Herman Blog

3 Ways to Reduce Risk as a Systems Integrator

Written 2017-05-18 by Chris Bianchet
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Being a successful business owner means not only knowing when to take a calculated risk, but also recognizing how to reduce other risks.  Of course, there are many factors that go into running a successful AV business, but reducing risk is something you have more control over than you may realize.  There are many areas that a company can open itself up to risk that can be costly. Consider these 3 ways to reduce risk:

  1. Review Scopes of Work.

    Every successful project generally has a well written scope of work that is designed to describe the work that is to be performed, but to also minimize the occurrence of scope creep.  Too many projects I’ve seen over my career, left the requirements open for debate and caused increased costs usually at the expense of the integrator.

    Some end-users rely on broad requirements to get more out of the integrator and that erodes margins in a big way.  Yes, sometimes you have to give a little to make a customer happy, but there’s a point that costs can get out of control if you don’t clearly define the work to be done. 

    This scope of work review, which is usually written by sales, should be reviewed by operations so everyone is on the same page.  Sales and operations look at things very differently (I know obvious).  However, when both groups get on the same page, a lot of great things can happen.  I realize there isn't always time to review every scope of work so having a boiler plate that covers a lot of the “gotchas” is advisable, minimizing the risk.

  1. Manage Cash Flow.

    Someone in your organization must be good at cash flow management.  I’ve seen many companies over the years get themselves in trouble because they do not manage cash flow correctly.  A good line of credit is always nice to have, but you don't want to rely on that to get you out of trouble. 

    Evaluating the scope and size of projects can be a good start.  You don't want to accept projects that will tie up all your cash for a long period of time.  In some cases, end-users can push payment terms beyond 90 days.  A project that lasts 6 months may tie up your cash for 9 months if you’re lucky enough to actually get paid on time.  Negotiate progress billing terms with a retainer of 10% to be paid after project completion.  Progress billing with a retainer protects both you and your client.

  1. Hire well, Hire Fast, Fire Faster.

    Whether it’s on the sales or operations side of the business, finding talent in the AV industry is one of the toughest challenges we face. There are few, if any, schools that prepare people for working in our industry.   The trend I’ve noticed is fewer and fewer companies want to spend money on training new people in the industry, because the cost of training is high and the fear of people quitting and going elsewhere with their new skills is a risk.

    Unfortunately, I don't have an answer for this because it is an age-old problem.   What I do recommend is if you are hiring thoroughly learn about the hire you’re making and if you feel this person is the right fit move quickly.  Talent isn't just sitting around waiting these days.

    If they’ve been looking for a job a long time, ask, yourself why?  Do a review of the new employee after 90 days.  Are they doing a good job?  Ask people who are interacting with them, “Are they doing a good job?” Find out if they like what they’re. doing.  You need to determine if they are worth a long-term investment and if not you should probably seek ways to separate from them. 

 Follow these 3 processes to reduce risk and see how they impact your business.  These small steps can make a huge improvement to your bottom line.

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