CE Pro Industry Insider, November 2015
I don’t have a big enough opinion this month to fill a whole page with it, but I do want to comment on a series of themes that are not unrelated. All have to do with the co-mingling of custom, less-custom and seemingly incompatible channels to market:
“What is the Value of my Company?” is a piece written by CE Pro’s Jason Knott in September. It covered many of the usual subjects – RMR, EBITDA, service contracts, etc. – but there was one little nugget from David Stang of Stang Capital Advisory that really caught my attention. He was speaking mostly about the buying and selling of security companies and their customer accounts, but his comments should resonate strongly with custom integrators who would like to sell their business (or borrow against it) someday.
If you’re thinking about an exit strategy, the best bet may be to embrace brands and solutions that everyone else is selling.
“To buyers, the [customer] account contracts are collateral that can be resold if they want to another purchaser,” Stang said. “So, as additional services are added onto the core security contract, what if the buyer can’t provide those services? You can’t provide services that are too proprietary or too unique so that a potential buyer could not be able to do it. That makes it tough to sell that account” [emphasis added].
In other words: If you’re thinking about an exit strategy, the best bet may be to embrace brands and solutions that everyone else is selling. Then your accounts (your customers) can be sold to a larger market of businesses that can easily service those accounts.
So while many dealers lament the “over-distribution” of certain brands, especially in the home control category, the smart ones might see brand saturation as the best hope for a future buyout or, as some would say, payout.
“Less custom” seems a fitting term for vendors who got their start building one-off products to spec … and are now making ready-to-buy models to satisfy most dealers and end-users. Stewart Filmscreen, for example, just launched a line of less-custom screens, called Standard Solutions. Leon Speakers is now packaging its ornate Sound Sculptures and “Sound Bar” hideaway liquor cabinets for less-custom installs. And home automation vendors are making less-custom lines such as Crestron Pyng and the Savant App/Smart Host.
The products are still installed by CE pros, but they can be spec’d, purchased, sold and installed more efficiently than their more-custom counterparts. It’s a good strategy. Once a manufacturer establishes itself as a luxury custom brand, it should be able to package that reputation for a broader market.
Integrators might be wise to follow that path.
The new DIY Savant Remote is the right thing to do, both for the company as well as the custom industry. Then again, you knew I’d say that. Funny that the announcement of the $499 product, to be sold through BestBuy.com, coincided with the Blood Moon. And yet, we’re still here. It’s a slick product, limited in its feature set, and if Savant does it well, the initiative will drive traffic to authorized dealers.
I have to give kudos to Savant for taking the brave move of launching a DIY product. Dealers will kick and scream but in the end, they will continue to embrace Savant if that is their custom control system of choice. Elan, Control4, Crestron, URC, RTI and others will be watching carefully.
There will be challenges ahead, of course. Much of the early backlash concerns loyal dealers who are not thrilled that DIYers get a slick remote and Sonos integration before the pros do.
As one Savant dealer says, “I'm quite sure many of my Savant clients will be calling me up about that remote wanting it in their system and I'll have to tell them that the $500 Savant remote isn’t compatible with their $10k+ Savant system we installed.”
Lutron is even more confusing with its Smart Bridge, Smart Bridge Pro, new Lutron Connect, Caseta, Radio Ra, HomeWorks, Sivoia QS Shades, Serena shades and related accessories – all with Lutron “ClearConnect” wireless but not necessarily compatible with each other.
They seem to be doing OK with that. Custom dealers have barely flinched.