Didja Know…??? Roadblocks to Profitability and How to Eliminate Them???

Randy Stearns highlights profit pitfalls in recent article

I'm going to lean on an industry veteran for this week's post. Recognizing that many reading this are neither D-Tools companies nor involved in the commercial space, it's possible you missed this article in Commercial Integrator which is a summary of an interview with Randy Stearns (CEO of D-Tools).

Titled "9 Roadblocks to System Integrator Profitability (and How to Eliminate Them)", Randy's information is spot on and worthy of passing along.

A note of reassurance to those of you using the BlueDog design team for proposal generation…we're not only aware of these "profit killers", but have addressed them in various ways utilizing functionality w/in the D-Tools design software we use and internal "best practices". I'll touch on these in my notes appended to those from the article.

So let's dive in! To follow are excerpts from the article that I found to be the most impactful…you can access the article in its entirety: +++++++++++++++++++++++++++++++++++++++++++++++++++++++

9 Roadblocks to System Integrator Profitability (and How to Eliminate Them)

System integrators’ business models should avoid these pitfalls to profitability at all costs during any given project.

Solid AV project planning and execution are ultimately what make integrator firms profitable. Randy Stearns, founder of one of the nation’s largest systems integration firms and current CEO of D-Tools, spent 20 years as systems integrator, always looking for ways that business wasn’t doing as well as it could.

In his webinar titled “Profit Pitfalls and How to Avoid Them,” Stearns shared several keys to improving AV integrator profitability.

1 – Incomplete, inaccurate, or poorly documented scope of work

“Clients will exploit anything not nailed-down in a scope of work document. Internal teams often end up giving things away or doing things incorrectly,” explains Stearns.

He likened it to a golf analogy:

“Sometimes, I come to a hole where there’s something in the way and I can’t see the pin. I don’t know what club to use and end up hitting in a general direction. Projects are often similar if there’s a poorly-documented scope of work.”

How to solve it:

o Create an accurate, comprehensive scope of work

· [CH Note]: This doesn't have to be a unique and well-crafted essay for every project (i.e. a sales or marketing style approach). Creating a template of common "bullet point" descriptions of functionality that can be used to simply copy/paste into a the project scope document can easily do the job. For example:

Family Room:

· Display Devices: · 65” flat screen HDTV on tilt wall-mount bracket.

· Surround Sound: · 5.1 Surround-Sound in-ceiling speaker system with floor-standing powered subwoofer.

· Audio/Video Distribution: · Playback capability of house-wide music and video sources through surround-sound AV system.

· Automation and Control: · Wireless touch screen with control of house-wide integrated systems.

· Lighting Control: · All loads controlled, in accordance with electrical plan.

o Whatever time spent documenting will pay for itself in the end – the loss of time in back end will be at least 10x if not documented properly upfront

· [CH Note]: Amen!

o Important to go even as far as system functionality, performance expectations, etc. – these are sometimes hard to quantify, but an effort should be made

o Exact equipment placement, style, color, any information is good information

o In addition to what’s included, state whatever is excluded in this project

· [CH Note]: THIS is gold!

2 – Underestimating labor

“For some reason, labor isn’t valued as much as equipment in this industry. Actually, labor is where profit is either made or lost on a project. It’s easier to charge for labor because clients don’t understand it as well as price of equipment.”

· [CH Note]: With ever diminishing equipment margins, this is even more true now than in the past. Don't be embarrassed about charging for your time and get comfortable selling it!

How to solve it:

o Include engineering time, project management, programming, warranty, etc. – you can charge for all of this

o Ask about site conditions with site visits, what’s going on there which may impact the project’s timeframe

o Parking? shuttle to job site? these costs need to be included · [CH Note]: Here in South Florida, with drawbridges, limited parking for oceanside condos & construction elevators, we could only rely on getting 4-5 hours of actual install time for our MDU projects…that HAS to be factored into the project cost!

o Meeting requirements – are all subcontractors expected to be at hours-long meetings every week? this should be charged for

o Projects often have additional documentation requirements and that time needs to be charged for · [CH Note]: all of the other trades charge for the professional documentation (drawings) necessary to support their craft - you should too! You won't earn your seat at the table for the best projects, otherwise. If you don't have this capability already, reach out to us to GET IT!

o Scour the plans for “gotchas” – things which impact wire path, routing, etc.

3 – Failing to understand “other” costs –

"Are there any travel or “other” responsibilities involved?"

How to solve it:

o Consider freight charges, scaffolding, storage, travel, rental equipment, etc.

o These are highly legitimate and common costs, so it is rare that a complaint will be launched against them

o With freight, set a percentage of equipment total like 3%; others are line items · [CH Note]: We recommend a "Miscellaneous Costs" allowance to include not only freight, but other associated costs of doing business. These may include vehicle (cost, gas, maintenance), insurances, etc. that accrue annually. Identify these costs, determine the cost (%) they represent against annual sales, and then add that % to every proposal. Also, develop a succinct, well-crafted message that addresses this line item in the proposal and have your sales people MEMORIZE it!

4 – Design oversight and omissions

"Many projects include change orders you cannot charge for, such as staff errors."

How to solve it: