Home Theater/Audio-Centric Business Model Yields 20% Growth
New Hampshire-based AV Therapy has built a $2 million hybrid retail/custom business on the foundation of two-channel audio and home theater.
Robert Archer · February 27, 2015
Who knew the worlds of fashion and consumer electronics have something in common? Pinning the hopes of a small business on a market that was given up for dead just a short while ago would seem crazy, but just like the fashion world where trends come and go, Nashua, N.H.-based Audio Video Therapy established an up-and-coming business on the groundswell of interest that is driving the suddenly rejuvenated two-channel audio and home theater categories.
However, unlike fashion, which rides the ebb-and-flow of whimsical consumer preference, AV Therapy is banking on audio not going out of style anytime soon. At the very least, there are more ways to consume music now than ever, aiding the company’s ultimate goal of building a long-term, sustainable business that is built on the fun and excitement of audio. But while an old school audio passion is deep in AV Therapy’s roots, the company is also nimble enough to roll with other hot tech fashions of today such as networking and wireless whole-house entertainment.
Filling a Market Void
AV Therapy principal John Rein has gone through a lot of changes throughout his professional career. With a background that includes real estate and software, Rein entered the custom electronics industry several years ago through an association with the New Hampshire-based company Ensemble A/V.
After parting ways with Ensemble, Rein searched for new opportunities within a market that he had embraced as a consumer. In January 2013, Rein and partners Stewart Davis and Mark Terletzky seized the opportunity to open AV Therapy. Rein says the company found good fortune in its location, which shares a parking lot adjacent to Best Buy.
“I thought it was the perfect location to launch a consumer electronics business. Retail is still location dependent, no matter what people say,” he emphasizes. “The location helps to pick up business from people walking and that is really the best way to [operate a specialty A/V business].”
Company: Audio Video Therapy
Location: Nashua, N.H.
Years in Business: 2
Number of Employees: 5
Revenues (for 2014): $2,000,000
Specialty: Music and theater sales and installation with a focus on two-channel audio
Top 5 Brands: B&W, Totem, Bryston, Prima Luna and Sony (projectors and TVs)
FYI (one piece of advice to another dealer): We are selling toys, so the entire experience needs to fun for the customer.
Knowing that location alone isn’t enough to build a business, Rein says AV Therapy operates with a specific mission statement — to fill a void that’s developed locally.
“We wanted to serve the market that the old Tweeter, the old Tech Hi Fi used to serve. That market has been neglected since Tweeter went out of business, and the service of that market is gone,” he explains. “Before Tweeter became a TV store, they were a high-end audio retailer, and that disappeared in New England. In the meantime, many companies went high-end and the middle market was left unserved. The bulk of our system sales are between $5,000 and $30,000 and that includes theater and two-channel.”
Learning from his past business experiences, Rein says it is important for the company to manage overhead costs to ensure financial stability. To minimize the draw of overhead expenses, for example, he points out that AV Therapy employs a minimum number of employees, and that it adds demo gear judiciously.
“We’ve paid for demo equipment using money we’ve made over the past two years to pay for products, rather than credit,” Rein notes. “There’s an old saying that 70 percent of businesses that have failed are profitable, but they fail because they are out of cash. We have zero longterm debt. We did the build-out of the building with cash and a little credit, but we paid it all off. The only thing we pay is rent and whatever we purchased during the month.”
Audio Renaissance Drives Sales
With a business plan in place and an ideal site procured, Rein and his partners were also fortuitous with their timing, opening AV Therapy in the midst of an audio golden age. Unlike recent times in which other markets and technologies were more prominently featured by manufacturers and the media, now because of the swing of consumer preference, Rein says audio is once again a point of emphasis for the public.
“Music has become important again. Let’s face it; Apple and Beats have put music back into people’s homes,” Rein says. “For a while it was all about theater, and now it’s an equal split between music and theater, which wasn’t the case years ago.”
To capitalize on that renewed interest in home audio as well as other categories, AV Therapy adopted a consultative sales approach in its business plan, which means gaining the trust of clients is one of the company’s top priorities, according to Rein. Toward that end, Rein and his partners designed a showroom space that equally highlights home theater, two-channel audio and whole-house audio. He says one of the most surprising developments to arise from the decision to open a business that hosts multiple floors of A/V in a busy location is the diversity of clientele that walk through its doors, and the reaction of some consumers.
“We’ve devoted half our space to twochannel audio and in the past I would have never have done that. Clients react excitedly when seeing all the systems. People comment that they thought this type of business was extinct, and younger people say they have never have seen this type of business,” he notes. “Audiophiles make up about 5 percent of our business, but most of our clients are just music lovers. Audiophiles are not our primary focus; we don’t do ads in consumer [A/V] magazines. I want them [audiophiles] to know I am here, but they are not what I am going after.”
Through diversified product lines, AV Therapy is able to address the technology wants and needs of its diverse customer base, which ranges from entry level, to full out high-performance: speaker brands such as KEF, Paradigm, Totem and PSB; wholehouse audio from Bluesound; high-performance two-channel gear from Bryston, Linn, Grado and Clearaudio; video products from Sony, Epson, Stewart Filmscreen and Screen Innovations (SI); and networking devices from Luxul. Rein says that AV Therapy hasn’t had to alter much of its original business plan, but adds that it is inevitable that it will have to make changes to keep pace with whatever developments do take place within the market.
Rein notes the only real alteration since the company’s launch has been the addition of computer audio, DACs and headphones to its products and services. Additionally, the company has experienced perhaps a somewhat surprising boost, given the New England climate, thanks to the increasing popularity of outdoor audio solutions.
“Outdoor speaker sales are consistently growing, and portable devices such as Soundcast have become important,” Rein says. “Outdoor speakers are becoming add-on sales for existing customers. We’ve had good responses from clients with those products … we need to do more outdoor speakers.”
Demos, Hosted Events Boost Business
Understanding the fragility of the A/V industry and audio in particular, Rein and his partners have made a major commitment to their showroom. Knowing the space has to appeal to youthful Generation Y, as well as Gen X, and traditional Baby Boomer consumers, Rein and company have applied an old-school mentality to its showroom by incorporating as many demo systems as possible while being fiscally prudent with them.
Rein thinks that part of the reason for some companies’ struggles is that some dealers moved away from utilizing one of the industry’s best sales tools — the personal experience of music and movies that having a showroom provides. The store is designed to accommodate and showcase systems that represent the array of price points the company can deliver.
Rein is particularly proud of the company’s implementation of Bluesound throughout the facility and the vignette created to highlight its selection of DACs and headphones. Rein explains that with Bluesound, clients can benefit from the ease of integration afforded with a wireless solution while also stepping into a system that supports high-resolution audio (HRA). He says Bluesound demos are available just about anywhere in the showroom, and he points out that they often encourage clients to come in with their own music so they can see how easy the system is to use.
Further aiding the company’s business plan, sales approach, location and willingness to adapt to whatever trends shape the market is the support it receives through its affiliation with ProSource. As a ProSource member AV Therapy has access to some top brands in the electronics industry and the associated training and sales support that comes with a buying group. Additionally, AV Therapy has leaned on an increase in visits from manufacturer reps.
“We have more relationships with our vendors and reps than ever before. It’s in their best interest to make sure we understand things,” Rein says.
Another cog in the company’s overall health has been the aggressiveness in which it markets to the public. Several times a year AV Therapy holds manufacturer-supported events that feature some of the industry’s top names, including past guests such as Vince Bruzzese of Totem Acoustic and Paul Barton of PSB Speakers. During these events, clients can interact with such industry luminaries, check out the latest components, and enjoy food, drinks and music.
“We wanted to create a community so [clients] can interact with our vendors,” says Rein. “During these events we are not in our typical mode; we are hosts and we want people to enjoy themselves. The events foster relationships because we want to build a long-term business. We’re not into one-off sales and the only way to do that is to foster those relationships.”
Keeping an Eye on the Prize
Showing just how much the A/V market has evolved, AV Therapy is fully cognizant of the reputation of the industry, including the elitism and quirkiness frequently associated with audio and audiophiles. Rein says the company understands that it has to educate clients and prospects, especially when it comes to digital audio and aspects such as file formats or that “wireless” speakers still require power.
“The major misconception is that MP3 is a good format,” Rein says. “Once you hear HD or CD quality, we open up a window they didn’t know existed. The hard thing is getting people to come in, but once they hear it they want it.”
Rein says business is going well and that he doesn’t foresee any downturn affecting the immediate future. His expectations are for the company to grow over the next couple of years, but there is some apprehension on his part.
“We are expecting 15 percent to 20 percent growth. We are getting more referrals. I don’t want the company to get too big. Bigger than $2.5 million and I think it could lose that family feel beyond that level,” he says. “I feel within a year or two we could peak at $2 million, to $2.5 million in another year or two.”
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Bob is an audio enthusiast who has written about consumer electronics for various publications within Massachusetts before joining the staff of CE Pro in 2000. Bob is THX Level I certified, and he's also taken classes from the Imaging Science Foundation (ISF) and Home Acoustics Alliance (HAA). Bob also serves as the technology editor for CE Pro's sister publication Commercial Integrator. In addition, he's studied guitar and music theory at Sarrin Music Studios in Wakefield, Mass., and he also studies Kyokushin karate at 5 Dragons in Haverhill, Mass. Have a suggestion or a topic you want to read more about? Email Robert at email@example.com
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