It’s not often you find commercial integrators crossing into the residential market, but Audio Visual Design Group (AVDG) has found the secret to doing so successfully.
AVDG’s move into the residential space in 2014 was a strategic one, driven by customer demand and a desire to balance the company’s revenue sources.
In targeting high-tech resi clientele, AVDG has earned $5 million in revenue.
According to a recent CEPro.com article, AVDG found success in expanding to the residential market through the following ways:
1. Team Experience
Greg Merriman, general manager of AVDG, worked in the commercial integration world for many years, including a stint at Crestron. That experience meant established relationships in the commercial design-build/architectural community were transferred into the residential space.
“I had some great relationships with builders, developers, architects and consultants in the market, but I probably assumed some of those relationships would automatically turn into business for us. I’ve had to earn that. When I decided to start this residential division — although we are 84 people strong with two offices in the Bay Area, and we are larger than anybody else in this market — it didn’t mean those partners were all going to start jobs with us tomorrow. There is a vetting process and a lot of work.”
If you are going to thrive in a tech-centric area, you need to have a strong company culture where Millennials want to roost. According to Foster, AVDG has an almost start-up mentality pervasive among the entire team.
“Theirs is a culture of self-assigned accountability. There’s a pursuit of excellence that is not imposed by the company leaders.
“Everybody is engaged in how to make it better,” she adds.
3. No Showroom; Subdued Vehicles
AVDG does not have a showroom. It’s not surprising given the area’s sky-high real estate costs, not to mention the need to staff it.
While admitting that a showroom would be a great addition, Merriman believes his high-end clientele are not necessarily inclined to visit one.
“As we grow this division, I want to be responsible and run a tight ship as a business person, and so right now, we’re not taking that step [to open a showroom]. That may change,” he says.
The commercial-like approach to the market is also apparent in the company’s fleet. If you saw AVDG’s fleet on the road, you might miss them if you blink.
“We don’t have billboard wraps on any of our vehicles. We have clean single-color vehicles with a very discreet logo on the door panel. You have to strain to see it, and that’s intentional. That’s throughout both our divisions. Although I see the marketing value of somebody driving down the freeway and seeing our van and calling us for business, that’s not the way we’re approaching the market. A lot of our key partners, particularly in residential, appreciate it,” says Merriman.
Those vehicles help AVDG navigate the traffic-laden freeways and cover clients from Silicon Valley in the south to the Napa wine country in the north. To ease that burden, AVDG has field offices in both locations.
4. Tight Labor Pool; Competitive Environment
With wealthy, high-tech clientele everywhere, San Francisco/San Jose certainly presents lots of opportunities, but it also means lots of challenges. Finding quality employees is at the top of the list.
“Bay Area labor is an extreme challenge. What we’re working towards is creating a culture where new employees seek us out for opportunity because they heard about our people, the way we work, the way we treat each other, and the way we treat our clients. We will find opportunity for those talented people,” says Merriman.
“Frankly, there’s some damage control to be done in this market specifically … and that’s not to call anybody out or be disrespectful in any way.” — Greg Merriman, general manager, AVDG
At the same time, because Northern California a very pleasant place to live, it’s an expensive place to exist. The cost of living and the cost of everything — even a cup of coffee — is higher.
To combat that, efficiency is vital to AVDG’s operation to maintain margins. Merriman admits that is getting harder and harder.
“There’s no moment of rest. If you think you’re doing great, you need to take a step back, look at the big picture, and look at what could be better,” says Merriman.
5. Professional Approach
“We get a great response from clients because we are business people — we are not uptight, but we’re professionals. Sometimes the legacy of the residential market is a bit more casual and more free spirited; certain clients and partners really appreciate our professional approach,” says Merriman.
“We like to have fun; we love the technology; we like to laugh in the course of meetings and our daily endeavors. If we’re not having fun we shouldn’t be doing this, but at the same time we’re really trying to raise the bar as far as the expectation in the market of professionalism, and be less casual.”
In the commercial market it’s not uncommon for AVDG to be called into meetings to develop scope of work, and be asked to deliver that project in 60 to 90 days.
But in the residential market, in new construction in particular, the company may not physically deploy to the jobsite to prewire for six months after it initially designed the project, then another four months for trim-out, and another five months for final phase.
That elongated timeframe can foster a lack of urgency or time compression, which can lead to a more casual pace of work.
“I think our commercial culture lends to a better status of addressing those urgencies, getting things done faster, and being more clear in our communications. All these things lead to a different perception of us,” adds Merriman.
The approach extends to internal analysis. The company conducts weekly P&L evaluations on every project looking at the profit/manhours over/under for every stage (pre-wire, trim-out, finish) of the job.
That data is used to hold regular meetings on each project with the entire team. If the job is running behind, the discussion revolves around how to minimize the impact of potential distractions or making key changes to stay on track.
6. Economies of Scale
One area of expertise that AVDG has been able to exploit is its ability to handle the non-electronic portions of a project.
For example, the company employs technicians who are gifted in their ability to build infrastructure to support the electronics.
“The things we have to do from a structural standpoint on the commercial side far exceed what you get from traditional residential structures. For instance, building a super structure to support a giant screen wall in a museum is outside the core competency of A/V. We bring that strength into our residential business because if we have to do something unusual, we’ve got a skill set in our commercial team to help support that in a rough-in and prewire phase,” notes Merriman.
At the trim-out and final stages, AVDG has residential-specific technicians who understand the aesthetic demands of a home.
For example, it would be rare to recess a screen or device into a padded fabric wall in a commercial environment, but AVDG understands the higher fit-and-finish needs onthe residential side and is able to meet those demands.
Purchasing power is another economy of scale the company is utilizing as it continues to add more residential work.
The company is able to use its established relationships with certain vendors, such as wiring suppliers, that are active on both sides of the A/V industry to gain advantageous pricing.
Other economies of scale are being achieved in fleet management, and equipment like hard hats, booties and shipping blankets — things it can benefit from being a larger organization and negotiating better deals.
7. Strategic Outsourcing
Unlike some integrators, AVDG uses outsourced experts often, even in areas where it has the in-house expertise.
“We play well with others. In the Bay Area, we are fortunate in that we have a great community of specialists. We are not absolutists,” says Merriman.
Even though AVDG has the capacity to do the work in every discipline of the custom installation business, its decision to work with other professionals is dependent on the project, while also a strategic tactic.
“If I have a lighting consultant that I have been lucky enough to work with on a project, the last thing I’d want to do is have them hear through the woodwork that all of a sudden we’re doing fixture assignments,” says Merriman. “Those experts can be great business partners.”