For an increasing number of security dealers, the home audio business is playing the engaging music of a new revenue source, one with better installation profits than alarms. At the business level, alarm systems and home audio systems have synergies that can produce operational efficiencies. At the market level, there is sizable demand for dealers that can bring reliable low-voltage services – among them, security – to builders.
“The reliability with which you deliver alarm services is not easily attainable within the niche market the audio-video people are in. They can do it on a small scale, but they have a lot of trouble doing it with any kind of volume. That’s why I think some of us are going into this area,†says Rick Brokaw, general manager of Vintage Security Systems, Columbia, Md.
Other security dealers are singing the same tune about selling audio systems.
“It’s a good business, because there’s still some good margin there and people are willing to spend money on it,†says Jamie Orvis, chief operating officer, Security Solutions Inc., Norwalk, Conn. Orvis’ family has been in the security business since 1969, serving Connecticut and Westchester County, N.Y. But it wasn’t until about five years ago that an opportunity in the home audio market came to Security Solutions, and Orvis acted on it.
“It started with a couple pairs of speakers and some volume controls and it went up from there,†Orvis says. “We started with the very simple, then we added remote IR control; then we moved into doing integrated control systems with keypads.â€
“We are not your full-blown home theater company, but if you would like to have a nice TV with 7.1 sound, we can do it. We can create great sound, but we’re not the whole thing,†Orvis says. “There’s a lot of schooling involved with doing that really right. We’re not geared for it. We’re much more geared for doing smaller scale home theaters.â€
Not only do high-end home theaters require a very advanced level of training and knowledge, but also an extensive time commitment, security dealers say.
“The phrase that is used a lot when somebody gives you a couple-hundred grand to do a home theater is ‘they own you,’ and there’s endless tweaking and fine tuning and it’s a never-ending project,†Orvis says.
Home audio is a sensible adjunct to the core business of security for many dealers. It harmonizes well with alarm dealers’ customer-focused skills – including attention to detail – and provides yet another service that builders can rely on from a single contractor.
“We started the company two years ago with a team of industry-experienced veterans who wanted to start a business that would service the customers much like the business was focused years ago, where every customer was considered a lifelong customer who we could form a relationship with and not just obtain a sale,†says Barry Piner, regional director of sales, Custom Home/Carriage Division at United Security.
“We started selling whole-house audio systems about a year ago,†Piner recounts. “That business segment, we realized, was far less saturated than the traditional residential and commercial markets. Many of the builders that we contacted during the early stages told us that they were interested in working with a provider that could be a one-stop shop and one-call resolution to all their low-voltage requirements.â€
Of course, being a provider of multiple home systems allows dealers to cross-sell, and often the sales process involves a similar approach.
“They are both truly consultative sales approaches,†Piner says. “The audio business is a natural tie-in to our security business. Many of our clients who are investing in audio systems also want personal protection for their family.â€
And having “security roots give you attention to detail that people have trouble finding from audio people at higher volumes,†Vintage Security’s Brokaw says. Vintage Security’s audio business accounts for about 20 to 25 percent of the company’s total installation revenue. “We do 75 different projects at a time. We’re after houses [valued at] $600,000 and above,†he notes.
At the market level targeted by Vintage Security, better profit margins are achieved through audio systems and structured wiring, while “alarms are no longer the primary installation value. We are obviously after the long-term revenue stream, but what we’re really trying to do is solve the builders’ needs,†Brokaw says.
Vintage Security doesn’t sell maintenance contracts on its home audio systems because the final product is used in such a different way than a security system. “This is a lifestyle product. I’m not sure if I want my guys on call worrying about it. You never know when you’re going to get called because Aretha Franklin doesn’t sound as good as she could,†Brokaw says, adding, “We downplay it. In my case there will always be a security focus because we pay much more for a salesperson to sell security.â€
Looking at revenue overall, not just from the installation, United Security’s Piner stresses the importance of the long-term profitability of the monitored alarm. Further, dealers must be strong financially if they are to be involved in the audio market, Piner cautions, because they will likely be involved in multiple projects at one time “where there are sometimes months between pre-wiring and trim out with final payment,†Piner notes.
United Security is currently occupied with about 50 jobs per month just in Raleigh. A typical audio system the company would install consists of one room of surround sound and at least three other rooms of distributed audio, which would include volume controls with basic components, Piner says, with an approximate value of about $4,500. Asked to describe their smallest and largest home audio jobs, Piner presented a range of between about $800, for basic speakers for a surround-sound application with no components, and about $35,000 for a large installation in a multi-million-dollar residence.
Risks & Resources
Brokaw admits that that the actual sale of a home audio system is easier, “because it’s a lot more fun to talk about it than security. [But it can be dangerous because] your reps gravitate towards it. We’re security people first, and the lives and property are more important than the sound system. They will forget about the details that go with that,†he says. “Hopefully you can profit from putting more things in one house, but it’s also dangerous, because the security focus is disrupted and you run the risk of being all things to all people. You have to try to limit your offering or structure it very carefully. It’s not easy.â€What Brokaw means is that customer expectations can easily get distorted unless they are distinctly spelled out.
“If you sell the speakers, you have to be careful that people don’t think you’re also going to hook up their stereo. If you sell the structured wiring, you have to be careful people don’t think you’re going to hook up their computers and install their network. It’s a tricky situation to live up to the expectations of your client,†he says. To protect themselves, Vintage Security does a lot of training of both salespeople and technicians, and makes specific declarations in writing so customers will understand which services are included and which are not.
Key to starting and maintaining a reputable, successful home audio business is having a skilled staff. In Security Solutions’ case, they hired a technician who had previously operated his own home audio company. The business evolved from there and now the company provides cross-training because that part of its business is growing so rapidly. Orvis says audio systems comprise about 10 percent of Security Solutions’ total gross revenue, and he expects the revenue from audio systems to be 100 percent better in 2004 than 2003’s audio revenue.
One of the greatest challenges of keeping technicians up to date on training, Orvis notes, is that the audio technology advances so quickly. “The run cycles on this equipment is not long. The better mousetrap is out reasonably soon. That’s what the marketplace is demanding.â€
In addition to counting on his distributors and manufacturers’ reps for technology training, Orvis gets engineering help from his local distributor branch. He is also a member of the Custom Electronic Design & Installation Association (CEDIA), which places heavy emphasis on education.
“It’s mandatory that you have the right person designing the audio, installing the audio in order to exceed the customers’ expectations. We have been fortunate in aligning ourselves with excellent vendors who have supplied to our sales and installation teams factory training,†Piner says.
A New Toy
Security dealers in the home audio market seem to really enjoy the systems they are designing and installing, and some even seem awed by the ease with which their customers will invest major dollars in their homes.“Audio is really moving fast,†Brokaw says. “I have 10 salespeople and we were talking about that a couple of months ago. When you tell people they can have music on the back porch, music in the kitchen, music in the office, a lot of them are buying these systems.
“You don’t have to have a home theater in a room in the basement. You can take the family room and turn it into a 5.1 surround sound package and get more regular enjoyment watching the ball game. It’s more mainstream now and its price has come down. People can get a package with five speakers and a subwoofer for a more reasonable price of about $1,500. For a whole-house audio system, it’s in the $4,000 range for the homeowner after the builder does his markup.â€
Orvis likens the strong consumer demand to the feeling of getting a new toy as a child.
“It’s easy to make [clients] happy for the most part,†he says. “It’s such a great buzz and whistle. I install an alarm in your house and you’re not calling your neighbor to say, ‘check out the new alarm.’ But you might put in a $20,000 stereo and say, ‘check out my new system.’ People love it.â€
Sidebar 1
Hot Housing Areas Can Fuel Dealers’ Successes in Audio Market
Being in the right place at the right time is priceless. A business that is located in a geographic area that’s experiencing accelerated new residential construction can help foster the success of dealers covering the home audio market.The home audio business may be an opportunity to
consider, especially if your company operates in one of the
20 hottest growth markets ranked by the number of new construction permits, according to the National Association of Home Builders.
2003 Permits (Thousands)
UNITED STATES 1,444
1. Atlanta, Ga. 53.75
2. Phoenix-Mesa, Ariz. 46.59
3. Riverside-San
Bernardino, Calif. 35.73
4. Houston, Texas 33.97
5. Washington D.C. 30.76
6. Chicago, Ill. 30.73
7. Las Vegas, Nev. 30.28
8. Dallas, Texas 26.91
9. Orlando, Fla. 22.39
10. Minneapolis-
St. Paul, Minn. 20.33
11. Tampa-
St. Petersburg, Fla. 20.18
12. Charlotte-Gastonia-
Rock Hill, N.C. 17.16
13. Sacramento, Calif. 17.13
14. Detroit, Mich. 15.33
15. Raleigh-Durham-
Chapel Hill, N.C. 14.07
16. Ft Worth-Arlington,
Texas 13.90
17. Indianapolis, Ind. 13.06
18. Denver, Colo. 13.01
19. Jacksonville, Fla. 12.64
20. Philadelphia, Pa. 12.41
Source: National Association of Home Builders
