You when you’ve been in the industry for decades, the institutional knowledge is solid gold. And the opportunity to have the information from those years of experience passed along to the next generation of integration company owners is priceless. With all the pressures facing CE pros today from supply chain to labor rates to company culture, worthy advice from someone who has seen it all and done it all is welcome indeed.
That’s where Franklin Karp comes in. After spending decades in the trenches, Karp is now sharing his sage advice with others through the formation of his own consulting company: Franklin Karp & Co. Karp started in the consumer electronics business when he was in college selling stereos. That evolved to a job in retail at Stereo Warehouse before moving Harvey Electronics, a high-end dedicated retailer that eventually expanded into custom installation. Harvey’s grew to $46 million in sales, including $21 million in custom installation during Karp’s long tenure. For the past decade he has been at Audio Video Systems in New York, dealing with vendors and affluent clientele.
Even though business is booming, there are always simmering issues on the horizon and efficiencies and improvements that can be made for business right now and to prepare the business for the future.
Karp offers this important advice in these key categories:
Supply Chain
“Relationships with the vendors is very important right now. If you were the type of integrator that hopped around from different vendors depending on your credit status of other reasons, things can be very difficult for you right now, especially if you are being pressured by clients, contractors, architects and designers.
“You need to have solid relationships with them. There are very few exclusives as far as the distributor being the only guy who has a particular brand in this day and age. Having a good relationship with your suppliers is critical. When you run into a problem, especially if a product fails, they remember who treated them fairly. They remember who answered their phone calls or remember who took a meeting even though perhaps you didn’t want to take that meeting. It’s all part of having a partnership in a relationship. When a regional sales manager calls up and says, ‘My boss is going to be in town and I really need to have a meeting.’ If you make that regional guy look good, then who knows that regional guy has control over the spigot of product and he remembers who was nice to him. He remembers who didn’t yell at him and behave like an animal. It comes down to human connections.”
Inventory Management
“Cash flow is incredibly important right now, especially if the projects are delayed, which means your progress payments are being delayed. If you’re disciplined enough to go to the client and say, ‘I won’t be able to get this product for three months, six months or in some cases one year, but I can buy it today. I want to schedule the order but I need you to give me the money now so I can buy it. I have to pay for it in 10 days, 30 days or sometimes COD. It’s going to sit in my warehouse but we’ll know it’s there, and when the job site is ready, I’ll be able to be on site on time and not hold up the project.’
“I’m normally not a believer in carrying a lot of inventory except in the case where you need that product for service, but it’s an unfortunate situation right now. Cash flows are being impacted whether you are a $10 million integrator or $1 billion integrator. Cash is king. Credit managers at distributors and manufacturers have responsibilities, and they can’t keep extending your credit. I was never a believer in buying my video products until one week to 10 days before the job because of market pricing. Today, market pricing is not as sensitive, but the lifespan of a video product can be only eight months. On a large project that can extend for one year or longer, you would be out of your mind to buy video products that early.”
Company Culture
“Culture is probably the hardest thing to change in any company, regardless of the size. Right now it is important to behave like a human being, who listens more than talks. Your employees have lives. The pressures that you as a principal of your integration company are feeling shouldn’t necessarily be translated down to the soldiers in the field. They don’t want to work 80 hours a week even though you may be working 80 hours a week. Communications, listening and paying them (or in some cases overpaying them). Are you doing enough to train those guys? That’s very important because training shows them that you care that they are installing it properly. That will lead to happy clients, which leads to more referrals, which leads to more money and, ultimately, greater compensation. It’s a family/team kind of thing. It’s no longer a situation of, ‘I get the money and you work for me.’ Culture is about how you treat them, how you communicate with them, how you instruct them, and how you give them permission to speak and to be involved in what goes on. We’re really not in the installation business but we’re in the service business. If you don’t remember that, then you really should go hang up your shingle somewhere else.”
Sales Management
“One of the mistakes I see made is that the sales guys, many of whom are prima donna, are allowed probably too long the leash. Having a regular dialog – not emails – about the proposals that are out that have not closed, or discussing where they are in the process, is important. Being engaged in what your salespeople are doing will help you to guide them to stay on track. It helps to see what they are selling, but not looking at the products they are not selling is a common mistake by many companies. If the service department is not crazy about a product, then why are you selling that product?
“Maybe at the beginning of the month, have a dialog about a particular sales proposal that hasn’t closed, and ask how you can help close that sale.”
Labor Management
“I used to like sending birthday cards to all my people, and I did my best to know about their families… what they like to do and retain information about their personal lives as much as I could. It’s very important and it’s even more important today. The money that you need to pay these people has gotten you know excessive in some cases, and so you need other connections to them beyond just money. That increases your chances of holding on to somebody to another company that waves more dollars in front of them.”
Software Selection
“Once you get mired in multiple pieces of software, you’re ultimately wasting time, not saving time. And time is the most precious commodity that we have both on the job and off the job. End-to-end software has come a long, long way in our industry. Years ago, we were never big enough to attract the attention of the big-time software guys to create something specifically for our industry so everything was off the shelf and had to be modified. Once you start modifying software, it costs time implementation. It all takes forever. I am not going to endorse one piece of software over the other, but I advise dealers that they don’t have make their proposals overly fancy. Years ago it was acceptable to do proposals in Excel. The truth is a client skips the last page anyway, but it’s all about time and time management.”
Standards and Best Practices
“I think standards and practices is something that a lot of integrators say they do but very few of them actually do what they say they’re doing or even understand that there is a much better way to do it.
“Almost every integrator uses the least expensive RJ-45 jack they can buy. I can tell you from firsthand experience how many times a service call was generated because that cheap RJ-45 jack was used and the cable came loose. That costs you to roll a truck to go and plug that RJ-45 jack back in. Also, many guys rush their jobs and then a problem occurs and you’ve got an unhappy client. The old maxim is: Inspect What You Expect. I don’t think enough people, whether it’s the project manager or the principal, actually see the finished product when it’s in place and inspected.
“A client doesn’t want to see the integrator’s guys walking around with a laptop trying to figure something out. That does not give them a high sense of confidence to see the technician still on the job tinkering.”
To hear more from the conversation with Franklin Karp, listen to or watch the full podcast above. Find past episodes of the CE Pro Podcast by subscribing to the CE Pro YouTube channel or our Apple and Spotify podcast feeds.