

For example, AudioVisions is now able to bring many employees to events like the CEDIA Expo, CEDIA Management Conference or EHX. In the past, the number of attendees would have been much more limited.

Another byproduct from the buyout has been AudioVisions' move into IT. In essence, the company has its own "undercover Geek Squad" now, with IT specialists handling clients' computer needs.

"It was an area that we shied away from before," says Hoffenberg. "But we used the well-oiled Geek Squad machine to help us create our own department that offers a high level of IT service."

He adds that IT service is already one of the company's fastest-growing segments.

At its 25,000-square-foot Lake Forest headquarters, AudioVisions is constructing a new 2,000-square-foot "experience center," complete with a working kitchen, theater, lighting and more.

In another portion of the facility, a brand new training academy is being built.

Moreover, Best Buy provides "an unlimited supply of new talent" to the company, says Murray.

"In the past, our growth was somewhat limited by our inability to find good, motivated and talented installers. Now, Best Buy, Magnolia Home Theater and Geek Squad employees can see AudioVisions as another option in their career path."

Obviously, AudioVisions is also taking advantage of a great benefits package, including reduced healthcare premiums and an employee stock purchase plan.

Meanwhile, the buyout has not affected its existing company culture. For example, employees often still wear shorts to work and the crews are not asked to wear blue Best Buy golf shirts.

AudioVisions is now planning to take its business model nationwide, working to pinpoint selected markets that meet its demographics.

"We know there are many small integration companies in these key markets with great people and market knowledge but are struggling operationally and financially and would welcome our operating methodology and work/life balanced culture.

"We have spoken with many dealers who would prefer to come to work for us to focus on doing what they enjoy and what they do best. A lot of the mundane but critical tasks required to operate your own company are not fun, like billing, managing cash flow, payroll and taxes," says Murray.

So far, the growth has been measured. Hoffenberg estimates it takes 18 months to launch a new location.

"We have done all the serious foundational work, but it still can take a long time to germinate a new location," he says.