Misplaced Optimism and the Transactional Mindset of Pro-AV

If I told you that the economy was great, your business will grow for another year, and over 60% of your industry peers agree – what then would be your biggest concern? This is not exactly how InfoComm’s Market Research team framed the questions in their recent “Pro-AV Business Index” for January 2017, but your responses really got me thinking.

Let me set this up for you. The diagram labeled Figure 5 reveals the response to two six-month prognostication questions. The second item interests me the most: 61.7% of respondents feel positive about their revenue for the next six months, but only 6.7% feel negative. That is a very upbeat assessment. The fact that 50.8% also feel good about the workforce is also good news.

In the very next question respondents are asked to rank their top concerns for 2017. On first reading it all seems good. Of course profitability would be everyone’s top concern. Who could argue with that? (I will…). Finding good people is next, check. Struggling with an unpredictable economy? Whoa. Wait. When was the economy ever predictable? Next is competition, then something about managing ‘costs’, then ‘negotiating’ followed by some technical thing. I could just nod and move on, except these results are disturbingly irrational and potentially self-destructive.

Clearly I have issues with these rankings, so let me share my order and reasoning. My top concern for Pro-AV companies is “Negotiating appropriate project fees.” My reasoning is this: if AV folks will figure out how to get paid for the value of what they do, the rest of these issues are moot. Better revenue at the same cost yields more gross profit. This covers two variables on your P&L. Pro-AV tends to still think in transactional terms in which price is the only reflection of value that matters. I will argue till I am out of breath that any AV installation worth having is worth substantially more than the sum of its parts. Focus on what your solution does for customers instead of how you do it. Negotiate better, protect your value and your gross profit will increase.

Next up on my priority list, “Managing the cost of running the business.” This is the third variable of the profit equation. It takes less time and energy to manage ‘below the line’ expenses, but ignore them at your peril. Additionally, many Pro-AV companies mistakenly bury variable costs of goods sold in expenses, which means paying attention to this part of the P&L is even more important. Being concerned about expenses will help uncover a lot of repairable business mistakes.

Third – and this is going to be a surprise – “Security in AV.” You don’t have to be a technical wizard to know that this is huge. Without security, AV has no credibility and therefore no value (see item #1 on fees). As an industry, we have to do everything we can to be part of the solution instead of the problem. It doesn’t help that we have just learned that the CIA has tools that allow them to listen and see through our so-called “smart” devices. I don’t think anyone is surprised, but this does add insult to injury for companies that install interactive technology.

My fourth item of importance is “Identifying qualified new staff.” This should be a priority all the time. I tell my clients, “Always be hiring. If a good person walks into your office, hire them.” The corollary of course is to “Always be firing.” Employee loyalties notwithstanding, we all deserve an employee upgrade. Experience tells me that at this stage of an “up” economy, talent starts to move around to leverage their value before the next economic upheaval. Pay attention.

Items five through seven are to me, unimportant. “Increase firm profitability” is hard to argue with except that it is a byproduct of a lot of other important priorities. Making a profit is easy. Maintaining one is the challenge. Doing all the other important things are the best hedge on profit.

Competition? My advice is stop worrying about them. You are your own worst competitor. You can control what you do. You can’t do anything about what other companies do. Fix your pipeline and suddenly competition doesn’t seem like a big deal.

The least important item on the list makes me chuckle: “Coping with an unpredictable economy.” At no time in my five decades of existence has the economy been predictable. If you take care of items one through four, the economy is not your enemy. It is a condition that everyone has to deal with. The playing field is level. Stay balanced and you won’t fall over when the economy decides to tip unexpectedly.

I enjoy surveys like this. It helps to gauge people’s perceptions and for business owners, having some validation about trends can be comforting. However, the real value is to elicit a useful response. Pro-AV still has some work to do.

Tom Stimson MBA, CTS helps owners and management teams rediscover the fun and profit that comes from making better decisions about smarter goals. He is an expert on project-based selling and a thought leader for innovative business processes. Since 2006, Tom has successfully advised over two hundred companies and organizations on business strategy, process, marketing, and sales. Learn More at TRSTIMSON.COM

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