Dealer of the Month: Taking the Electric Avenue

Some businesses that have been operating in one field for more than half a century might have trouble adapting to new technology. This is not the case, however, for S&S Electric Co. in Oldsmar, Fla., at the north end of Tampa Bay. In 1998, after 51 years in the high-voltage electrical business, the company added low-voltage integration to its mix. Five years later, the $22.7-million company earned $1.5 million from structured wiring and audio in more than 4,700 new homes.

Vice president Shawn Smith was the instigator of the bold move. After just a year in the family business, Smith couldn't understand why builders would hire two or three different trade contractors to install cable in a single home. At every job site he visited, Smith saw a mess: There was one contractor for power and lighting, another for audio, video, voice, and data networking, and another for security.

While most electrical contractors had been told for years that they weren't capable of pulling the sensitive low-voltage cables, Smith was new to the industry. He knew of no such limitations, so S&S soon started installing structured cabling.

"There are several reasons why we got into the structured cabling market," he says. "First, it was the late 1990s and there was a large focus on structured cabling. Second, we saw structured cabling as a way to recognize additional revenue in the homes where we were already installing electrical and HVAC systems."

Finally, Smith saw it as a way to respond to builders who wanted fewer trade contractors on the job, wanted to meet tighter production schedules, and wanted to partner with a company that possessed a long-standing record of stability and longevity.

"The reaction we got was very mixed," he recalls. "Some builders threw us out the door, saying, 'You are an electrician and you are not allowed to touch low-voltage.' Other builders were looking to consolidate with one contractor to handle low-voltage and high-voltage. They were very receptive. The fact that we have been around so long is a big advantage for us. Several builders told us they were just waiting for us to start doing low-voltage work; some had been burned by other contractors going out of business."

Smith's vision was recently rewarded at the Spring EHX in Orlando, when the company received the 2003 Dealer of the Year award from the Consumer Electronics Association's Tech Home Division. Today, S&S handles specialty lighting, lighting control, surge protection, backup power, energy management, whole-house audio and video, voice and data networks, satellite TV, closed-circuit and IP cameras, HVAC, and indoor air-quality systems from four office locations on the west coast of Florida.

Honing Builder Relations

Over the years S&S Electric has been involved in various aspects of residential contracting from high-end residential to service to high-volume production, which is its current niche. Its installations last year were typically in new homes ranging from $250,000 to $400,000 in price. S&S reports an average low-voltage sale of about $4,000 per home, which typically includes 10 built-in speakers, volume controls and structured cable, as well as high-voltage wiring and lighting. (See sidebar below.)

The production-home environment maintains tight margins, so S&S maintains profitability with high-volume work and careful cash-flow management. "We carefully choose the builders we work with, seeking out those that effectively manage their projects and pay their bills on time. Teaming with these builders, we are able to get in, get out, and get paid, all within a matter of days," says Smith. Among S&S builder/clients are large builders such as Centex, Lennar, David Weekly, KB Home, Ryland and Taylor Woodrow.

But production homes do not necessarily mean sparse technology. Even in houses with lower price points, Smith says S&S is still finding tremendous opportunity to present and install home-technology products and upgrades.

"Many of today's technology-savvy homebuyers are more concerned about and willing to pay extra for their 'tech toys' than they are for countertops and flooring," says Smith. "The other nice thing about the production environment is, you can reproduce the same system design over and over. You do not have to reinvent the wheel, and invest extensive design time into each and every project. We often find that there is a keeping-up-with-the-Joneses mentality among buyers in many developments; they want to have at least as much as their neighbors."

The interaction between S&S and its builders is constantly changing. Prior to 2000, the company sales staff did not meet with individual homebuyers. "Our relationship was strictly with the builder," says Smith. "Whenever we had a new product, we had to meet with the builder's salespeople and educate them so they could sell it to the homebuyers. That system failed miserably."

In 2001, S&S hired an outside salesperson to actually meet directly with the homebuyers. At first, the S&S salesperson could meet with the homebuyers only while accompanied by the builder's salesperson. That is not unusual, since most builders are reluctant to have a subcontractor meet their customers alone. Getting that face-to-face meeting with homebuyers was a "tremendous step" for S&S, according to Smith. "We could not rely on the builder to sell our product. They cannot be experts on Corian, flooring, and communications cabling."

By meeting with the homebuyer, S&S boosted low-voltage sales. Subsequently, the company has cross-trained its sales reps on every discipline it offers: power, lighting, air conditioning, indoor air-quality products and low-voltage communications. "Homeowners now can meet with a single salesperson vs. several subcontractors or vendors. We have built trust with the builders, so for the most part they are not present when we meet with the homebuyers. We even have keys to their model centers," adds Smith.

S&S' executives contemplated building a showroom, but the construction expense and the fact that the company works across a wide geographic area made it prohibitive. Instead, S&S decorates the model homes and design centers for the builders. According to Smith, that tactic allows the company to display only products that are specific to that particular builder and that particular planned community.

Low-Voltage vs. High-Voltage

Most of S&S' builders offer structured wiring as a standard, but six years ago, S&S had to sell it as an option. "Once we sold it as an option in 95 percent of the houses, it was a clear indication to the builders that they should include it as a standard," says Smith.

S&S offers homebuyers a base price for the infrastructure wiring, then uses a room-by-room sales approach for the upsell. Additional outlets are charged per drop; however, if the client wants a whole-house system of some sort (e.g., multizone, multisource audio or CCTV), then the salesperson offers them a good/better/best package.

According to Smith, distributed audio is becoming more popular. "It is a big drawing point. Speakers and volume controls in every room have become commonplace. Lately, we have seen more interest in multisource, multizone audio."

According to sales manager Dave Preloar, selling high-voltage and selling low-voltage go hand in hand. "It is a seamless transition from high-voltage to low-voltage. The low-voltage can be a bit harder, because there is some education that needs to be done for the customers, because they don't know what Cat 5 wiring is, for example."

Likewise, Smith says neither high-voltage nor low-voltage is harder or easier to install.

Preloar's room-to-room sales technique offers clients a "custom feel," even though it is in a production home. "The clients feel like they are purchasing a custom home. They have a choice on the location of lighting fixtures, computer outlets, and more," he adds.

After the homebuyers have made their selections, S&S presents the proposals directly to them with the builder's margin built in. "We get the proposal signed and give it to the builder, along with an additional proposal that shows the builder exactly what his costs are."

With its concentration on production homes, S&S does not sell a lot of video components, because Smith says the builders are reluctant to include those items in the buyer's mortgage.

One lesson learned by S&S' installation staff is that Cat 5 cable is more delicate than power cable. "We had to make sure that everyone was aware of the wire characteristics and knew how to handle it properly. We now treat the high-voltage Romex with the same kid gloves that we treat Cat 5," he says.

Marketing to Builders

An important aspect of maintaining relationships with homebuilders is marketing.

Smith graduated as a communications major and immediately tried to apply that background to his family's business. "I realized how important it is to communicate to customers about what we can do. My main focus has been to promote the industry and technology, so clients will ask us more questions," he says. That promotional effort includes issuing numerous press releases, which are posted on the company's Web site.

S&S' main campaign includes printing brochures that spell out the lifestyle benefits, which are delivered to builders and to homeowners prior to meeting with S&S, "so they are prepared and inquisitive. That starts a dialog," adds Smith.

To keep builders educated on home tech, S&S is constantly sending them new information. The basic messages:

• Technology won't create problems with the construction cycle.
  
• Buyers of production homes will purchase home technology.
  
• Home technology can make builders money.
  

The company sends direct-mail postcards to builders on a consistent basis. "Most builders do not have time to sift through letters," says Smith. "We try to keep it graphically eye-pleasing to catch their eyes. Also, at the end of each month, I send an email to various key people at the homebuilding companies we work with, letting them know exactly how many homebuyers we met with that month and the total sales dollars. We also will send a copy of that letter to builders who we are not working with, so they can see what they are missing out on."

Selling Lighting Fixtures: A Mixed Bag

One often-overlooked potential spec and sale for dealers is lighting fixtures. How many times has an overzealous interior designer ruined a home theater with outlandish lighting?

As electricians, S&S is able to resell and install lighting fixtures. In fact, while the company averages about 10 in-wall or in-ceiling speakers per home, it averages 30 to 60 recessed can lights per home. Still, vice president Shawn Smith says lighting has been "a mixed bag."

"We have lost a lot of our decorative lighting-fixture business over the past five years to the manufacturers, who have tried to go directly to the builders and cut out the electricians and the electrical distributors," says Smith. "One thing we have been able to maintain control of are built-in fixtures, such as recessed can lights and under-cabinet lighting. We have had great success in that area. As one contractor selling both electrical and audio, we are able to tell a homeowner exactly what their ceiling is going to look like. We can juxtapose the lights and the speakers in conjunction with each other, and they don't have to worry about two or three different contractors cutting holes in their ceiling for lights, speakers and air-conditioning registers."

57 Years of Change

Because custom installation is relatively new, it's not often that consumers and builders run across a company with such a long history as S&S Electric in Oldsmar, Fla.

In 1943, Sheldon D. Smith moved his family from Michigan to Largo, Fla. Sheldon was somewhat of a prodigy, a jack-of-all-trades and master of none. Smith had several business ventures ranging from restaurateur to used-car dealer and electronics repairman. His passion was electronics ... especially radios. In 1947, Sheldon established Smith Electric Company to take advantage of the postwar construction boom. The company did a little of everything in those days: service, residential, commercial, industrial, and, more notably, most of the original McDonald's restaurants on the central west coast of the state.

In 1961, Sheldon had a company with very little work. Meanwhile, his longtime friend, C. Robert Stuller, had a large contract for the electrical work at Guy Lombardo's in Tierra Verde, but did not have a company. The men formed a partnership, creating S&S Electric Co., Inc., but the partnership of Smith & Stuller was short-lived, lasting only four years. The work at Tierra Verde came to a close, and after several other projects, Stuller decided to leave the company and seek other endeavors.

Shortly thereafter, Sheldon's son, Vern, and Vern's wife, Barbara, became full partners in the company, which grew steadily over the next few years, moving gradually towards a niche in residential. When Sheldon retired in 1977, Vern and Barbara took on the task of running the company.

In 1984, the company relocated from its original home in Largo to its current facility in Oldsmar. This was a strategic move made possible by the building boom taking place in Clearwater's Countryside development, adjacent to Oldsmar. It was also a move made to gain better access to the growing developments in Hillsborough, Pasco, and North Pinellas counties.

S&S Electric is now a third-generation company, with Vern and Barbara's sons, Chris and Shawn, managing the company's continued growth. Christopher, like his father, grew up in the business, and is now the company's executive vice president, managing the construction and services operations. Shawn, after finishing college in 1997, returned home to join the family business, and is currently the company's vice president managing the business operations and new product development. Vern and Barbara's daughter also worked for the company until her death in 1995.

With an existing customer base made up of many of the nation's top production homebuilders, S&S Electric began seeking new business opportunities. One logical strategy for increasing the company's business was to offer additional services and products to existing clients. So, in 1994, S&S Electric established its Air Conditioning Division. In 1998, Shawn brought his grandfather's passion for electronics into the company by establishing a structured cabling division. As Florida's building industry continued to prosper, and customers spread to new communities across the Gulf Coast, the company established offices in Sarasota (1991), Ft. Myers/Naples (1995), and Brandon (2000).

The family atmosphere continues today at S&S.

"For such a large organization, you get a sense of closeness," says Dave Preloar, sales manager. "The longevity of the employees is a great example of that ... The owner of the company comes in every day and says 'Hi' to everyone. They give you the feeling that you are part of their extended family."

Vital Statistics: S&S Electric Co., Inc.

S&S Electric Co., Inc.
105 Douglas Road East
Oldsmar, FL 34677
Phone 800-762-3056
Email: .(JavaScript must be enabled to view this email address)
Web: http://www.ss-electric.com
Satellite Offices: Tampa, Ft. Myers, and Sarasota
Years in Business: 57
Number of Employees: 286
Revenues (2003): $22,756,000
Specialty: Residential new construction for production homebuilders; electrical lighting and power; indoor air-comfort and air-quality systems; and audio, video, voice, and data networking
Residential/Commercial Split: 99%/<1%
New Construction/Retrofit Split: 98%/2%
Total Number of Residential Customers (2003): 2,150
Total Number of Builder Customers (2003): 64
Total Number of New Construction Units: 4,709
Major Brands Carried: Bryant, Channel Vision, DataComm, Channel Plus, Direct Connect, DirecTV, Honeywell, Hughes Electronics, IceBox, Leviton, Linksys, LiteTouch, Lutron, Middle Atlantic, NuTone, Panamax, Panasonic, Peerless, RCA, Russound, SenSonic, Sharp, SquareD, Trane, Xantech, Yamaha
Association Memberships: Alarm Association of Florida, CEA Tech Home Division, CEDIA, NAHB, NFPA, Air Conditioning Contractors of America, BICSI, Electrical Council of Florida, International Association of Electrical Inspectors, Independent Electrical Contractors, Refrigeration and Air Conditioning Contractors Association

Best Business Decision Creating a design team to meet directly with homebuyers and sell home- technology system upgrades.

Worst Business Decision Creating a separate division for structured cabling and having different crews wire homes for low-voltage vs. lighting and power. We ended up giving low-voltage back to the electricians.