Sunshine, Advice Rain On PARA Dealers At Conference

By Joseph Palenchar On May 17 2004 - 6:00am




Specialty retailers and custom installers came away from the recent PARA conference with more than just a tan after five days of meals under the sun here at the Camelback Inn.

Attendees walked away with expert advice on how to make a profit on labor, turn their companies into brands, cultivate Nordstrom-like customer-service reputations, and manage employee and customer relationships.

The conference agenda also helped guide dealers' response to accelerating technology and industry changes, including the convergence of CE and IT technologies in the home; the impact of wireless on the custom-installation business; and growing retail-level competition from cable operators, PC manufacturers and national chains (see TWICE, May 3, p. 1).

While dealers formulate their responses to these changes, they must simultaneously continue to upgrade their current business practices, from managing cash flow to increasing the profitability of labor, attendees were told.

One presenter, Wilshire Home Entertainment chief financial officer Mike McMasters, outlined how he turned a 2 percent loss on labor to a net profit of 8 to 10 percent, starting with the development of a departmental income statement. The statement excludes the cost of products and sales but includes installer wages, vehicle costs, tools, training, rent and administrative allocations, and the cost of such materials as interconnects.

To improve labor utilization rates [hours billed to hours worked], Wilshire implemented several strategies to cut down on unproductive return trips to the showroom. One strategy is to stage products and materials seven days before a job is scheduled to provide enough time to procure missing products. The company also outfits installers' vehicles with bins of interconnects that can be sold off the truck and invoiced at the site, McMasters said.

John Banks, owner of Audio Centre in St. Laurent, Canada, said he boosted labor utilization rates to 80 percent from 40 percent, in part by requiring a salesperson's change orders to go through a system designer to incorporate accurate labor-cost changes. On top of that, salespeople earn a commission on the profitability of a job's labor, not on the volume of labor, he said. The company also created yearly team bonuses for installers to "create peer pressure" to perform. Separately, the company awards bonuses per technician per contract, with the bonus rising if costs come in under contract.

In researching construction-industry practices, consultant Robert Macfarlane devised 10 tips for squeezing more profit out of labor, including the installation of systems that let managers review a project's costs on a daily or twice-weekly basis, not a month after job is completed.

Some surefire ways to lose money on labor, Macfarlane said, are not knowing the true cost of keeping an installer on the road for one hour, including vehicle and vehicle-insurance costs. Macfarlane also suggested dealers market standardized systems so that installers become more productive.

Robert Lydecker, a Warwick, R.I., installer, suggested that "nice uniforms and trucks" will help boost labor profitability because they "reduce labor-charge complaints." Along those lines, he also suggested installers wear booties into a house and bring their own vacuum cleaner.

One presenter questioned how much labor income would be generated in a wireless world. Asked Tweeter executive Noah Herschman: "What will the custom installation business look like when there are no more wires to pull?" He pointed to future wireless technologies such as ZigBee, which transmits low bit-rate control signals to home systems, and ultrawideband (UWB), which he called a potential cable-supplier killer because of its ability to distribute multiple HDTV streams around the house.

Other presenters contended that structured wiring isn't going away. One of them was Intel strategic programs director Donald Whiteside, who told PARA members that "structured wiring is here to stay for the real-time delivery of entertainment content with high quality of service expectations." Wireless opportunities nonetheless exist for PC mobility in a house and moving content from a PC or PVR to portable devices, he said.

Bill Thompson, president of structured-wiring company UStec, pointed to consumers' wireless experiences with cordless phones and wireless PC networks and said, "Reliability and performance are most important" among custom customers. Thompson echoed consultant Jim Taylor's insight that today's consumers are risk-averse.

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