Case Study: Double Vision

The new Home Electronic Connect Team division, which opened its doors late last year and is run out of the Room Service facilities, is aimed at capturing the large market of consumers who buy a patchwork of consumer electronics gear, usually from retail outlets such as Costco and vendors like Dell, and simply don't have the technical know-how to pull it all together.

Home Electronic Connect Team has its own separate logo, Web site (www.helpav.com) and phone number. That's because Veile wanted to make sure that the Room Service (www.goroomservice.com) business, which he has built with his partner into a highly respected marquee brand in the high-end home theater market, did not suffer as he made the move into the home integration services business. "I wanted to save the high ground for Room Service and not confuse my customers," says Veile, the president of Portland, Ore.-based Room Service. "Both of these businesses are about sticking to your knitting and paying attention to what works."

Paying attention to what works has made Room Service, which Veile started with his partner, Dennis "Mac" Maciejewski, 13 years ago, a $2 million company whose average sale is about $25,000 with double-digit profit margins. Room Service has prospered by delivering easy-to-use home theater, control systems, music distribution and lighting control systems. In a market that is sometimes characterized by spotty performance, Room Service has won over demanding customers by consistently delivering projects on budget, on time and following through on each and every detail. The Room Service business is a highly complex integration business that features select high-end products like the Crestron TPS-6000, which can control everything from audio/video to heating and air conditioning to lighting and security.

"We have always been committed to showcasing the very best home theater in our showroom rather than a bunch of cheap stuff thrown together to make a system," says Veile. Mark Donegan, a Room Service customer who had more than his share of headaches with a system at a prior home, says Room Service achieved what seemed like the impossible to him by delivering in his new home an easy-to-use system that his wife could operate with no problems to control home theater, lighting, music distribution and satellite stereo throughout his property.

"I couldn't have asked for a better experience," says Donegan, noting that he has spent a substantial amount of money with Room Service. "Everything has worked. They were professional from the word go. Whatever they said they were going to do, they did."

Donegan says he has recommended Room Service to several friends who have wanted high-end home theater systems and all have had the same stellar experience. "They don't do retail [consumer electronics]," says Donegan. "They are very focused. They define very clearly what their market niche is and they excel at it. I don't think they try to be everything to everybody. I don't think they dilute their resources. The people are very familiar with what they are doing and they are extremely good at it," says Donegan.

Veile and his partner are now trying to bring the same sharp focus that made Room Service successful to Home Electronic Connect Team. It's a wildly different business with completely different demands and operating model. The average sale price for the Home Electronic Connect Team business, which charges $75 per hour for home theater hookup, speaker installation, audio-video setup and audio-video wiring, is about $450. It's a services-driven business model with only 15 percent of sales coming from products such as cables. That's a drastic change from the Room Service operating model, which is composed of 75 percent product revenue and 25 percent services revenue.

"I am going for the 98 percent of the market that doesn't deal with a custom installer from start to finish, but buys the stuff and realizes the integration and the installation and the ease of operation and the disappearing act they want the stuff to do isn't part of what comes out of the box," Veile says.

One big difference between Room Service and Home Electronic Connect Team is that Room Service designs every custom system with usually 12 to 18 different products, and sometimes as many as 50. "At Room Service, we design everything. We design none of it up front for Home Electronic Connect Team," Veile says.

Matt Yodis, a Portland contractor, hired Home Electronic Connect Team two months ago to relocate a plasma video system from one room to another and reprogram a home control system job that was "botched" by another company. Home Electronic Connect Team pulled off the relocation and the home control reprogramming "like it was second nature," Yodis says.

"The other guys I had didn't know what they were doing. They were like confused bees in the house and left gaping holes." Home Electronic Connect Team even reprogrammed the other system for no charge. "These are the only guys I will go back to. It's hard to find someone with such high integrity and care for the public," Yodis says. "Every person they had was like the owner of the company and wanted to do the best job."

Yodis is not the only customer that has been blown away by the new division.

One large system installation job came in at a whopping $10,000, Veile says. The client, who was also a builder, had purchased a complex home theater and plasma system from other outlets. "We managed to get it all together and make it work and by the end of it he had a great appreciation about what we do and can provide in our regular Room Service business," Veile says. "That wasn't clear to him before. He learned firsthand witnessing how we had to cobble together all the stuff he bought into a meaningful system."

Veile is confident that the Home Electronic Connect business, which has two service techs and is in the process of adding a third, will be successful. The unit already has done some 80 calls since opening its doors. He expects the business to break even this year on about $100,000 in sales.

"We are very happy with the business so far," says Veile, who expects to add an outside sales rep to the team next year. "There is a giant need for this business. There are not many options for these people. It's hard for people to get what they need at a reasonable price. It is gratifying to know there is that much demand out there. I am very optimistic."

Veile points out that there is an estimated $2 billion worth of electronics sold in the Portland area annually. "If I get one percent of that, I've got $20 million worth of electronics," he says. "And if I get 20 percent of that for installation, then I am looking at a $4 million market. It is going to take a long time to get there, but I think we can do it."