And Other Questions About Planning
From Rental & Staging Systems Jan-Feb 2007
By Tom Stimson
I recently had lunch with a Rental & Staging company president who is a veteran of the events industry but new to the AV business. He asked some very astute questions that – unbeknownst to him – zeroed in on three of the biggest issues facing mid-size stagers today. He started out by asking if there were any strategic planning (emphasis on any) going on inside AV rental companies. In studying competitors he was having trouble finding differentiation much less innovation. Secondly he wanted to know why companies (including his) were bent on competing on price when it was clear to him that equipment pricing was dictated by the wholesale market. Finally, he was very interested in whether national sales models held any advantage over regional approaches. The answers will explain why so many stagers never breakaway from the $3-5 million regional staging model.
My lunch partner was correct that AV rental companies pretty much look alike. The ones that venture into strategy sessions generally do so without outside perspective and spend most of their time focusing on the competition. Sometimes they end up mimicking companies they admire instead of choosing a path that can’t be imitated. When these businesses look at what the competition is doing – the number one question is, “How do they make money with those prices?” After that, the pattern becomes fairly predictable. They begin to compete on price, see their margins start to shrink, panic sets in, and they try to fix everything by growing revenue. That leads to chasing national business hoping for bigger margins. At the end of the day their sales force doesn’t know what not to sell so they end up doing a lot of things poorly.
By the end of lunch, my new colleague was convinced that he was right about needing to keep his company from drifting into the AV rental doldrums. We talked about some strategic planning options and agreed to visit again. But he had one question left and that was whether regional or national focus made the most sense. As I visit with more and more companies – this question is becoming almost as moot as the pricing issue and for the same reasons. If prices are set by the market (ie: what the customer will pay, what reasonable substitutes cost, and what the wholesale price index for that product is), the only difference between regional and national deals is the cost of doing business for the Rental & Staging company.
Granted, some customers still seem to care whether the vendor is local or not – there is a perceived added cost if the vendor is from another region even when there are no added costs visible. There is also a customer viewpoint that national companies must be better than regional providers. But if the company knows how to present itself, there is really no obstacle to regionalizing a national business or vice versa. The question at the end of the day is whether or not you can sell your services for a profit. Are you in control of your expenses well enough to wander away from home? Regional or national is a cost control issue. And effective cost management by the way, can be a strategic advantage.
If you are frustrated by the business practices of your competition, the buying preferences of your customers, or think there might be greener pastures than the market you are located in – then it’s time to look at your business like a strategist instead of a tactician. There are lots of types of strategic planning processes that fit every company size. The most common mistake small companies make is trying to formulate a plan without some outside help. Asking for assistance is not a sign of failure – it’s what successful companies do. Enlist an objective viewpoint and welcome some outside perspectives. Your banker or accountant may know other businesspersons who would share their time to help you along. You might contact the Service Core of Retired Executives (http://www.score.org/) and enlist a mentor. The American Management Association (http://www.amanet.org/) has seminars on Strategic Planning in cities all over the country. If all else fails, hire a consultant or planning facilitator. Don’t take planning lightly and don’t go it alone.
Tom (T.R.) Stimson, MBA, CTS, is president of The Stimson Group, a Dallas-based management consulting firm providing strategic planning, market research, and process management services to the AV industry. Tom is the 2007 Chairman of the InfoComm International Rental & Staging Council and a member of the ETCP Certification Council. Contact him at firstname.lastname@example.org