PRO AV Forecast 2011: Silver Linings
No one claims the AV industry is out of the woods, but most agree the worst is behind us?and the future's a new ballgame.
Michael Fay, general manager of Escondido, Calif.based Sound Image's contracting division, said the company is putting more bids on the street to get back to healthy revenue levels. Despite the recession, Fay says 2009 was a strong year for Sound Image. Most of 2010 was, too. It wasn't until the fourth quarter of 2010 that business hit the brakes, falling 50 percent from prerecession highs.
"But we're already seeing more opportunities the first few weeks of 2011 than we saw at the end of last year," Fay says. What's different now, though, is the nature of competition. Specifically from companies pitching low-ball bids."
"Once upon a time, when we bid on a project, most of the bidders were within about 10 percent of each other," Fay says. "Now we're seeing 50 percent swings."
On public bids, where all bidders are permitted to see each other's final numbers, Sound Image conducts what Fay calls an "autopsy" or a "bid post-mortem" and tries to figure out how it could have matched the lowest bidder. Assuming they haven't made mistakes in their bids, he says, it often requires taking their markups down to zero.
"Competition's fierce for the smaller jobs," agrees Lepp. "You have a lot more smaller companies bidding that don't have the same overhead we have, and we've seen a lot of low-balling."
A ripple effect of low-ball offers, and something AV integrators would be wise to alert potential clients about, is the fact the if a low-ball contractor goes out of business before the project is done, it may be hard to find a replacement to finish the job on remotely similar terms. (Fay says that this can be a problem with other contractors, too, such as mechanical contractors, which only serves to delay or sometimes doom a project.)
But low-balling can also be symptomatic of a revenue opportunity. When organizations are cost-conscious, they may also be strapped for maintenance resources. Because the cost of equipment and the cost of ongoing support often come from different budgets, AV pros would do well to pivot toward operations managers. For Lepp and D&P, service revenue has tripled in the last two years and the company now carries a dozen large contracts.
"That's another phase of our business that's making a positive turn: As facilities have had to cut their staffs, they are outsourcing more maintenance," Lepp says.
The company only pitches service contracts to clients it has done AV installations for, but those contracts can encompass more than D&P-provided systems. For example, at the Smithsonian Institution's Museum of Natural History, D&P installed three exhibits. It then bid on a multiyear contract to provide maintenance service because the museum had cut staff. D&P now has techs in the museum three days a week. "We're very familiar with their systems," Lepps says. "And we picked up general AV and lighting maintenance work."
Offering support services has been a differentiator for D&P. In challenging times, standing out can make all the difference. Several AV pros say being able to get bonded on a project that might require such assurances is especially attractive these days. Others say knowing when to go the extra mile to impress a client is also important.
"Maybe it's our residential background, but if someone calls and a Cat-5 jack isn't working–and people tell me I'm crazy to do this–I'll walk out and say, 'It's no charge this time,'" Watt says.
For Sound Image, being versed in the language of today's construction professionals has given the company an advantage. "We've been a Revit-certified low-voltage contractor for 3.5 years when a lot of people in our area don't know what Revit is," Fay says. (It's a type of building information modeling software from Autodesk, the developers of AutoCAD.) "That's helping us get on short lists because one of the prequalification items that's starting to separate some contractors from others is their ability to participate in BIM coordination of a project."
Where will AV pros find the most project activity this year? "Education will continue to be strong," says Biamp's Metzger. "When you talk to people at the university and community college level you get a sense of just how strong their enrollments are and how competitive those spaces have become. As the economy turns, they understand they need to update their learning and education."
With an aging population, experts believe that more healthcare facilities will also be in the market for new technology this year. And everyone will be looking for more than just AV. In the forecast survey, a great share of respondents expect to be involved with building control, security, content distribution, and energy management than just a couple years ago.
Which brings Xcite's Watt to one last strategy for growing his business: training. "You can't take enough classes," he says, "because you can't ever have your client come to you for something and answer, 'I've never done that before.'"
Words from the wise.