If your firm has fallen into the doldrums, perhaps it is time to take an introspective look at your business with an eye toward shifting gears. Maybe it is time to become a more aggressive player in your marketplace. Two years ago, Karl Jensen and the staff at West Side Electric in Portland, Ore., took that approach, made a significant operational and financial investment in the home theater market, and are now beginning to reap dividends.
Though no single event motivated the dramatic change in the types of products and services the firm now offers its clients (architects, contractors, interior decorators and consumers), Jensen recognized that WSE needed to reduce the amount of profitable business it could handle that was being lost to retailers.
Dick Keil and Mark Church were chief among the instigators and facilitators of the change. Keil said, “We had to ask ourselves why we are allowing one extra trade—the lighting or home theater types—on the same jobs on which we were working. The real money on those types of jobs is not in pulling cable and installing boxes, it is in selling the design and high-dollar equipment that is becoming more commonplace in upscale residences. In our situation, we are basically breaking even on our labor costs, and there’s not a lot of money to be made in basic electrical equipment.”
The A-V companies were moving their fingers further into WSE’s cookie jar by beginning to sell low-voltage switching systems as well. They knew it was time for a change.
West Side Electric opened its doors in 1961 and was subsequently sold to Karl Jensen’s father, an electrician with the company, in 1963. Karl Jensen joined the firm in 1985 and, 16 years later, purchased the company. He is now the president of NECA’s Oregon-Columbia chapter.
The company employs 34 people, an increase of only one person since it entered the A-V niche market. Gross sales are approximately $5 million.
Historically, “we were a traditional commercial electrical contractor that specialized in new construction and remodels of residences, and construction and tenant improvements in commercial spaces,” Jansen said. “We entered A-V and telecommunications because it was a direction that allowed us to branch out and increase our profits.”
Keil adds that there was internal pressure to innovate, as well.
“A lot of our staff members are techies by nature. To some extent, the firm is driven by their desire to be on the cutting edge, and the pride of ownership they take in the work they do. This type of work also presents a new challenge, so you avoid the pitfalls of boredom.”
“It created quite a buzz among our staff because our employees want to see us as being innovative and expanding. The expansion involved the entire work force, so has had a positive affect throughout,” Jensen added.
From a mechanical standpoint, the addition of these new services has been seamless for his technical staff.
“We knew our installers were going to be OK because they already were doing custom installations in new 6,000- to 12,000-square-foot homes, and large remodels,” Keil said.
Before launching the new venture, the WSE’s management spent months testing the water with architects, contractors, interior designers and potential clients. In the process they learned that a major obstacle was the familiar Catch-22: while the firm enjoyed a solid reputation in the industry, potential clients wanted to do business with experienced firms. At that point it had established a telecommunications division that was operating successfully, which provided a level of credibility.
“We considered partnering with a large home theater retailer who approached us about doing their installations,” Jensen said. But, in the final analysis, “all he was doing was giving us the same type of electrical business we were already doing. It bothered me a lot that they would sell the high-end, profitable components and we were still left with low-profit installations. That’s why we decided to do it ourselves.”
At the outset, “the concept involved developing a home theater/conference room showroom for the purpose of showing clients what we can do. This gives them a real-life experience of what the home theater/conference room and home automation is all about. It’s a better idea than reading about it or looking at pictures in brochures,” Keil said.
“We utilized an existing kitchen/lunchroom space (500 square feet) for the showroom. We installed different forms of recessed lighting, surround sound, a drop-down plasma screen that can also be used as a monitor for a CPU on our network, a rack including DVD, VCR, HDTV, 300 CD storage player and Fireball.”
“We received discounts on all the materials necessary from our vendors because this is a showroom. But nothing was given to us,” Keil said. Products on display include a Crestron Home Automation system, Vantage light control system, Lutron home control display, Panasonic and Avaya phone display for home or office, Square-D MultiLink structured wiring system, surveillance cameras, powered window shades and various types of under-cabinet lighting. Accent pieces are large photos of previous jobs.
“Since we also were losing out on the low-voltage switching being sold by the A-V people, we set up our office with new low-voltage computerized switching to show customers. This shows them that an electrical contractor can do the same type and quality of work as an A-V company,” Keil said. “Using us also requires less coordination for the contractor.”
Six months passed between concept and the final product, which required an investment of $100,000.
One year after completion, “we are starting to see measurable results. It has taken a lot of time to make our contractors and their customers comfortable that we can do this job,” Keil said. “We are now part of the bidding process for this part of the job on almost all of the jobs that we are wiring electrically. We are also bidding and getting jobs where we are not the electricians on the job.”
Compensating sales staff always is a bugaboo when a firm changes direction, and WSE is still in the learning phase.
“We initially started by hiring salespeople and putting them on a base salary,” Jensen said. “We looked at a lot of different options but could not find a workable arrangement. I thought this way was clean and easy. The salespeople know what my expectations are. And I know what the profits may be.
“However, I am rethinking the system. An incentive program may make salespeople more motivated.”
In hindsight, Jensen said, “I’d pay more attention to developing a marketing plan. We’ve had good results, but I think a good marketing plan at the outset would have been helpful.”
Speaking as a chapter president, he thinks NECA’s involvement could be improved.
“I think we focus too much on commercial and industrial work, particularly in training seminars, though we do a good job in that area. We don’t do enough for the contractor working in the residential field.” EC
LAWRENCE is a freelance writer and photographer based in Bozeman, Mont. He can be reached at email@example.com.