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Tuesday, April 22, 2014

If you think you’re losing money buying through distribution, think again.

By Julie Jacobson

Richard Glikes, the outspoken leader of startup buying group Azione Unlimited, offers some useful business tips to integrators in his April newsletter to members. His suggestion to avoid distributors, however, is not one of them.

That tip goes:

Avoid purchasing from distributors whenever possible. They have to make money too. Generally they work on 6% to 25% margins. That’s your money if you buy direct. TVs are the exception.

First, I come from distribution and I can tell you 25% margins would be extremely generous, applying mostly to accessories and impulse buys such as connectors, mounts and tools.

But more importantly, Glikes ignores the very real monetary benefits that extend beyond “margin.”

For example, what about inventory holding costs? Do you really want to have a bunch of boxes tying up cash flow and physical real estate in your shop? If you have a distributor nearby, why not let them eat the cost? Just-in-time is where it’s at, baby.

There are so many other reasons to go through distribution.

They buy in bulk; individual dealers may not have access to those discounts. You don’t have to buy select products in volume to get a good deal.

Distributors likely have better RMA policies than manufacturers. You don’t have to manage relationships with multiple vendors. You typically get better tech support. You get access to specialists that deal with a variety of product categories so they can better understand the integration ecosystem.

Distributors can be a huge value to even the largest of dealers. Don’t listen to Glikes on this one. But do take heed of his other excellent business tips:

Posted by Julie Jacobson on 04/22 at 08:15 AM
News, Blogs, Business Resources, Distributors, (3) Comments, Permalink

Monday, April 21, 2014

Integrators are perfectly positioned to garner a piece of the pie from the billions of dollars that will no longer be spent in brick-and-mortar CE stores. Photo credit:

By Chuck Schneider

Let’s board the way-back machine to 1998. I was a rep principal in New England, representing “better-best” home and car CE vendors, including one major Japanese electronics manufacturer. We sold this line to only retailers at the top of the specialty pyramid with a few meticulously selected CIs who met a long list of stringent requirements. No trunk slammers. Not even any reputable, highly regarded local distributors.

Cambridge SoundWorks approached us about putting this line not only in their 14 stores located in greater Boston and metro San Francisco, but also (horrors) on their brand new state-of-the-art website. It would be big bucks for both my firm and the manufacturer. The web back then was still the Wild Wild West, a potentially very dangerous place to authorize the sale of your brand. It was a huge watershed precedent-setting decision, a decision that could cost the rep firm (me), the line, and the vendor’s sales VP our jobs if it backfired.

The VP of sales (a 2013 CE Pro Masters honoree) made the gutsy and enlightened call to forge ahead and allow CSW to sell his brand online. There the term “Authorized Internet Retailer” was born. Business skyrocketed that Christmas. In the process I lost a few local accounts, as did the northern California rep, and the vendor had some accounts resign the line in protest. On balance we all made a lot more money.

But what happened all around the specialty CE marketplace because of this vendor’s bold move was truly remarkable. Competitors to the brand I represented actively began to look for Internet “partners” for fear of being left behind. Brick and…

Posted by Chuck Schneider on 04/21 at 07:54 AM
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Friday, April 18, 2014

Integrators say it is a “bitter pill to swallow” to learn their custom integration companies they have re-invested in for so many years are not geared toward a big payday. Photo credit: The Penny Hoarder

By Jason Knott

Have the accountants got it all wrong after all? That’s a question some custom integrators are asking as they depressingly realize “outsiders” deem their long-term, highly successful businesses to be close to worthless from a valuation standpoint. Instead, the market is solely focused on “multiples” of recurring monthly revenue (RMR) from either service agreements or security monitoring contracts.

How can a custom integration company with success in every area possible be worth squat? Are years of satisfied and repeat customers, profitable operations, a beautiful showroom, pristine vehicle fleet and consistent upgrades valueless? According to the pundits, it’s worth zippo…nada.

Several integrators recently vented about this issue to security legal expert Ken Kirschenbaum of Kirschenbaum & Kirschenbaum, and a columnist for CE Pro‘s sister publication Security Sales & Integration.

“Somewhere along the way, possibly with the introduction of ‘multiples,’ the buying and selling of alarm accounts became a big business,” notes Lee Hearn, president of Allegiant Security in Stuttgart, Ark. “I am not implying that there is anything wrong with selling one’s account base at generous multiples, but there are many in the industry whose sole purpose has become originating (or acquiring) as many accounts as possible in the shortest amount of time possible so that those accounts can be turned for a quick (and sizable) profit.  Again,nothing wrong with that if that’s your business model.  It’s a proven money-maker.”

Hearn frustratingly adds, “Unfortunately, many in the industry now think that’s the ONLY business model and that anyone who isn’t focused solely on building the number of RMR-generating accounts held is foolish. Call me a fool, then. I own…

Posted by Jason Knott on 04/18 at 06:27 AM
Blogs, Legal, Mergers and Acquisitions, (3) Comments, Permalink

Friday, April 11, 2014

By Jason Knott

Set aside any ideas about commenting about my movie-watching tastes for a moment and just take my advice: Don’t use the 2013 movie “White House Down” for your demo material with clients.

Sure, it’s got lots of explosions thrilling chase scenes that will certainly excite the senses of prospective customers in a home theater demo. But it’s not the film’s audio or video quality that makes it a bad demo.

In the flick, a group of domestic terrorists infiltrate the White House’s custom installation company… a fictitious firm named Sonic DC. The Sonic DC men drive right through the White House gates in their van (filled with lots of guns and ammo). The side of the van proudly announces the company’s expertise in “Commercial A/V.”

The bad guys are all wearing gray jumpsuits with name tags. (They look better than the Circuit City firedog team did!) They are there under the guise of putting in a new sound system in the White House home theater.

Interestingly, the villains are showing “Lawrence of Arabia” on the White House home theater when all hell breaks loose, so at least the terrorists know good demo material when they see it. 

Of course, the plot is terrible, along with the acting by stars Channing Tatum and Jamie Foxx. But the mere idea that the A/V company for the President is filled with bad guys probably won’t go over well with prospective clients.

I still remember the blow-back from the 1982 Kurt Russell/Ray Liotta movie “Unlawful Entry” in which Liotta plays the devious policeman who helps getting an alarm system installed…

Posted by Jason Knott on 04/11 at 07:17 AM
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Wednesday, April 09, 2014

The International Security Conference (ISC) West 2014 was dominated by ... security!

By Julie Jacobson

The International Security Conference (ISC) West 2014 just wrapped up with a record number of … security companies.

I’ve been going to these shows for 24 years and they always have a variety of exhibitors who live outside the immediate realm of security but see value in this ripe market of low-voltage installers.

This year, very few non-security companies had booths at the show.

Lutron was there for the third year with lighting controls and some motorized shades. CentraLite exhibited for the first time with its lighting controls and ZigBee peripherals. Leviton had Z-Wave devices but the highlight was its security offering formerly known as HAI.

Other than that, it was tough to find home-control products such as energy management and motorized shades. There wasn’t a remote-control exhibitor in the house, although that category and some of the others were ably represented by distributors such as ADI, Tri-Ed and the PowerHouse Alliance.

True, Xantech had a small presence in the Core Brands booth, but the focus in that sizable space was Proficient Audio and its entry-level spin-off brand Emphasys.

As far as I could tell, no other consumer loudspeaker brands were highlighted at ISC, although Channel Vision showed some audio betwixt its CCTV lineup.

The electronic door lock manufacturers were represented but that’s still security, and most of the residential offerings were sidebars to their big commercial access control booths.

Except for the pure-play security manufacturers who have added automation to their repertoires – Linear/2Gig, Interlogix, DSC, Honeywell, Napco – I didn’t see much else in the way of home control from traditional players or startups.

Posted by Julie Jacobson on 04/09 at 09:15 AM
News, Blogs, Home Automation and Control, Security, (3) Comments, Permalink

Tuesday, April 08, 2014

The typical builder earned $37,255 in profit from a $399,532 new home built in 2013.

By Jason Knott

The average builder earned just over $37,000 in profit for every home he built in 2013, or about 9.3 percent of the total sales price. Exactly 4 percent of a typical home’s total sales price was spent on electrical, another 4 percent was spent on HVAC and 1.2 percent was spent on lighting.

Those are just some of the results from a new study from the National Association of Home Builders (NAHB) that opens up the proverbial kimono of the average homebuilder.

The new “Cost of Constructing a Home” study offers itemized details on how much money it really costs a homebuilder to construct a new home. Unfortunately, the cost of automation, audio, security or other electronic amenities is either buried in the general “electrical” or “lighting” categories and not broken out.

The survey has a base home of 2,607 square feet on a 14,359-square-foot lot that sells for $399,532. In all, 62 percent of the sales price in 2013 went to constructing the home itself. That is actually up from 59 percent back in 2011. The cost to acquire the lot itself in 2013 was 19 percent of the sales price (down from 22 percent in 2011). 

Among the eight major subcategories for construction costs are:

  • Site Work (permits, water/sewer, architecture/engineering, etc.): 6.8%
  • Foundation (excavation, concrete, retaining walls, backfill): 9.5%
  • Framing (trusses, sheathing, steel, roof):19.1%
  • Exterior Finishes (windows, doors, garage door, siding, etc.): 14.4%
  • Major Systems Rough-ins (plumbing, electical, HVAC:13.4%
  • Interior Finishes (insulation, drywall, trim, painting, lighting, cabinets, appliances, flooring, fireplace, etc.): 29.3%
  • Final Steps (landscaping, driveway, cleanup, deck): 6.6%
  • Other: 0.9%
  • Total Construction Costs: 61.6% of sales price

Among non-construction…

Posted by Jason Knott on 04/08 at 08:51 AM
Blogs, Research, Builders, (2) Comments, Permalink

Thursday, April 03, 2014

Sharing your first-hand experience can go a long way with your customers.

By Julie Jacobson

Leon Shaw of Audio Advice in Charlotte, N.C., is a classic geek, adopting technology early, using his home as a lab and (thankfully) sharing his findings with folks like us — the ones who don’t actually get their hands dirty, at least not on their own time.

I recently shared with CE pros one of Leon’s blogs about ditching the remote in favor of an allapp entertainment experience (go here to read more).

That article generated more traffic than usual on I wonder why — could it be that dealers are living vicariously through their hands-on cohorts?

Leon told me the experiment was inspired by countless customers who believed apps could save the world. Or at least could save them the cost of what they deemed as a superfluous remote control.

“What spurred me to do this is we are having a lot of customers push back on a remote for their theater,” he says. “They tell us every component has an app, I like apps, I think I’ll just use apps.”

In his head, Leon knew this premise to be wrong, but how could he prove it to consumers? By telling them to “just trust me”?

Related: Dealer Sees for Himself: Can You Eliminate Remotes and Use all Apps?

Leon decided to look at the issue from the eyes of a typical customer, ditching the remotes in his home theater and using individual apps for his surround- sound processor, Blu-ray player, DirecTV, Vudu and lighting controls. About one real-world example, he writes:…

Posted by Julie Jacobson on 04/03 at 05:50 AM
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Tuesday, April 01, 2014

Here’s the first look at the user interface of St. Hubbins and Tufnel’s upcoming subwoofer, which they claim provides features the market has never seen before.

By Robert Archer

As the economy slowly grows stronger business opportunities within the custom installation market are beginning to heat up.

Crossing the pond to enter the U.S. electronics industry, a pair of former British entertainment professionals is set to launch a custom installation company and a line of supporting electronics.

David St. Hubbins and Nigel Tufnel acknowledge the economy may never approach its previous levels of 2006 and 2007, but the duo say they are prepared to meet the challenge today’s business climate presents.

“It’s a fine line between stupid and clever,” admits St. Hubbins.

As part of their custom installation business plan, Hubbins and Tufnel also plan to introduce a complete line of electronics to complement the services they will offer. The pair says in their grand scheme they will have products that cover everything from home control and lighting to home theater, security and home networking. Their initial products will be a powered subwoofer, code named “Big Bottom,” and a projector they say is engineered to deliver performance no one has ever seen before.

“It’s like, how much more black could this be? And the answer is none. None more black,” boasts Tufnel on the capabilities of the still-unnamed company’s upcoming projector’s black levels.

Describing their “Big Bottom” subwoofer, Tufnel says it will bring features and deliver the high volume levels the public expects from a subwoofer.

“The numbers all go to 11. Look, right across the board, 11, 11, 11 and …  it’s one louder, isn’t it? It’s not 10. You see, most blokes, you know, will be playing at 10. You’re on 10 here, all the way up, all the way…

Posted by Robert Archer on 04/01 at 07:18 AM
Blogs, Audio, Video, Home Automation and Control, Installation, (2) Comments, Permalink

Friday, March 28, 2014

Ian Shepherd has been promoting his grassroots Dynamic Range Day for several years and now the initiative is starting to take root in the pro music industry.

By Robert Archer

Over the past decade a growing number of music industry professionals, as well as audiophiles and even mainstream consumers have increasingly complained about the deteriorating sound quality of new music releases.

Ask anyone from the recording industry and they will tell you the industry’s “loudness wars” that conceptually make recordings “louder” by reducing their dynamic range are why these recordings sound poor when compared to recordings from yesteryear. Taking the blame to the next level, mastering engineers have been unfairly blamed in some cases, but most realize that these professionals are simply following the instructions of those paying for their services. 

The real culprits responsible for modern recordings sounding so bad have been the record labels and their attempts to pander to mobile/earbud users, and in a minority of cases, the artists themselves (see Metallica and The Red Hot Chili Peppers).

Recently the professional audio community has stated the days of crushed, dynamically void recordings are waning. Through the efforts of individuals such as the British mastering engineer Ian Shepherd and his Dynamic Range Day movement, as well as bold statements from high-profile mastering engineers such as Bob Katz, the recording industry claims it is moving to put the “loudness wars” in the rearview mirror.

Maybe there is some truth to this claim. With new resources and the guidance of the newly passed Commercial Advertisement Loudness Mitigation (CALM) Act the music industry will take a new approach to music production.


Posted by Robert Archer on 03/28 at 09:16 AM
Blogs, Audio, (1) Comments, Permalink

Thursday, March 27, 2014

This home style, named Bodega, from Tumbleweed Tiny Homes comes in two sizes: a 261-square-foot studio or a 356-square-foot one-bedroom… neither with an entertainment system.

By Chuck Schneider

Can you design a whole house control system for a home only scantly larger than a maximum security prison cell? Can you plan a smart home so miniscule it makes a double-wide mobile home feel like San Simeon?

A domicile where a 27-inch LCD dominates a room could be coming to your world sooner than you think. Former New York City Mayor Michael Bloomberg may have lost his battle to ban the Big Gulp, but just prior to leaving office late last year he took the wraps off what he considers one of his greatest achievements—a building in Midtown that will contain over 50 apartments ranging in size from 250 to 370 square feet each. Rents are expected to start at just over $900 per month.

New York, despite having legal residences of at least 400 square feet for decades, is not the birthplace of this phenomenon that nationwide city planners and developers insist is not a fad, but rather a rapidly accelerating trend. Tokyo, Osaka and many European cities have also had these “micro-lofts” for some time as well. In the United States, Seattle leads the way with San Francisco, Austin, Denver and Chicago not far behind.

I know what you’re thinking and you’re right…you could have guessed which cities are leading the way on this trend. It certainly seems to be a blue state phenomenon with a pinch of green consciousness tossed in for good measure. And yes, in large part it’s being led by Zip-Car Millennials who are likely to still be single, have as yet no real roots, and…

Posted by Chuck Schneider on 03/27 at 08:53 AM
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