How a Detroit-Area Integrator Survived Recession

Google "Detroit" and you'll find some depressing stuff - foreclosures, houses going for $10,000, 15 percent unemployment, auto industry decline, umpire Jim Joyce.

It's not pretty.

You won't find many stories about thriving small businesses with anticipated 2010 growth of 25 percent. That, however, is the situation at Spire Integrated Systems. Despite its Troy, Mich. location 20 miles north of Detroit, local construction grinding to a virtual halt and a client market reluctant to spend for fear of losing their jobs, the company has grown over the past three years from five to nine employees and its 25 percent revenue growth this year comes on the heels of 12 percent growth in 2009.

Things aren't all bad in the Detroit area and that doesn't just go for Spire Integrated Systems, says principal Navot Shoresh. As a proud Michigander, he doesn't always appreciate the media's sometimes-indulgent portrayal of a collapsed region. That's not to say that he's in denial.

"The Detroit area has been hit hard by the recession," Shoresh says. "However, many companies and individuals have long realized that the auto industry is no longer going to sustain their growth or livelihood and so they evolved. Many of our clients are in the biomedical field, military and aerospace, banking, software and so on."

Thriving auto industry or not, manufacturing and an appreciation for methodical hard work are in the blood of Detroit-area folks, says Spire general manager Jason Bellanti. Spire, meanwhile, takes an assembly line-like approach to system building, which he says plays well with the client base.

Big AMX and Control4 dealers, the majority of the programming and rack assembly is done at its office. "Our customers notice that we don't spend very much time in their house to complete a system," Bellanti says. "We test the system in our build area before it ever goes out to a job site."

Architects and interior designers notice, too. In fact, Spire credits its upstream growth to a referral network of satisfied clients, architects and designers.

Cash for Clunky Systems
A great referral network alone couldn't have completely accounted for Spire's astronomical growth through the recession - especially not in greater Detroit. It didn't. Spire uses a rather ingenious, rather apropos marketing approach for a region affected by the struggling U.S. automobile industry, one that's very similar to the federal government's 2009 Cash for Clunkers program aimed at stimulating sales.

Spire began salvaging projects for clients in 2005 when its Lutron sales rep approached with a proposal to save a 30,000-plus-square-foot project done by a now-defunct integrator. "Within two weeks we had redesigned, rewired and programmed the entire system," Bellanti recalls. "Fixing [it] and making the client happy led to invaluable relationships with the builder and the architect. This is when we realized we were on to something: there is more to be gained than just the profit on the initial sale."

The Systems Conversion Program was officially started in 2007, two years prior to Cash for Clunkers. It's based on referrals, often from architects or designers, to clients whose systems "never worked right," Bellanti says. "Our philosophy was that we will not just take a project over; we make it ours. We insist on doing it our way so we can put the Spire badge of approval on it."

The Spire approach means updating products, programming, even starting from scratch - a frustrating proposition for customers who already invested in these unsatisfactory systems. "If they agreed to have us to fix their system our way, we would take back all of their old equipment and sell it on sites like eBay and Audiogon," Bellanti explains.

"We applied 25 percent of the equipment sales as a listing fee, and the rest went right back to the customer. These customers loved the idea, and most of the products sold for a fair amount of money, given their age. We then went to our manufacturers for some additional discount on the product to alleviate the cost, and they helped."

The program had an enormous impact on Spire's business and helped propel it through a slow 2007, Bellanti says.

In the long term, Shoresh adds, the Systems Conversion Program "created lasting relationships and trust with the top builders and architects in our area." That meant that, while construction and remodeling virtually stopped in the area, many of the few green-lighted projects went to Spire.

The uptick in projects also forced Spire to evolve its business. Three of the Systems Conversion Program projects were out of state. "We had to learn how to complete them efficiently," Bellanti says. Spire would write a full schedule of what each installer/programmer needed to do during each day of a road trip. Pre-programming and prep work was taken to a new level.

"This experience helped to streamline our day-to-day operations," Bellanti adds. "When the time came to do our largest conversion, which happened to be local, we had our process down pat. We were able to completely overhaul an old automation system with three full racks in a 25,000-square-foot house while working in the client's house for only seven very long days."

Controlling Referrals
The Systems Conversion Program would have been a failure if the clients ended up even more frustrated than they already were, but David Laikind had a pretty strong indication that wouldn't happen. He's the Lutron rep who suggested Spire take over that first project that inspired the program. "I knew they'd do a great job and bring it back to where it needed to be and to where the client was very happy with them," says Laikind, whose company, Electronic Materials, has represented Lutron for 30-plus years.

Spire was also a logical choice, he recalls, because, in addition to Lutron, the system featured AMX and the integrator takes a unique approach to AMX programming. In essence, Spire does the majority of its AMX programming and setup on the touchpanel, shortening the time and complexity of projects. Again, Bellanti reiterates, "this is a manufacturing city, or it used to be, and people want things to be tight and strict, so we continuously developed processes to make things faster and faster."

Spire brought in Control4 as a means to lower automation system prices - another measure that helped Spire barrel through the recession. "We had our eye on Control4 for a while, but they never proved to be ready until about three years ago when they came out with the new line of faster processors, mainly the HC-300," Bellanti says. "We were doing a lot of jobs with basic remote control systems, but by turning them into Control4 jobs, we quickly started adding lighting control, HVAC control, and security integration to these projects. What would have been a $5,000 install can easily turn into a $15,000-plus system."

Spire's approach to automation systems is a big reason for its referral-based business stream, says Glenn Kunnath, vice president of Thomas, Sebold & Associates, a building contractor that adds to that referral stream. "Them knowing the programming is huge for me," he says, adding that he knows Spire will take care of any system usability issues before the home owner complains to him.

Nipping those issues in the bud is part of the process, Bellanti says. Spire doesn't just show clients how to use the control interfaces, he explains. "We go far beyond that with hands-on training sessions and custom changes, both of which are included in the contract. If we don't hear from a customer for a week or so after an installation, I give them a call to see how things are going. Some customers are afraid to call because they think that we are going to charge them for every visit after the installation, because that is what many other companies do."

Spire's two-year warranty on installations covers all that. "This is why we continue to grow with referral-based business," Bellanti says. "You can't just sell the product and then forget about the customer."

It's not just that, though, Shoresh notes. There are also the little things: always taking off shoes in a client's home, always putting down drop cloths, never eating or drinking in homes, never being late for an appointment and always completing jobs on time and within budget.

Perspective on Detroit
The fact that Spire has a thriving referral network doesn't mean things are fine in greater Detroit. They're not. Spire would love to be installing AMX- and Control4-based automation system in Detroit condos, but it isn't.

"We have done some condo developments there but there is no boom, not a lot of residential work in Detroit proper. There is really nothing going on there right now. Most of our jobs are 20 miles north in Troy," Bellanti says.

Even affluent Troy, which is home to many white-collar auto workers and corporate folks, has suffered dramatically, Bellanti says. "We went from 5 percent unemployment to 15 percent. We lost a lot of the middle class and even the upper-middle class. It's recovering, but there have been a lot of foreclosures even on $1 million or $2 million homes."

Kunnath knows this all too well. "The market is tough, real competitive," says the builder. "There are limited jobs, not a lot of new-builds, mostly remodels, and because there are so many companies bidding, you have to be more aggressive with the numbers than you would have been four years ago."

Still, there are plenty of people doing well outside Detroit, which is something that isn't often covered in the media, Shoresh says. The community, in general, is very civic-minded.

In turn, much like Spire's referral base is boosted by its manufacturing-like approach to system building, it probably also benefits from being a civic-minded company. For instance, Spire, along with manufacturer partners, recently donated a theater to the children's hospital in Detroit.

"We didn't do this as a way to generate referrals, but as a way to give back to the community," chief technology officer Jeffrey Skalny says. "We are not going to deny that there are business benefits, but the original motivation was to bring a little joy to those that need it most. It also serves us as a company to bring perspective to our jobs and our lives. You learn very quickly what real problems exist in this life, and an A/V outlet buried by drywall is not one of them."

It does generate business too. "People see the ‘thank you' notes from the hospital hanging in our office and it's a great way to start a conversation," Bellanti says. "Once a customer sees that we are not about just taking their money, they start to feel very comfortable working with us."

It may be that Spire is just a good fit for the Detroit area. Many of its competitors have shuttered over the past few years. Shoresh does think Spire - with its work ethic and community service - is a good fit, but he says his company has grown while others have fallen because it adapts.

When it launched nine years ago, Spire had a small showroom and didn't do retail. "Our competition laughed at us," Shoresh recalls. "Back then product was king. Few of these companies have survived and some have become a shell of their glory days. Our engineering background, design methods and low overhead have helped us flourish, even in this economy."

In 2007, Spire took advantage of a soft commercial real estate market and built a new experience center. Shoresh says it's a move that will pay dividends for years to come.

Spire's new showroom - and its general success - are also a reflection of something that doesn't get played up in the media much, Shoresh says: Businesses and people can still thrive in greater Detroit.

"I really want people to realize that Detroit is an amazing place for entrepreneurs. There is so much talent here, inexpensive facilities, great infrastructure and some of the best universities in the country. It's also a great place to live. Yes, I mean it."

Enter the Experience Center, ‘Not a Showroom’
Shoresh isn’t the only CE pro that prefers a more exotic name for his company space than “showroom.” And hey, if a company manages to buy real estate near Detroit in 2007, it earns the right to call it whatever it wants.

Spire’s by-appointment “experience center” is aimed at builders, architects and designers in addition to home owners. It includes “several distinct areas that highlight some common installation options in the way technology integrates into each living space,” Shoresh says. “We put great emphasis on the aesthetics of the space and this resonates well with visitors.”

It includes:

• Living room with a 5.1 media system
• Family room highlighting premium audio and video
• Dedicated theater with lighting, acoustical treatment, seating and new audio and video technologies
• Conference room for commercial offerings and to review blueprints with clients
• Foyer with invisible speakers and lighting control
• Equipment room for showcasing head-end installation ability
• Engineering area to show how its systems are built, programmed and tested

There are no price tags, boxes, flyers or TV walls. “The goal is to help the client understand the options available and then decide which are important to them. Once we establish the desire, the value of our solutions becomes clear,” adds Shoresh.