Latest / CE Pro Podcast / CE Pro Podcast #177: Scott Newnam of Audio Advice Shares His Thoughts on Growing Business and Culture in CI

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CE Pro Podcast #177: Scott Newnam of Audio Advice Shares His Thoughts on Growing Business and Culture in CI · CE Pro Podcast

• 0:08
  SPEAKER_00: Today I am with Scott Noonham, CEO of Audio Advice, here to talk about the company's recent acquisition of sound components and what it's been like to grow audio advice as a more national brand over the years.
• 0:19
  SPEAKER_00: Before we get into that, though, if you are new to CE Pro and what we do, we cover all manner of news, trends, and research related to the custom integration channel.
• 0:27
  SPEAKER_00: So please, whether you're an integrator hearing about us for the first time or you're collaborating with integrators on your projects, I encourage you not to let this be the last time you engage with us.
• 0:37
  SPEAKER_00: You'll find links to our main website as well as more information about what we're talking about today in the description below.
• 0:43
  SPEAKER_00: Now, with that out of the way, Scott, how are you doing today?
• 0:46
  SPEAKER_00: I'm doing great, Nick.
• 0:48
  SPEAKER_01: It's uh excited to do this with you.
• 0:50
  SPEAKER_00: Yeah, like I said, uh I was talking to you a little bit before we got started, but uh I want to say I appreciate it like you being able to sit down with us like so soon after this news because I I feel like you have to be busy, busy, busy right now.
• 1:05
  SPEAKER_01: Yeah, when you do these acquisitions, I mean making sure they go great and communication is right and you're embracing everyone.
• 1:12
  SPEAKER_01: Uh it takes a lot of time, but we carved out today to do this, and it's just I'll be in Miami uh next week.
• 1:19
  SPEAKER_00: So oh yeah, bew it's gonna be beautiful weather this time of the year.
• 1:23
  SPEAKER_01: Yeah.
• 1:24
  SPEAKER_00: Now, so something that I wanted to start off talking about, and it's something that, like, you know, I'm still relatively new to the channel, but I have like a pretty good grasp on like um the history of you know, custom integration and how a lot of uh a lot of guys got their start in the channel.
• 1:40
  SPEAKER_00: Um, something that fascinates me about audio advice is that you guys still operate as like a brick and mortar retail location.
• 1:49
  SPEAKER_00: Um, obviously you mix that in with like a little bit of um uh you know, you mix that in with custom integration and you mix that in with um, you know, digital retail now.
• 1:59
  SPEAKER_00: Um, but I I I I'm curious, like how have you been managing um running that kind of a business in the age of you know digital storefronts?
• 2:10
  SPEAKER_01: Yeah, it's a great question.
• 2:11
  SPEAKER_01: I mean, honestly, if you look at most people in the CI channel, uh particularly uh traditional stereo stores and high performan, you know, high performance audio stores, those have been dwindling, right?
• 2:21
  SPEAKER_01: And so they've been closing because they've been impacted by your Amazons and your Best Buys and online marketplaces.
• 2:28
  SPEAKER_01: Um, our strategy has been that we think at the end of the day, when you're selling high performance, whether it's you know, high performance audio meaning stereo systems or it's home theaters or it's smart home systems, people have got to touch and feel it.
• 2:41
  SPEAKER_01: And so one of the sort of core unique attributes of audio advice is we build really large experiential showrooms where you can touch and feel everything.
• 2:51
  SPEAKER_01: And so uh that goes against the grain of what's been happening in the market.
• 2:55
  SPEAKER_01: Um, we combine that with the same thing online.
• 2:58
  SPEAKER_01: So, you know, you've been to our website, and as you know, we we have um, you know, one of the largest social media followings, particularly on YouTube, of people that are into high performance audio theater or smart homes.
• 3:10
  SPEAKER_01: And so what we try to do is make our website just like our showrooms, which is really, really filled with great content, very experiential.
• 3:18
  SPEAKER_01: Um, and so those two really blend together.
• 3:22
  SPEAKER_01: And uh what we found is if you've got an incredible team of people and you can market and communicate to people in a market um that you're there and you have these, you know, showrooms are very experiential, that it works.
• 3:35
  SPEAKER_01: And so we continue to invest heavily in really big um experiential places for people to go and match that with the digital side.
• 3:45
  SPEAKER_00: Do you do you feel that's like a benefit of selling AV equipment?
• 3:48
  SPEAKER_00: Because obviously, AV, it's like it's different than I feel like it's different compared to like, you know, you're shopping for clothes online, and it's like you know that it's like, you know, once you hit a certain age, you're gonna stop growing.
• 3:59
  SPEAKER_00: And then it's like, okay, all I ever need is like um like a medium t-shirt for the rest of my life or something like that.
• 4:06
  SPEAKER_00: Um, obviously, AV equipment, um, it it requires you more to be able to like sit there and like listen to how it sounds, like see how it looks.
• 4:17
  SPEAKER_00: And then on top of that, too, I feel like um just by the nature of um hi-fi and like that whole community, it it feels like it the product lends itself to being able to develop like strong core communities around it.
• 4:33
  SPEAKER_01: A hundred percent.
• 4:34
  SPEAKER_01: And um, you know, if you look at the average um sale price in our physical brick and mortar stores, it's way higher than what we have online.
• 4:42
  SPEAKER_01: But and it's not because there aren't people buying a um higher-end product online, it's because once you experience, let's say someone comes in and they're thinking about, hey, want to buy a stereo system, and maybe want a turntable, a streamer, an integrated amp, and some speakers, and they're thinking maybe$5,000.
• 4:58
  SPEAKER_01: They can walk into one of our stores and experience a$5,000 system.
• 5:02
  SPEAKER_01: But usually if they're spending a Saturday and they're gonna spend two or three hours really looking at options, they can also experience a$7,500 system and a$10,000 system and a$100,000 system.
• 5:11
  SPEAKER_01: And so that may orient them in a way that they start to get into it.
• 5:14
  SPEAKER_01: Go, you know what?
• 5:15
  SPEAKER_01: I really enjoy this stuff.
• 5:17
  SPEAKER_01: And I want this$10,000 system.
• 5:19
  SPEAKER_01: Um, that's harder to do online, right?
• 5:22
  SPEAKER_01: For someone to get that experience where they can hear it and experience.
• 5:25
  SPEAKER_01: And that's also, by the way, true of home theater and of smart home, which is why we, you know, most of our stores, you can experience any level of performance in theaters and smart homes and in audio.
• 5:36
  SPEAKER_01: And we think it's a critical component to the not just to audio device, but to the entire ecosystem.
• 5:42
  SPEAKER_00: So I I I would have to assume that like um in the debate of like, you know, if you're an integrator and you're debating, it's like, should I try and like set up a showroom or like a listening space?
• 5:51
  SPEAKER_00: You'd be like, yes, every single time.
• 5:54
  SPEAKER_01: Yes, it's interesting, you know, for what you know, we talk to a lot of people that are entering this space and they're trying to get into, they might call me and say, Hey, I'm thinking about entering the space and I'd like your advice on doing it.
• 6:04
  SPEAKER_01: And you know, uh, we are very open as a team.
• 6:07
  SPEAKER_01: What we want to see is the entire country be successful because we think the rising tide lifts all boats.
• 6:12
  SPEAKER_01: And what I'll tell people is, you know, if you're starting a brand new company today, you're probably not going to get a great return on investment to try to build an audio advice size store.
• 6:21
  SPEAKER_01: Um, but because you have to already have a brand name and marketing and all those kinds of things.
• 6:26
  SPEAKER_01: However, um, if you want to be a certain size, having a showroom that's impressive that you can bring architects or designers into or homeowners is pretty critical.
• 6:37
  SPEAKER_01: And so, depending on where you want to play in that market at the lower end versus the higher end, I think uh certainly for us, it's a really mission critical part of our strategy.
• 6:48
  SPEAKER_00: Interesting.
• 6:49
  SPEAKER_00: Now, the main reason why I reached out to you in the first place was because you just announced that you're acquiring sound components out in Florida.
• 6:57
  SPEAKER_00: Um, what made you want to pull the trigger on that?
• 7:00
  SPEAKER_01: Yeah, so um, you know, obviously we've been around for a long time, almost 50 years, and we've gotten to know a lot of people.
• 7:07
  SPEAKER_01: I mean, I've been in the industry now for about 20 years.
• 7:10
  SPEAKER_01: And um, you know, if you go, if you step back a little bit to when I got into the industry, I bought in with a um into audio advice almost 20 years ago, and we have one location.
• 7:22
  SPEAKER_01: And we decided early on to test two locations, and so we were in two locations.
• 7:27
  SPEAKER_01: We had to build the software systems to make that work, two warehouses, different salespeople.
• 7:31
  SPEAKER_01: How do we market and communicate?
• 7:32
  SPEAKER_01: And we did that honestly for over a decade before we did anything else.
• 7:36
  SPEAKER_01: I mean, just like really trying to hone it and get it right.
• 7:39
  SPEAKER_01: And then we launched um e-commerce, and that e-commerce was pre-COVID, and we focused on how do you add value to consumers.
• 7:48
  SPEAKER_01: And so that led to, you know, we shoot about two videos a week that were putting out product reviews, how-to reviews, uh, buyers' guides, all those kinds of things.
• 7:57
  SPEAKER_01: And um that built us a national and actually to some extent, an international platform of people that follow us.
• 8:03
  SPEAKER_01: So, what a lot of people have seen in the industry, whether it's someone looking to sell their company because maybe they're getting near retirement, or they're just like, I don't want all the business headaches and I don't want to do all the marketing.
• 8:13
  SPEAKER_01: What I want to do is really deliver cool stuff to homes and work with customers.
• 8:17
  SPEAKER_01: We have a lot of people reach out to us, and it became clear to us that because of this national platform, and I think we built a very good reputation, that we have people call us and say, Hey, I'd be interested in talking to you.
• 8:27
  SPEAKER_01: And so, as you might imagine, like in the Sound Components example, we've been talking for you know years, and we keep it very confidential until we're like, this is the right thing to do.
• 8:38
  SPEAKER_01: Um, and so in this particular case, I've known Bill and Sound Components team for uh about 20 years.
• 8:45
  SPEAKER_01: They're they were they're the oldest, you know, audio video store in Miami.
• 8:49
  SPEAKER_01: They're incredibly prestigious, they match our brand, they play at the high end.
• 8:53
  SPEAKER_01: Um, you know, they're incredibly well regarded.
• 8:57
  SPEAKER_01: And so it was perfect timing.
• 8:59
  SPEAKER_01: And I think Bill, who's staying with uh Sound Components, so he's going to run the audio advice branch in Miami and be part of the team.
• 9:07
  SPEAKER_01: Um, I think he thought, oh my gosh, this is a perfect opportunity to have to deal with the marketing and deal with the payroll and deal with software systems and let our team flourish.
• 9:16
  SPEAKER_00: That that's really interesting.
• 9:17
  SPEAKER_00: Because when I was uh because when I first heard about this, you know, I'm still relatively new to the uh the channel.
• 9:23
  SPEAKER_00: Um uh probably five years in at this point that I've I've been like actively engaging with like custom integration and like all you guys.
• 9:30
  SPEAKER_00: Um, but it it was interesting because you know, I saw that you had made like a few acquisitions over the past few years, and then I was just like, Oh, that's really interesting.
• 9:40
  SPEAKER_00: And I I dug back to see like you know how how long you've been like doing the mergers and acquisitions, and then I kind of didn't see anything like pre-COVID, and I was just like, Oh, so this is really recent, but that explains a lot that like you guys were really working on building a solid foundation with like just that initial expansion before you kind of started to adopt like um a more national model, so to speak.
• 10:08
  SPEAKER_01: Yeah, so like a really interesting example, a lot of people that have tried to have national models, they've generally not been successful in our industry.
• 10:16
  SPEAKER_01: And um, I think a lot of times it's outside money coming into the industry and just trying to grow really fast.
• 10:22
  SPEAKER_01: Um, the foundation that you have to build before you go multi-location, just the ERP system.
• 10:29
  SPEAKER_01: So we spent a couple of years an enormous amount of money on the ERP system so that we know every single day, you know, what the income is, what the sales are, what the leads are, uh, we know what the balance sheet is.
• 10:41
  SPEAKER_01: We know everything of every location at all times, and everyone can see uh across well, that that that takes a lot to get that right first.
• 10:49
  SPEAKER_01: And that's also true of the systems and how you interact and who your vendors are and all those kinds of things.
• 10:55
  SPEAKER_01: So um, yeah, we took our time.
• 10:57
  SPEAKER_01: It was many, many years before we did the third one.
• 10:59
  SPEAKER_01: However, once we did the third one, um, then all of a sudden there was another one and another one because each one that we've done, we've gotten faster and better and we've learned.
• 11:09
  SPEAKER_01: And one of the things we're super proud about is if you look at every acquisition we've done, um, every single person, whether they stayed with the entity because they wanted to be a part of Audi Advice or they were retiring, I think uh speaks incredibly highly that they're glad they did the transaction, that was a win for their team, a win for us.
• 11:27
  SPEAKER_01: And that is that's like a really shining part of the entire story for us.
• 11:32
  SPEAKER_01: Um, like if you look back before the Sound Components one, the one that um we did one of the ones we did last year, uh, we acquired the sound room in St.
• 11:40
  SPEAKER_01: Louis.
• 11:41
  SPEAKER_01: And um David Young had run that.
• 11:44
  SPEAKER_01: It was like the name in St.
• 11:45
  SPEAKER_01: Louis for over 40 years.
• 11:47
  SPEAKER_01: I mean, just incredible place.
• 11:49
  SPEAKER_01: Well, he was at the stage where he said, I actually want to move on in life.
• 11:52
  SPEAKER_01: Like I'm ready to go on and experience retirement and enjoy it.
• 11:56
  SPEAKER_01: And so in that case, he was stepping out of the business.
• 11:59
  SPEAKER_01: And you know, one of the things I told him is you can call every single person we've ever done a deal with and they will tell you we have focused on making this a win for everyone.
• 12:06
  SPEAKER_01: And he now is one of the biggest proponents of what we do because he's experienced that success and what we've been able to do with that business.
• 12:15
  SPEAKER_00: Yeah.
• 12:15
  SPEAKER_00: So I was going to ask, is there like a specific business profile that you're kind of like looking at when it comes to these acquisitions?
• 12:21
  SPEAKER_00: Because again, just kind of going back through your recent history, um, kind of seems to be the case where it's like it's usually, you know, they um they have like a retail retail component to their business, they've been in the business for like multiple decades at this point.
• 12:38
  SPEAKER_00: Um, and usually it also seems that like you have a pretty strong established relationship with the owners, like well before you end up like, you know, doing the acquisition.
• 12:49
  SPEAKER_01: Yeah.
• 12:50
  SPEAKER_01: So it's uh really interesting.
• 12:51
  SPEAKER_01: If I look back at the expansions over the past this is a couple years, there's a huge benefit when you've known someone for 20 years because the trust level is already there.
• 13:02
  SPEAKER_01: Because when you're when you have a company and you're thinking about, okay, I've built this baby and I'm thinking about selling it and or having it, you know, join with another entity, whether you're staying with it or you're leaving, you have to believe, one, I'm still gonna have autonomy, right?
• 13:16
  SPEAKER_01: So I have to sit with these people, I have to know I'm not gonna be micromanaged, I'm gonna be running my own business, but I am or you know, someone else will be running it, and my people are gonna flourish.
• 13:25
  SPEAKER_01: And there's nothing better than having known someone for a long time.
• 13:29
  SPEAKER_01: In the cases where it's been shorter periods of time, um, we really do spend a lot of time relational.
• 13:35
  SPEAKER_01: And so I tell people when they call and they say, Hey, I'd be interested in just talking to you.
• 13:38
  SPEAKER_01: And a lot of times it's just, hey, I don't know if I want to sell, I just want to chat with you.
• 13:42
  SPEAKER_01: And I say, let's get together, let's meet.
• 13:44
  SPEAKER_01: I'll come visit you, you come visit me, and we'll, and at the very least, you'll learn how we run our business.
• 13:49
  SPEAKER_01: And we're open book.
• 13:50
  SPEAKER_01: We tell everyone this is exactly how we do it, and we show everything.
• 13:53
  SPEAKER_01: And the hope is it'll be a win-win, but you can't beat the relational side.
• 13:57
  SPEAKER_01: Um, we have, and I'll use uh Sound Components example in this.
• 14:01
  SPEAKER_01: Sound components fit everything about what we do, meaning it was, you know, incredibly uh prestigious in their market, really well known as top of the line, you know, best in class.
• 14:12
  SPEAKER_01: What didn't match so well is that their showroom was smaller than what we typically do, the retail component.
• 14:18
  SPEAKER_01: Okay.
• 14:19
  SPEAKER_01: And so concurrent with the deal, we're acquiring the space adjacent and over doubling the size of the showroom.
• 14:28
  SPEAKER_01: And so uh sometimes we get into a conversation and it's like, okay, you meet best in class, it's a terrific team.
• 14:35
  SPEAKER_01: Um, you really get this stuff, you know it, but maybe you don't have a showroom that we typically do.
• 14:40
  SPEAKER_01: Then we look and go, okay, do we need to get a showroom?
• 14:42
  SPEAKER_01: Do we not?
• 14:43
  SPEAKER_01: Uh, because typically we have best in class sizable showrooms.
• 14:48
  SPEAKER_01: And but but like in this case, we fixed that with the deal.
• 14:51
  SPEAKER_00: Yeah, interesting.
• 14:52
  SPEAKER_00: The the other question that I wanted to ask is uh, and we kind of like touched upon it, like um bits and pieces here and there, like with our questions beforehand.
• 15:00
  SPEAKER_00: But um uh how has audio advice been balancing like this national growth with maintaining a close, you know, personal service model, like you get with like the more local stores?
• 15:12
  SPEAKER_00: Because like you yourselves and like all the stores that you're buying out, like part of the reason why they built like the the best in class reputation is because they started off with like those strong local connections.
• 15:24
  SPEAKER_00: So it's like I'm I'm curious to hear like how you're able to maintain those while like growing nationally.
• 15:30
  SPEAKER_01: Yeah, it's a great question.
• 15:31
  SPEAKER_01: First of all, I'm gonna tell you it's not easy.
• 15:33
  SPEAKER_01: I think I think it's one of the greatest risks of failure in expansions, is that when you acquire or bring another business into a larger business like this, if it loses what made it what it was to start with, which is usually starts with the entrepreneur who founded it, um you know it's likely not to be successful.
• 15:54
  SPEAKER_01: And so this relational thing we talked about earlier, we spent a lot of time talking about how do we not lose it.
• 16:00
  SPEAKER_01: So, like in the case of Sound Components, whereas we're expanding it, um, you know, the same team is running it, like the team's not changing at all.
• 16:09
  SPEAKER_01: Uh, Bill's still running it.
• 16:11
  SPEAKER_01: Now we're bringing some marketing capabilities and some brand, like we're bringing a whole host of things that I think they're super excited about that are going to enable them to grow the business.
• 16:21
  SPEAKER_01: Um, but I think that starts as the foundation of the whole thing, which is how do we enable you to maintain that autonomy?
• 16:30
  SPEAKER_01: And actually, this gets down to an interesting point.
• 16:32
  SPEAKER_01: Most entrepreneurs who start these businesses, if you ask them what motivates you, and you'll get you'll get sort of some answers, but if you dive two or three levels deeper, what you find is a lot of entrepreneurs like autonomy.
• 16:44
  SPEAKER_01: They like the ability, you know, if something goes wrong with a customer, they can take care of it, or if they want it on vacation, they can, or if they got to go to the kids' play, they can do it.
• 16:51
  SPEAKER_01: And one of the first things we communicate to people is we're not changing any of that.
• 16:55
  SPEAKER_01: We have the same family culture that we want you to have this feeling of autonomy and entrepreneurship that you can have, but within a foundation that we think we can bring, you know, if you Google audio video or home theater or any of that, you're likely to find audio advice pretty quickly anywhere in the nation today.
• 17:12
  SPEAKER_00: So yeah.
• 17:13
  SPEAKER_00: So, but it's it you we have to be very deliberate and intentional about it.
• 17:16
  SPEAKER_00: Yeah.
• 17:17
  SPEAKER_00: So uh on that topic of like autonomy, because it's like I love that you guys give uh the businesses that you bring in that level of autonomy.
• 17:24
  SPEAKER_00: Because I I genuin I generally uh personally when I see like a uh company being like acquired, merged, like however you want to say it, I I kind of like to see that autonomous operation where it's like, like you said, um, you know, if there are people, if there are fans of the original business, it's like that autonomy is like good at kind of saying it's like, listen, we're gonna try our hardest to like make sure that like, you know, we don't have like the that it doesn't change based on like us moving to this new company.
• 17:54
  SPEAKER_00: Um, but like obviously there's a lot of um there's like a lot of leadership uh strategies out there that might like see autonomy almost as like a risk where it's like there might be inconsistencies in the service.
• 18:07
  SPEAKER_00: Do you do you view any risks in like uh giving people autonomy?
• 18:12
  SPEAKER_00: Do you see any like challenges in allowing businesses within you know your organization to kind of like run autonomous?
• 18:19
  SPEAKER_00: Or is that something that like you've just seen, you know, outsize success over?
• 18:24
  SPEAKER_01: Um, so yes, there are risks with it.
• 18:26
  SPEAKER_01: I think it's imperative to do it, but I'll give you like an interesting example.
• 18:30
  SPEAKER_01: In a lot of acquisitions or um sort of national platforms where there's multiple companies coming together, both in our industry and other industries, one of the things that falls apart is you don't get people in the same software system, right?
• 18:42
  SPEAKER_01: So someone's using QuickBooks and someone's using Net Suite and someone's using Acumatica, and you try to put them all together, and now you can't communicate and you can't see the warehouses together, and and it doesn't function as one company.
• 18:52
  SPEAKER_01: That part we do pull all together.
• 18:54
  SPEAKER_01: And now we've built a best in class software system that we think is you know the best in the industry, but um we rip the band-aid off fast.
• 19:02
  SPEAKER_01: So, as an example, um the sound components thing will close on midnight next week on Tuesday.
• 19:12
  SPEAKER_01: Okay, that night our IT team will work all night long, we'll import all their data, and the next morning they'll be working on our software system.
• 19:20
  SPEAKER_01: And they all will have been trained in advance going into it.
• 19:24
  SPEAKER_01: And that's really, really important to us.
• 19:26
  SPEAKER_01: But the part that's about um, you know, having team culture and the entrepreneur, we don't want to mess with that at all.
• 19:34
  SPEAKER_01: And their relationships with builders and designers and architects, we want to keep that.
• 19:38
  SPEAKER_01: We do do something that's quite interesting.
• 19:40
  SPEAKER_01: I'll give an example.
• 19:41
  SPEAKER_01: Um, just a few weeks ago, we did the grand opening of our Nashville location.
• 19:46
  SPEAKER_01: And as you might imagine, like every build out, the last minute, there were all these things that had to be put together because we had all these people coming to the grand opening.
• 19:53
  SPEAKER_01: And so we were going to be in a scramble to get all of the, you know, Lutron Ketcher stuff going and the control four systems going and all the audio systems.
• 20:01
  SPEAKER_01: And what happened was the general manager who runs our Wilmington location and the general manager who runs our St.
• 20:08
  SPEAKER_01: Louis location.
• 20:09
  SPEAKER_01: So those are the guys running those entire markets.
• 20:12
  SPEAKER_01: They left their markets before the grand opening and went to Nashville and helped the Nashville team install themselves.
• 20:18
  SPEAKER_01: Now, these are guys who don't install on a daily basis at all.
• 20:21
  SPEAKER_01: But what they wanted to do was to go, we want to show you the camaraderie we have as a company.
• 20:27
  SPEAKER_01: And the two guys that came in to help do that, you know, back in the day were like off the charts technicians, right?
• 20:33
  SPEAKER_01: So their ability to walk in and make this stuff stuff beautiful is really cool.
• 20:37
  SPEAKER_01: And that that's a feeling you cannot, you know, when you're on your own, you don't get that.
• 20:42
  SPEAKER_00: Yeah, yeah.
• 20:43
  SPEAKER_00: No, that's that's crazy.
• 20:45
  SPEAKER_00: I I love to hear that.
• 20:47
  SPEAKER_00: Um, the the while we're talking about kind of like the um growing the company, uh, I am curious, do you guys have a roadmap that you're kind of following right now?
• 20:57
  SPEAKER_00: Are there like set growth goals that you're aiming for?
• 21:00
  SPEAKER_00: Or are these acquisitions just because you mentioned that a lot of them um or a decent number of them have just been guys that are looking to retire, like coming up to you and saying it's like, hey, you know, I'm interested in striking a deal, sort of.
• 21:13
  SPEAKER_00: Um is it just right place, right time for a lot of these?
• 21:17
  SPEAKER_01: Yeah.
• 21:17
  SPEAKER_01: So there are three different ways that they're happening.
• 21:20
  SPEAKER_01: So we're not like running out going, oh, I want to be in this market, let's go call this guy, or let's try to do this or that.
• 21:25
  SPEAKER_01: Um, or what's really happening is you want to have a group of people that are at the stage that they built great companies, they're starting to think about the next phase of their lives and they're going, well, I don't want to do go do this forever, but I want to take care of my people and you know, I want this to be a success and a legacy after me.
• 21:43
  SPEAKER_01: And just because we've been in this industry for 48 years, a lot of those people know us, they see our reputation, they see what we're doing, and they reach out and they say, I'd love to talk to you.
• 21:51
  SPEAKER_01: And obviously, we like know and do about this sound components thing, even though we've been talking for years.
• 21:55
  SPEAKER_01: And uh, so we keep it incredibly confidential.
• 21:58
  SPEAKER_01: Um, and then the The second example would be people that actually they're not retiring.
• 22:04
  SPEAKER_01: They want to keep running.
• 22:05
  SPEAKER_01: So, as an example, there's um we have a guy at the company, Jim Williamson, who's on our senior team and does all the integration and oversees HR and IT.
• 22:14
  SPEAKER_01: We acquired his business almost 20 years ago.
• 22:17
  SPEAKER_01: He's still with the company today.
• 22:18
  SPEAKER_01: And what happened for him is he ran a uh Raleigh market, then he opened up Charlotte for us.
• 22:24
  SPEAKER_01: And then he eventually said, I want to move into the corporate side, which is what he did.
• 22:29
  SPEAKER_01: And so in that case, it wasn't a retirement thing.
• 22:31
  SPEAKER_01: It was, I want to be a part of this bigger story and I want to have fun with it.
• 22:34
  SPEAKER_01: And I want to see my business grow and expand.
• 22:37
  SPEAKER_01: Um, and then the third example, if you look in, uh, we recently announced Las Vegas.
• 22:43
  SPEAKER_01: And in the Las Vegas acquisition, we actually had an individual who flew, you know, we do this a big event every year called Audio Advice Live.
• 22:51
  SPEAKER_01: And you and I were talking about before.
• 22:52
  SPEAKER_01: And it's it's every August, and this year it's like August 7th and 9th.
• 22:56
  SPEAKER_01: But it's the second largest audio show in the country, and it's the largest home theater event in the world.
• 23:00
  SPEAKER_01: So we buy out the Sheraton Hotel, downtown Raleigh.
• 23:03
  SPEAKER_01: And all these people come.
• 23:04
  SPEAKER_01: A lot of we invite all of our competitors, so it's not like an just an audio device thing.
• 23:08
  SPEAKER_01: People come from all around the country.
• 23:10
  SPEAKER_01: There's thousands of consumers that come, but it's a way to see all your audio players.
• 23:14
  SPEAKER_01: We install home theaters in all these conference rooms and everything else.
• 23:17
  SPEAKER_01: So you can experience all the major brands.
• 23:19
  SPEAKER_01: Anyways, this guy showed up and he handed me a card.
• 23:23
  SPEAKER_01: And um, and I didn't know it.
• 23:25
  SPEAKER_01: And he said, Will you read this card?
• 23:27
  SPEAKER_01: And I opened it and it said, I've been watching your videos for years.
• 23:29
  SPEAKER_01: I've learned so much about what you've done, and you guys have inspired me in this industry, and I would love to get to know you more.
• 23:36
  SPEAKER_01: And the upshot was eventually getting to talk to him.
• 23:38
  SPEAKER_01: He said, I'd love to open an audio device.
• 23:39
  SPEAKER_01: And I'm in Las Vegas, I've got all these skill sets, and he had the perfect skill set to be the guy to launch and open that market.
• 23:46
  SPEAKER_01: And so that's the third way that they happen.
• 23:48
  SPEAKER_00: Yeah.
• 23:49
  SPEAKER_00: Interesting.
• 23:50
  SPEAKER_00: That's that's really cool.
• 23:51
  SPEAKER_00: Um, I it's it's something that it's like, you know, um it's it it strikes me as a very organic way of like going about mergers and acquisitions.
• 24:02
  SPEAKER_00: Because I feel like, you know, when people talk about growing a company, um, I I was actually just listening to uh some people talk about it the other day where it's like they'll talk about organically growing a company, and then when it comes to like the the acquisition or the the merger side of thing, that it's like um it they always view that as being a very artificial way of growing the company.
• 24:22
  SPEAKER_00: But for you, it it sound it very it does sound like very organic with the way like you're creating these connections, you're like networking with people, it's kind of like all seemingly happening very natural for you guys.
• 24:34
  SPEAKER_01: Yeah, Nick, you've said it better than I could say it.
• 24:38
  SPEAKER_01: That's exact, it's completely natural.
• 24:40
  SPEAKER_01: There's nothing forced about it at all, it's just uh natural and organic, and uh yeah, you I won't say it any better than you just did.
• 24:50
  SPEAKER_00: The the other thing that I wanted to ask you too, and this is kind of getting away from like um talking about like you know, audio advice in particular.
• 24:57
  SPEAKER_00: Um, but like you guys have been in North Carolina for over 40 years at this point, and I know that like very recently or somewhat recently, it's like the the state has kind of the state and the region has kind of started to take off as like this business and tech hub.
• 25:11
  SPEAKER_00: Because um, I have a friend who uh works for like Epic Games down there, so it's like it's it's it's big, it's getting big, and there's all this talent and money flowing into it.
• 25:22
  SPEAKER_00: Um, how for the integration side for you, obviously, like how has that changed the real estate market at all?
• 25:30
  SPEAKER_00: Like, or has it changed it at all?
• 25:32
  SPEAKER_00: Because I know it's like the the entire area has like a history of being kind of like a luxury destination for a lot of people, yeah.
• 25:39
  SPEAKER_01: So through COVID, there was a lot of migration, particularly from the northeast into the Sun Belt, and so you had uh cities like you know, Raleigh and Charlotte, and then over to Nashville, and somewhat south of there, Texas had a lot of this migration as well, where people were moving in, and that drove up prices a lot, right?
• 25:59
  SPEAKER_01: And so what happens naturally, right?
• 26:01
  SPEAKER_01: Everyone moves to an area because they're like, oh, it's better cost of living and it's better lifestyle, and then of course prices go up and it sort of uh hits an equilibrium.
• 26:09
  SPEAKER_01: Um, my take is that's a very natural ebb and flow.
• 26:12
  SPEAKER_01: And so interestingly, as we, you know, we're in three three North Carolina markets today, we're in Charlotte, Raleigh, and in Wilmington, North Carolina.
• 26:19
  SPEAKER_01: Um, I I we don't look at any market going, oh, it's going to take off, or it's taking off right now.
• 26:26
  SPEAKER_01: Because uh, for one, like if we build a showroom, by the time the thing's totally up and running and stabilized, it's almost a year.
• 26:33
  SPEAKER_01: And so the market can change a lot.
• 26:35
  SPEAKER_01: And so we're very focused on let's go into build something that's fundamental into a good market that makes sense.
• 26:41
  SPEAKER_01: And so um, you know, we're playing the long game, we're thinking 10, 15, 20 years out and uh trying to just build something great.
• 26:50
  SPEAKER_01: But obviously, North Carolina, you know, I lived in the Boston area, I lived in New York, I lived in California.
• 26:56
  SPEAKER_01: Um, and I've enjoyed everywhere I've lived, but this has been the place that I, you know, ended up settling.
• 27:01
  SPEAKER_01: It's been great.
• 27:03
  SPEAKER_00: That's that's very interesting.
• 27:04
  SPEAKER_00: I'm originally from like the Boston area.
• 27:06
  SPEAKER_00: I've moved uh a little bit further up north.
• 27:08
  SPEAKER_00: I'm in um New Hampshire right now, just over the border in uh Salem.
• 27:13
  SPEAKER_00: Um, but like I I totally get that.
• 27:15
  SPEAKER_00: I went um uh I'm trying to forget, I forget how long ago it was, but when you guys had the uh the eclipse happening down that area, like the total eclipse um uh a few years ago, um I went down there and it was just like a gore, it was gorgeous out that way.
• 27:34
  SPEAKER_00: Uh the the place I ended up staying in Charleston, um, South Carolina, and um I ended up having to drive pretty far north because the time during the the the eclipse, uh it was gonna be pouring rain out in Charleston.
• 27:48
  SPEAKER_00: So I just drove all the way up north until I finally got past the clouds, and I ended up just like staying in this um, I forget the name of the town, but it was like a little town like close to like much further up north where it's like um they had like this whole grand band uh playing for the eclipse, this big outdoor festival.
• 28:08
  SPEAKER_00: And um I'm I'm horrifically off tangent at this point, but it's it's a great, it's a great region, is all I'm saying.
• 28:15
  SPEAKER_00: Yeah, no, I agree.
• 28:16
  SPEAKER_00: I agree.
• 28:18
  SPEAKER_00: Um, so one last thing I wanted to ask, and we've been again like kind of bouncing back and forth on this topic, and it's um the it's the it's the question of like a um succession, like a final game plan for business, you know.
• 28:32
  SPEAKER_00: I hear it discussed a lot at the buying group events, um, guys that are looking to grow their business, what their kind of like exit strategy is.
• 28:41
  SPEAKER_00: Um, for anyone that is interested in growing their business, um, you know, whether it be organically or through acquisitions, although, like we've already discussed, like your acquisitions are kind of on the more organic side.
• 28:54
  SPEAKER_00: Um, what would be a resource or bit of advice that you would offer to them?
• 28:58
  SPEAKER_01: Yeah.
• 28:59
  SPEAKER_01: So um I'll focus first on the side of someone who's thinking about, hey, I'm building a business, but what am I going to do one day when I want to exit?
• 29:08
  SPEAKER_01: The first thing you have to do is you have to think about exit planning years in advance, which people don't understand, right?
• 29:14
  SPEAKER_01: People go, oh, you know, I built this business go.
• 29:17
  SPEAKER_01: In most uh businesses in our space today, where there's an owner, they got four or five employees, and they built the business, there is no organic value to it.
• 29:26
  SPEAKER_01: I mean, not really, because when the owner leaves, the business is effectively gone.
• 29:30
  SPEAKER_01: And so um, you know, a lot of people will come to us and say, hey, I'm um either I'm interested in potentially selling or just, hey, can you just give me some advice?
• 29:39
  SPEAKER_01: Because we've now seen it and done a handful of these.
• 29:42
  SPEAKER_01: And what I tell people is one, I don't know that selling the business is perfect for everyone, right?
• 29:47
  SPEAKER_01: Sometimes you hand it down to another employee, sometimes it makes sense to shut it down.
• 29:51
  SPEAKER_01: There's different reasons you do it.
• 29:52
  SPEAKER_01: But the most important thing, and there's some great books on it that when people come, I'll be like, you know, read this book.
• 29:57
  SPEAKER_01: Um, there's also great consultants.
• 29:59
  SPEAKER_01: So, as an example, Sound Components had a consultant they worked with who's a um an exit planner, but also a business consultant who worked with them to say, how do you maximize the value of your business for what you want?
• 30:12
  SPEAKER_01: And what you want might be money, it might be, I want to be able to retire and not worry about it.
• 30:17
  SPEAKER_01: I want to take care of my employees.
• 30:19
  SPEAKER_01: Maybe I own the building, I want to be able to release the release the building.
• 30:22
  SPEAKER_01: And um, the Sound Room in St.
• 30:24
  SPEAKER_01: Louis had worked with a consultant, I think about three years, who was terrific, by the way.
• 30:28
  SPEAKER_01: So sometimes people come to me and they'll say, Hey, I'm thinking about it.
• 30:31
  SPEAKER_01: Can you introduce me?
• 30:32
  SPEAKER_01: And I'll often say, Hey, here's a person that I know worked with two companies that we acquired.
• 30:36
  SPEAKER_01: You should talk to them.
• 30:37
  SPEAKER_01: But but the number one thing is this it's got to be really intentionally planned.
• 30:44
  SPEAKER_01: And so there are companies that have come to us, and even in the case of Sound Components, we were talking years ago.
• 30:50
  SPEAKER_01: And I say, Hey, here's some things you need to work on or build, build so that you would be valuable to us or anyone.
• 30:55
  SPEAKER_01: Um, but uh if if this is going to be a win-win, you probably should do these things between now and when we do uh deal.
• 31:02
  SPEAKER_01: And so I think either, you know, getting a consultant, reading a few books about it, but then there's some investment in time and money if you ever want to sell your company because you have to build it differently.
• 31:13
  SPEAKER_01: So in St.
• 31:14
  SPEAKER_01: Louis, I'll give you an example.
• 31:16
  SPEAKER_01: In St.
• 31:16
  SPEAKER_01: Louis, David Young was the founder and had owned it for many, many years.
• 31:20
  SPEAKER_01: At some point, he hired a consultant and analyzed it and said, the only way I can sell the business is if I have a team that can run it without me.
• 31:27
  SPEAKER_01: Well, now what does he got to do?
• 31:28
  SPEAKER_01: Well, he's got to have a president, he's got to have a, you know, um, you know, head of operations, and he's got to have these different people.
• 31:35
  SPEAKER_01: And he built that team and he built it so that he could sell it and and a buyer would know without him, it still runs perfectly fine.
• 31:45
  SPEAKER_00: That's a that's a good way of pointing, uh uh putting it because it it kind of reminds me.
• 31:49
  SPEAKER_00: Um, I was at Light of Palooza this year, and um David Worfle gave the um the keynote there, and he he actually focused on that a lot.
• 31:58
  SPEAKER_00: Um, obviously it was kind of like tinged towards um the lighting side of the business, but he he was very intentional on saying that it's like, you know, when you're building your team, um you got to build a team, you gotta look at like what you do, you gotta look at like what you're really good at and what you like to do, and then kind of just build your team around that.
• 32:20
  SPEAKER_00: So it's like you get to do what it is you really want to do, and that you know, if for whatever reason you can't show up to the project one day or you're looking to exit like the business, that it's like your team can keep on running without you.
• 32:34
  SPEAKER_00: Um, and I think that's a really that's a really good bit of advice for like um, you know, any business, really.
• 32:41
  SPEAKER_01: Yeah, what's interesting about that is that um a lot of this depends on what your long-term goals are.
• 32:48
  SPEAKER_01: So, as an example, there are people I know that that um, you know, they'll eventually want to sell their business, so they have to do that.
• 32:55
  SPEAKER_01: They got to build the team that'll work without them.
• 32:57
  SPEAKER_01: There's other people that that's not really who they are.
• 33:00
  SPEAKER_01: They are the guy.
• 33:01
  SPEAKER_01: They love to be in front of the customer and they're really good at managing all the people in their team to get it right.
• 33:07
  SPEAKER_01: And when I ask them, what do you really want to do?
• 33:10
  SPEAKER_01: They love being that quarterback.
• 33:12
  SPEAKER_01: In other words, they don't actually want to build a team, they want to keep it small and be that person.
• 33:17
  SPEAKER_01: And I tell them, if that's your personality type, right?
• 33:21
  SPEAKER_01: You could go do like a Myers Briggs or a desk assessment and these types of things and understand the personality type.
• 33:26
  SPEAKER_01: There are some personality types that I would um you'd conclude actually, you're probably never gonna build this to sell it because what you love is being that guy, and you really don't want to be a part of something else, you don't want to sell it.
• 33:38
  SPEAKER_01: And and so that's one profile type.
• 33:40
  SPEAKER_01: And then the other is exactly what David's talking about.
• 33:42
  SPEAKER_01: Okay, well, if you do want to be able to sell it, or you do want to be able to scale it, um, and there's a term in the industry called crossing the chasm.
• 33:49
  SPEAKER_01: And what it refers to is a lot of people, you might be able to build a million, two million dollar business, and you can maximize your own personal income at let's say two million.
• 33:58
  SPEAKER_01: But then when you want to get to be a four million dollar business, you're actually gonna cut your income in half because you're gonna have to hire an ops guy, you know, uh AR person to collect the money.
• 34:08
  SPEAKER_01: And so you're gonna grow to four million in revenue, but you're gonna make less money.
• 34:11
  SPEAKER_01: And for some people that makes sense because they like it, and then they're gonna try to get to five million or six, and others go, you know what?
• 34:17
  SPEAKER_01: I got a two and a half million dollar business, I love it, I don't want all that headache.
• 34:21
  SPEAKER_01: And and actually, interesting, I grew up, and my dad had a tiny little remodeling um, you know, construction company.
• 34:26
  SPEAKER_01: So I grew up doing electrical and plumbing and his business.
• 34:29
  SPEAKER_01: And he I I remember coming up from college, like, Dad, you got to add all these people and grow it and get it bigger.
• 34:34
  SPEAKER_01: And he was like, I love it the way it is.
• 34:36
  SPEAKER_01: Like, this is what I love.
• 34:37
  SPEAKER_01: And I'm and I and I look back now that I'm older and I go, Oh my gosh, you never should have like tried to build like this bigger entity because that was the right thing for him.
• 34:45
  SPEAKER_01: So yeah, I I think both models work.
• 34:48
  SPEAKER_00: Yeah.
• 34:48
  SPEAKER_00: Yeah.
• 34:48
  SPEAKER_00: I I like I like that you're giving like um attention to that other side of the business too, because I feel like it's it's for a lot of people, it can be very easy to get like caught up in the growth mindset of like, I gotta keep doing it bigger, I gotta keep doing it better.
• 35:02
  SPEAKER_00: But like for a lot of people, um, you know, there there is value in taking a step back, looking at like who you are as a person, who you are as like, you know, in terms of running a business, what your business is, and just you know, not not everybody needs to grow up to be like the the the 10 plus million dollar like mega business.
• 35:22
  SPEAKER_00: It's like, you know, there's still there's still value and there's still um success to be found in just kind of like reaching a certain point and then saying it's like I'm good, I'm just gonna stick it out here, it's working for me.
• 35:35
  SPEAKER_00: Um, you know, I get like this amount of money for this amount of headaches, it's like we don't need to add any more headaches on top of that.
• 35:42
  SPEAKER_01: That's right.
• 35:42
  SPEAKER_01: And in fact, a lot of people that do end up wanting to sell the business because they're tired of the headaches, right?
• 35:47
  SPEAKER_01: If you build a business big enough and you're the owner, you're eventually gonna get phone calls every Saturday and every Sunday, and every headache's gonna come and all that kind of stuff, you're gonna deal with it.
• 35:55
  SPEAKER_01: And so, uh, yeah, if you want to chase, like you'll never chase and be the biggest, there'll always be someone bigger, right?
• 36:01
  SPEAKER_01: And so I'm we talked about this earlier.
• 36:03
  SPEAKER_01: I'm a real believer in find out how you are, what you care about, about your team, about your customers, and let it organically match what's right for you.
• 36:14
  SPEAKER_00: Well, Scott, like I it's been great getting a chance to talk with you today.
• 36:18
  SPEAKER_00: I know we kind of came on to talk about sound components, um, but like it's you've been such a wealth of information, just for me personally.
• 36:26
  SPEAKER_00: And I hope that like everybody tuning in has had a chance to kind of like absorb what it is you've been saying because it's like this is um this is good stuff.
• 36:33
  SPEAKER_00: I've I've liked it a lot, and it's you know, it's great hearing it from somebody like you who have been in the business for such a long time.
• 36:41
  SPEAKER_00: Well, I appreciate it.
• 36:42
  SPEAKER_00: It's been terrific, and I'm glad we were able to jump on.
• 36:44
  SPEAKER_01: And it's uh it should be perfect timing for your viewers.
• 36:47
  SPEAKER_00: Yeah, and I just want to say thank you everyone for tuning in.
• 36:50
  SPEAKER_00: Like I said at the top, link to CE Pro will be included in this description if you're not already connected with us.
• 36:56
  SPEAKER_00: Um, subscribe, follow us on socials, sign up for our newsletter, and you know, if you if this is your first time hearing about audio advice, go on and follow them, they've got a big social media connection too.
• 37:06
  SPEAKER_00: Um, anyways, cheers.