Home Automation Unplugged Episode #211: An Industry Q&A with Mike Abernathy
In this weeks home automation show of Automation Unplugged, Mike Abernathy, Director of Business Resources at NSCA shares the future of system integration and the emergence of the Super Integrator.
This week's home automation podcast features our host Ron Callis interviewing Mike Abernathy. Recorded live on Wednesday, April 27th 2022, at 12:30PM EST
About Mike Abernathy
Mike has been part of the systems integration industry since 2001, when he started his career with NSCA as a Member Relations Manager. During his time in that position, Mike developed a broad understanding of the AV industry and how consultants, integrators, manufacturers, and independent manufacturer representatives interact and work together within the industry. He later joined a commercial audio manufacturer, where he managed international sales for ten years. In 2017 Mike rejoined NSCA and is now the Director of Business Resources. In this role, Mike helps members find and use business resources to more effectively operate systems integration firms.
Interview Recap
- The many resources being provided by NSCA to its members
- The future of system integration and the emergence of the Super Integrator
- Creative solutions to the Av industries labor shortage
SEE ALSO: Home Automation Podcast Episode #210 An Industry Q&A with Tobi Tungl
Transcript
Ron: Ron Callis here with another episode of Automation Unplugged. We are here. Actually, I'm looking over on my show notes; I don't see the show number. So, David, I'm going to ask him to give me the show number. But today is Wednesday, April 27. It is 12:42. We are a few minutes behind. Streaming live is always fun. Mike has enjoyed the show as he's watched my team and I kind of get some of our Ducks in a row. We had an issue with the LinkedIn feed, but I think it's cooperating now. I'm actually going to jump over to Facebook and see if that's streaming, and then I'm going to look for my team to give me a thumbs up on the LinkedIn. So bear with me. All right, cool. It does look like Facebook is streaming, and David's telling me we are also good on LinkedIn. So that's exciting. David, remind me what show number this is, just so that I can state that accurately to our guests. I know we're in the 200s. There we are, we're show 211. Can you believe that, folks? Two hundred eleven of these shows; started all the way back in April of 2017. So this month is actually our anniversary month, which is kind of cool. Five years of Automation Unplugged. If you are watching us live or you're watching us on replay, do not forget that you can go to your favorite app on your phone. I know when I listen to podcasts, I use the podcast app on Apple, purple icon, and you can simply type in Automation Unplugged, and you'll find this show, and you'll find all of our shows for the past several years, I think we started actually putting out the audio podcast back in maybe late 2019 or so. For the first couple of years, it was only video and then 2020 to the present, it's been audio and video. But today, I have a special guest, and that guest is Mike Abernathy. He is the director of business resources at NSCA. One Firefly has known of NSCA for many years. I actually called and interviewed Chuck Wilson, the executive director. Actually, I'll get Mike to give me the formal title of Chuck, CEO. All right, he's in my ear. He's telling me, CEO of NSCA. A couple of years ago, when I was starting to do some of my due diligence around potentially pointing One Firefly to help commercial and pro-AV integrators, just as we've helped residential integrators for many years. Chuck was one of the first people I reached out to, and he was very kind and guided me through many conversations and helped me understand the landscape. So Mike is the director of business resources at NSCA. He's going to tell us what that means and what he's up to and what's going on at NSCA and in the commercial AV space. Without further Ado, let me bring in Mike. Mike, how are you, sir?
Mike: I'm well, Ron, thanks. Great to be here.
Ron: Yeah, man, I appreciate you helping me out there. How's your fearless leader over there? How's Chuck doing?
Mike: Chuck is doing really well. And as many of you probably have seen that, Chuck's kind of moving back a little bit and trying to do a little less at NSCA, thus the change in title from executive director to CEO, and we can talk about that more later. But now, Tom LeBlanc, formerly of Commercial Integrator, is NSCA's executive director, and a lot of great things are happening here at NSCA.
Ron: Well, help everyone that, I'm sure most on the commercial side of the fence, everyone knows you, you are well known and liked, but help people understand what is NSCA and what's your role at NSCA?
Mike: Yeah, and we get that question a lot. And sometimes, NSCA, we fly under the radar, which can be good and not so good. But with that, NSCA, we are a trade association, a community of commercial systems integrators, so systems integrators that are working in the commercial space in the technologies of AV, security, life safety, low voltage lighting, IT, and so forth. So as a trade association and a community of systems integrators, our role is to help them look at key business issues and support them in business issues at IOSA, keeping them up at night as business owners and leaders within an integration firm. So we have benchmarks and metrics, and other tools that can help them lead their teams. So that's part of my role here at NSCA is ensure that our members are leveraging and using those resources, but also helping them if they call in with a question, "Hey, what are other members doing in regards of talent acquisition or whatever it may be?" And sometimes we have a resource; sometimes we don't. That's when we develop a new resource for our members and support them that way, and also through partnerships with other firms, if it's marketing firms like One Firefly, or if it's on the business process side with like Navigate or corporate sales coaches with sales or many other partners that we have to help support certain areas of an integration business in the commercial side.
Ron: Got it. Where are you physically coming to us from right now? Where do you reside?
Mike: I live just north of Madison, Wisconsin. So it is a beautiful 45-degree day here in Wisconsin.
Ron: Practically summer.
Mike: Yeah, practically summer. We've been teased with summer a couple of days here this spring, but it seems to go back to winter after a couple of days.
Ron: What was the date that it broke freezing?
Mike: Good question. We'll get a couple of days in January and February where it teases you, where you get that high 30s, low 40s day, and you go out, and you think it's 4th of July and so forth, and then it drops back down below freezing. But we had snow; I think last week here and maybe a week and a half ago, just a flurry, nothing stuck.
Ron: I remember I've told this probably many times on the show over the last five years, but I lived for a stent of my career back when I was with Lutron; I lived in Minneapolis, and I lived there for about three years. I remember so vividly the approximate mid-April time frame when the lake ice in front of my apartment building would finally break up, and you'd see water again. The temperatures would be above freezing, which meant all the moms or families would go outside in shorts, usually jackets, but in shorts, and they'd be strolling the babies around the Lake.
Mike: Yeah.
Ron: And I was like, you know spring has sprung when it has broken freezing.
Mike: That's right. That happens here as well here in Wisconsin.
Ron: I can imagine. Look who we have. We have Jeremy Elsesser over at Level Three. He's like, "NSCA!" What's up, Jeremy? Thanks for tuning in, sir. We also have Angel. He says, "Hello, Ron. Hello, Mike, Saludos from Mexico.".
Mike: Hello, Angel.
Ron: Thank you, Angel. So, Mike, lots of things I want to query you on and kind of get your position and your thoughts. But before we do that, I would love to go back in time. And if you don't mind, tell us your origin story. How did you land here?
Mike: Yeah, I tell you what. I ended up in this industry by total accident. I think a lot of people will say that as well. I did not grow up technical; really interested in the technology side of things. But going back to Chuck Wilson, many of you know, Chuck has been in the industry for many years as an integrator and then the last 20-25 years as the leader here at NSCA. I was just out of college. I was working in Cedar Rapids, Iowa, where I grew up. I'm sitting at my desk at my first job as a telecommunications company. And I get this call, and I say, "Hello, this is Mike," and it's Chuck Wilson. And the short of it is; he says, "Do you want to come work for me?" And I've known Chuck my whole life; we're from the same small town in Iowa and so forth. So what do you do? What do you do, Chuck? Well, I work for this association. Well, what does that mean? I kept going, kept asking these questions, and I said yes. So I worked for NSCA, came into NSCA in 2001 and worked for six years, back when we actually had a trade show, NSCA's Expo. Many of you remember that. Then in 2007, actually sold the show to Infocomm and kind of went through a transformation that way, but learned a lot about the industry. I think Ron, you and I were talking about that from the AV industry and security industry and so forth. I learned a lot about the players. How do manufacturers work with sales reps and the integrator and the consultants and all the different players, the buying groups and so forth, different associations. I mean, you're familiar with, you're active in CEDIA and so forth and everything. So that really helped me when I moved on to the next part in my career. That was Atlas Sound. At the time, Atlas Sound now Atlas IED. And that was a great ten-year experience there. That's where I learned more about the technology, more about, okay, what truly keeps the manufacturer up at night, what keeps an Integrator up at night and ended up traveling a lot and ended up getting involved in international sales and learning a lot there. But also learned more at Atlas the importance of distribution and how that works in the channel and the balance of that, and so forth. And then five years ago, came back came back to NSCA and been able to apply those ten years of flying all over the world and the growth and the technology side of things and now sharing that with members and using the resources with NSCA members, both integrators and vendors and manufacturers as well.
Ron: That's awesome. How are you enjoying life back at home? Were you a road warrior?
Mike: I was a road warrior putting a lot of miles on an airline, United.
Ron: Being platinum is overrated, isn't it?
Mike: That's right. Anyone says it's glamorous has never done it or is lying. A lot of the folks probably listening have experienced that, but a lot of great experiences and learned a lot through that. It is wonderful being home. It's interesting when I do travel for two days or three days; it's nothing for my wife. It's just like, oh, that's just once a month or once every two months. So when we got married, I was traveling all the time, so she didn't know any difference. So it's been kind of nice to get back to now, going to the ball games, the soccer matches and the band concerts and all that stuff as the kids get older.
Ron: Yeah. I would imagine you're working out of your home office now.
Mike: I am.
Ron: Is that common for the NSCA staff? Do they work out of home offices, or is there an office where people go and do their thing?
Mike: Great question. So it all goes back to Cedar Rapids, Iowa; That's where NSCA is headquartered and located. We have a team; that's where Chuck Wilson is located. Anyone familiar with Teresa Solario, our general manager and director of membership, is located in Cedar Rapids. We have about a team of 6-7 there, as well as myself here in Wisconsin. Then Tom LeBlanc, our executive director, he is based out of Boston. So two of us work from home. We have about a total of ten overall, ten staff, not all full-time, some part-time, and we're small but mighty here at NSCA.
Ron: So I'm going to give you credit. You didn't know in advance I was going to say this, but Jessica from my team and I attended the BLC, the business leaders conference, just recently. I want to say recently; I want to say it was February. Does that sound right?
Mike: It was February, yes. Last week in February.
Ron: Everything blends together these days. I don't know. Today's Wednesday. There you go.
Mike: I think so.
Ron: I don't know. But the conference was really super polished and professional. I want to say of my 22 years doing this, one of the more polished professional from beginning to end conferences I've attended. I just want to say great job. So who else deserves credit for that? Because I know there's a lot of people involved.
Mike: There are a lot of people. And thanks for sharing that. BLC is kind of our flagship event throughout the year. So when you look at BLC, we have the NSCA team, the staff of NSCA, but then we have a BLC planning committee; that's our Integrators and other partners within the industry that really help us drive the content side of things. Looking at the content from a perspective, okay, what's really important? What are some key issues facing the integration channel right now, from a leadership perspective, from a business perspective. And then taking that and using, we use a Speaker's Bureau and longtime relationship with them and really saying, okay, here are the topics that we need to cover. Here are some of the speakers and presenters that we're looking at. Then we bring them on board, and we work with them and say, okay, here are things we want you to address. This is how it's affecting our industry. So to make it very specific to Integrators, what's keeping them up at night and the business issues for the channel. So that's kind of how BLC gets created. And then all the way through implementation with the staff.
Ron: The quality of the speakers. So you just maybe gave one of your tips there one of your secrets. You guys use professional speakers. You have a council, as I'm understanding it, of integrator business leaders that are brainstorming around what the needs of the marketplace are. And you're looking out there to look at what are the best speakers. You guys had so many darn good speakers. I've been to a conference where there was one or two, that was cool. But you guys were like quality one after the other. It was really cool. I personally gained a lot. There was a lot of takeaways.
Mike: We've been blessed to be able to do that year after year. I think we're coming up on the 25th anniversary of BLC and just being focused on the business issues, and it's a great networking event. And I think that's where the value, Ron, I think you experienced it. You sit down, you listen, you're shoulder to shoulder to other professionals in the industry, and you're learning about a key issue, whatever it may be, if it's marketing, if it's on the business side, leadership, culture, and then you step away at lunch or in dinner. That's where the greatest value of BLC comes from is that networking. Sharing those ideas and then taking it to the next level.
Ron: Exactly! The idea was seeded in the professional speaking engagement with a professional speaker. Then it's definitely at breakfast, lunch and dinner; the table would dig into the topic. So it was really cool.
Mike: Maybe even at the bar in the evening.
Ron: Just maybe. I can't remember the last time at an industry event that I pulled out my phone and took so many pictures of so many slides; I was like, oh, that's a good one. That's a keeper.
Mike: Yeah. My phone is full of that as well.
Ron: Yeah, and then even a few of the speakers. I'm trying to think I'll mix up names, but a lot of these people were authors of books. And I posted a few pictures of members of my team were like, oh, my God, you saw them live. I was like, yeah, do you know them? I hadn't heard of them. He's like, I've been reading all their books for years. Yeah. And they had a lot of...
Mike: John Acuff may have been one of them.
Ron: John Acuff was one of those guys. Yes. I'm admitting that I was unlearned and had not heard of John Acuff. But when I posted, and actually I posted when I was watching him live and then he retweeted it. So I tagged him, and he retweeted it. A member of my team follows him, and he's like, wait a second. That's from Ron. That's from the CEO of One Firefly. It was pretty cool.
Mike: Yes! My wife said the same thing. You guys brought in John Acuff. And I said, yeah. Not think it was that big of a deal, but my wife thought it was a big deal.
Ron: Yeah.
Mike: It's good. And we've had the likes of Verne harness the whole scaling up. In the past, we've had the likes of Kindra Hall, who at the time wasn't as popular, if you will, well known and now has written a couple more books. The whole power of telling stories from a sales and marketing perspective. Hopefully, we can continue to bring just the same quality of speakers year after year.
Ron: I know later in the year. And I'm admitting I have not gone to it, but me and my team, we will attend it. What is the rest of the 2022 look like for NSCA with events.
Mike: Yeah. So for, event-wise, I'm going to skip to September and then we can talk about an event in June. But kind of going more in the business perspective is; in September, the 20th and the 21st in Chicago, we have our Pivot to Profit event, and it's a smaller of our event. The focus really of Pivot to Profit is to look more at emerging technologies, recurring revenue, cybersecurity and new revenue, new revenue opportunities for the channel and looking at ways how Integrators can leverage and Pivot towards that. I think we may talk about the whole recurring revenue model a little later, but that's in Chicago; that's a smaller event. That's 200 attendees, around 150 Integrators. There are actually what we call toolkit talks where manufacturer sponsors and participants come, and there's some speed dating similar to kind of the Total Tech Summit and so forth that we've been referencing where an Integrator will go from table to table and learn the different technologies and revenue opportunities and so forth. What's really great about Pivot to Profit, Ron, is that the manufacturers and the sponsors frame their story. Their solution and everything around the content that's being shared throughout the event so it can be applied accordingly. That's kind of what makes Pivot to Profit a little different than from some of the other events.
Ron: I know I'm looking forward to attending that and listening and learning and participating. It's going to be a lot of fun.
Mike: Yeah.
Ron: Outside of that Chicago event, are there other in-person? Like I know, around the corner in June, we have Infocomm. Are you guys doing something there?
Mike: We do. We have an event planned on June 8. So I believe that's Wednesday and opening day of the show, if I'm correct at Infocomm there, in Vegas. This event is actually supported by our education foundation. The goal here of the event and it's about be the hero. It's part of our Ignite initiative. So Ignite is an initiative to help Integrators fill that gap, build that workforce, that whole workforce development side for technicians, for engineers, for sales, really overall staff of an integration firm. So we'll have an event. It's really a party at the Brooklyn Bowl. So that will be June 8. If anyone listening remembers the drunk Uncle's events, excuse me, in concerts and so forth. This is kind of a replacement of that. So NSCA will be there. We'll have some entertainment, but also some teaching and information about the whole workforce development. Looking at the workload right now, that's a big challenge. But then also future workforce development for the channel, both Integrators and from a manufacturing and vendor perspective.
Ron: Well, let's dig a little bit deeper into that if you will. I don't think I have a conversation with someone these days that doesn't ultimately either go-to supply chain. Don't worry. I'm not going to go there with you now, I know our audience is tired of hearing about that, but the other side is workforce the idea of getting talent, finding talent. So rather than belaboring that in a negative way, I'm going to spin it. Are there any neat success stories? Are there any positive, interesting ways that you've seen your members solving the workforce, maybe challenges or stresses in terms of finding quality people?
Mike: Yes, there are some stories out there, some success stories and everything. I think we're seeing this just from our recent compensation and benefits report that NSCA provides is really not to go on the negative side, but it's becoming an urgency for NSCA members. Sales is great, backlog all that stuff, but having the team to get it done. Where I've seen success, and it doesn't necessarily fill the gap immediately. But as I was sharing is, we have a member in the Midwest here. They decided to use some of the tools and resources from NSCA, from the Ignite initiatives and so forth to go out and build relationships, not with the tech schools, not with the community colleges and even universities, but with the high schools, getting in with the technology instructors, building relationships with the technology instructors, the guidance counselors, and so forth, to, in a sense get the students and so forth, interested in their company and in our technology if it's security, AV, whatever it may be from the beginning. So they don't have a chance to get away, and they're having success with that, especially from a technician point of view, and hopefully, that will lead towards engineers and project managers and so forth. So that's one area of success. But it's also just getting creative in who to look at it. Some people are looking at going after people that were in theater from a sales perspective, from a training perspective, and looking at different areas. You're not going to find someone that's going to be a programmer right out of college. That's whatever the control system is, but you can teach them. But if they have a good understanding of networks and now the IT side, the question I always ask is, what industry are we in? And you say the AV industry or security industry. This will probably get some people talking, but we're in the IT industry. Everything we plug in nowadays is an endpoint on the network, and as integrators looking for maybe a staff member that fits more of that need than we have traditionally.
Ron: Just for my knowledge, as much as the listeners to go back to Ignite or the Ignite initiative, the primary purpose of that initiative is to try to solve this.
Mike: Yeah, it is. And not necessarily in the short term, but in the long term. I think we've done a poor job over the years in our industry and selling our industry. It's kind of like my mom never didn't understand what I did for a living. We were chatting about that. I think there's a lot of good stories. What do you do? It's even more complicated when you say you work for the trade association that supports that industry.
Ron: Oh, yeah. Back a couple of years ago, I updated my website, and so I was doing a little video production, and I have an outtake that I want to say lives on YouTube. But I tell the story of when I graduated from college with a degree in engineering that, I went to go work for Lutron. So my dad would joke with me till this day, he's like, Son, how's the light bulb selling business going? Lutron doesn't even make light. Well, I guess maybe they do make light bulbs now, but they didn't then 22 years ago. But what do you tell your neighbor that you do? I just moved into a new neighborhood, and I've got neighbors all around me, and you start to get together and have socials, and what do you do? Well, we work in this industry that you've never heard of, and we do stuff to help these businesses grow. It's hard.
Mike: It is. And I've tried different things. Like I'm the trade association for companies that install technology, that implement technology, and then that goes into. Well, what does that mean? Sometimes I say a business consultant for technology companies. It was a lot easier when I was Atlas IED, and I just simplified it, says I work with airports, with airport communication and Paging system. At least they could put, you know, a frame of reference around that. But that didn't tell the whole story either.
Ron: But this is the problem with recruiting these young people, right?
Mike: Yeah.
Ron: Is the kids at high school or the kids in community College, young adults in community College or tech schools, apprenticeship schools. I'm imagining they're more exposed to this concept of an IT Career path than they are this quote, pro-AV or audio, video or automation career path. I'm imagining that doesn't even exist to them in their periphery.
Mike: That's true. So some integrators going back, and I should have shared this earlier. Some integrators are actually creating almost; I wouldn't even call it a career day. Maybe you could call it a career day where they're actually hosting something; let's say they had a great project at a hospital or University or something like that, where their technology is on display. So they do a mini career day, inviting high school students, whoever it may be, to come and see the actual technology in use.
Ron: That's a neat idea.
Mike: Then using that and having that relationship and that contact and then taking it from there and even offering, in some cases, offering some training, some training that's maybe it's simple, some basic AV 101 or Security 101 or whatever it may be. But just to kind of let the appetite a little bit and show that there is a good career and a good career path within this industry.
Ron: Yeah. All right. Well, I think those are some interesting things to consider. Maybe you've sparked a thought in someone that's watching or listening well.
Mike: That's the whole goal of Ignite. So the website is Igniteyourcareer.org, and that's on the NSCA website as well, with the tools and resources to help Integrators. Another is an internship program as part of the NSCA Education Foundation. And through the Ignite initiative, there's an internship program. NSCA will have the kind of the framework and so forth for the internship program. It's not just for technicians but someone interested in sales or project management, or engineering. Then the Education Foundation here at NSCA will provide $1,000 back to the integrator to kind of help with some of those costs and so forth associated with the internship program.
Ron: No, I think that's brilliant. I want to circle back to one of the speakers that really stuck out to me at the BLC, and that was the economist. You had an economist take the stage. I want to say his name was Dr. Keel.
Mike: You got it. Yeah!
Ron: He took the stage. He was prepared. He has his data, and he told us what the effect of the Russia invasion of Ukraine was going to mean. It's, frankly, played out play by play, as he defined in February, in terms of the effect on the Macroeconomics and what that then would mean locally impact of inflation and all of this. In our pre-show, when you and I were just chatting, you were like, Ron. Yeah. He's coming back next week to do a follow-up. So just high level if you're reading the tea leaves or maybe you're reading the pre-show notes from Dr. Keel, what are you seeing as you look ahead? Or he's going to come back on for a webinar here in the next, I guess next week; who is allowed to attend.
Mike: Yes. So next Tuesday, we'll bring Dr. Keel back next Tuesday 11:00 a.m. Central at 12:00 Eastern; and he's going to do an update from his BLC presentation, and we try to bring him back two times every year. I've been back at NSCA for five years, and Dr. Keel, at least six or seven years has been at BLC presenting. And really NSCA's economist and him and Chuck and Tom and all of us have a good relationship and reach out to him a lot. So next Tuesday, he's going to just kind of share how things have changed or where things are going from BLC with everything going on in Russia and in Ukraine, but also the supply chain looking at that, not to bring that up again and how that's affecting from a macroeconomic side of things. He'll probably make a joke about the purchaser's index and everything, and they don't lie. I always like that comment about from Dr. Keel and so forth. So, yeah, that's next Tuesday; everyone within the industry is invited. You do not have to be a member of NSCA to participate and listen. It is every year our number one, number two webinar because everyone loves to hear what Dr. Keel has to say. A number of our sponsors, as well as attendees, they take very copious notes and are listening fully. One of our members said, yeah if I had Dr. Keel as an Econ Professor, I'd probably be an economist today. One of those type things. He's very entertaining but also very to the point and share some great information regarding where our industry is going.
Ron: Yeah, wonderful dry sense of humor. I was able the day after he spoke, there was a full day of events at BLC, and then there was a cocktail hour. I remember he was the first person I stood in line and I had a nice 20 minutes chat with him. Just about some of the points he'd made on stage. He was certainly wise and informed. So it was pretty cool.
Mike: He's kind of a mini-celebrity when it comes to BLC every year. So it's a great resource to have and to have him part of BLC every year.
Ron: So big picture trends here, Mike. I know this from dialogue that you and I have had that Chuck has made reference to this at recent events. And it's even a conversation that's happening within NSCA's Emerging Technology Committee. Emerging Technology Committee. That is around this concept of the super integrator. So why don't you just run with that? What does that mean? What the heck am I talking about? And what we're really trying to do here is pull back and look at what's going on, what's going on in the space. There's consolidation happening; there's maturing happening. So what's your take on that?
Mike: Yeah, that's a great question. As I get into the whole idea of a super integrator, master integrator, the system of systems, that type of conversation, we don't have all the answers here at NSCA. But it's a trend or something that I saw back when I was even as a manufacturer. And you look at the relationship between an integrator and their customer and the technologies that they sell. One thing I noticed early on in the conversation seemed to be that an end user they have to have a notification system or emergency evacuation system, a fire alarm system. In order to have Occupancy within their facility. So it's co-driven by the local authorities and so forth. As an integrator, if you're having those conversations, that leads to security, that can also lead to an AV system. From a conference room to performing arts center auditorium, the football, soccer stadium, whatever it may be. So kind of the thought process here as integrators, if you're focused on one technology, if that's AV, if that's security or whatever it may be is expanding beyond just what your core technology is. As a matter of fact, it's kind of scary, right. That's a whole different business. It can be different technologies and so forth. But challenging integrators to look at. Okay, maybe we don't know it all. From a technology perspective, I'm an AV Integrator. I know nothing about life safety, but how can I partner with other companies? How can I come in and be that? It's a term that we've kind of used back and forth on the emerging technologies committee is, being that technology GC. Everything is becoming an endpoint on the network. One of our committee members is talking about a hotel that was all; the entire hotel was Poe. So how many Integrators have for that refrigerator in the hotel room? How many Integrators have a refrigeration tech on staff? But how do we, in a sense, generate revenue and so forth and realize revenue on those opportunities and getting beyond the systems that we know? Maybe it's reselling cybersecurity solutions. Maybe it's even reselling marketing solutions. Depending on who your customer is, but thinking differently and getting beyond of what we know traditionally within our industry. I said a lot there.
Ron: Well, I want to pull a thread on that, and I'm curious, and I want to run down a rabbit hole here. But you're talking about selling services. You're referencing selling some things that sound like they could be recurring. Differentiating, repeat business. Repeat business is your customer that buys stuff. Maybe you do work for a University, and the University has you do big projects every year that's a repeat customer. But recurring would be some sort of ongoing service, service or maintenance or whatever that is that you're getting income from. And there's some contractual relationship between your business and the client. There's an understanding that if they pay you consistently X amount of dollars, you're going to deliver some service. Another simple example is maybe some access control or security monitoring service. Something to that effect. Within the NSCA base, is it public knowledge? How many contractors are in NSCA?
Mike: We have 800 members within NSCA.
Ron: What is common? Is there an average? How much of that revenue is projected revenue versus recurring revenue?
Mike: Yeah. So that's actually data we gather and so forth through; every two to three years, we send a survey out to our members, to our integrated members, and our financial analysis of the industry. It's a great resource for especially smaller Integrators and even medium-sized Integrators to compare, in a sense, compare your PNL with other members. So within that data, it shows that of an Integrator member, NSCA Integrator member, 17% of their revenue comes from recurring.
Ron: Has that been trending up, or is there a goal or initiative that that would trend up, and if so, why?
Mike: It has trended up significantly since I've been back five years. So when I came back in 2017, that was around that 5%, maybe 7%, if I remember correctly. So it has jumped tremendously. And it has been an initiative of NSCA to help Integrators. That was really one of the original tenets of Pivot to Profit is, hey, we got to move towards contracted recurring revenue. Some of that is driven by a number of our member companies are fire alarm dealers. So they have the inspections and so forth. From the fire alarm side of things, that's recurring or the security. But it's now turning into more of the service level agreements. But also turning into that concept of as a service or manage service. There's different. I think everyone describes it differently and so forth. But in the sense providing services that you can realize revenue on a monthly basis, and that's increasing at 17%. Would love to see that at 20%. With a final goal, we have one member where 65% of their business is recurring revenue.
Ron: Wow! An NSCA member?
Mike: A small NSCA member. And granted, a lot of that is more from the telephony side, but they've moved that into other MSP side of things. Some of it is IT, but also some of it is security. And even on the AV site.
Ron: I can share with the audience. I'm not an integrator of technology, but I am an integrator of marketing strategies. Our business shifted. You can really look at it. Although I founded One Firefly in 07, for the first seven or eight years, we were primarily doing project work. So all of our revenue was project; one-time revenue, hero this month, zero the beginning of the next month, hero, zero, hero, zero. We slowly and steadily we're building up recurring. And then in about late 2015, we made a mindful decision to pivot to a majority recurring strategy. That meant focus on product development, focus on who we are, the type of work we secure. Like everything had to change if that was to be realized. Today, a nice percentage of total revenue is recurring. But it didn't happen by accident. It happened by design over many years of design and figuring things out. Bouncing that back to you, Mike, is that what you're seeing is happening? Is there's a focused initiative within the space to try to do some of that?
Mike: There is a focus initiative in the space, and it's been a challenge. I think part of it is from the IT perspective; right, there are standards, IEEE Standards and so forth. And everyone kind of does it all the same way. Well, let's just talk AV specifically. One manufacturer does it this way. Another manufacturer does it that way. I think integrator is new. I know I need to sell services. I know I need to create a recurring revenue model. I can sell it, but then I don't have the format and the tools in the background, the back office side of things, to actually do it. Now you're starting to see a little bit more of that from some manufacturers, and some vendors within even some integrators are now creating separate brands and so forth and reselling that to other integrators. The remote monitoring, the Proactive side of...
Ron: Some of those companies may have contacted us to help them with their marketing. I don't know. That just might have happened.
Mike: And a number of them are NSCA members and so forth. I think that's starting to help integrators move towards that. I don't know if easier is the right term, but a lot of people have started and failed and then come back and go; okay, I have to look at this differently and use other partners, and sometimes it is using outside resources to move towards that recurring revenue model. We have some data it's showing, and I think this has probably increased. This data is a good 9-12 months old now, but it's in one of our white papers that we partnered with PSA and USAV on. It's showing that of the end users out there, 33% of them now are starting to ask for that recurring revenue. Excuse me, that as a service model. That might start increasing as money, as interest rates go up and so forth. That moving more towards that operational expense. It's not always a CAPEX versus opex conversation that motivates some people, but other organizations, it's not an issue.
Ron: This is fairly abstract. So I don't want to lose the audience here, but I'm just going to connect the dots, at least in my little brain. So I just bought a pool for my house, and my pool contractor was one of the esteemed pool contractors in South Florida. And if my pool contractor had offered me a maintenance plan where I would have known, I would have paid X amount monthly, and they would come out and maintain it or check on it or do whatever maintenance things they need to do with my pool if that maintenance plan would have given me probably a discounted hourly rate committed to discounted hourly rate if I want to buy extra services from them. For example, right now, I just had quoted that I'm going to be adding a new valve to put one of my little doodads on its own control. That's very valuable to me. But I asked them, no, we don't do it. And I said, well, why don't you do it? This seems like you're putting in so many pools every year. Look at the recurring base of revenue you could build. Not our business, not interested, like Blinders on to the business opportunity. And this is a 25-year-old pool contracting company. I look at all the integrators that I talk to every single day, and the vast majority of them have those Blinders on.
Mike: Yeah.
Ron: Yet they've developed that relationship with that customer who knows, likes and trusts them and would prefer to maintain that relationship and would happily pay them to maintain that relationship. And they'd be that much closer to the next project.
Mike: Yeah. And it's changing that behavior. From our sales and that mentality and selling. I think one thing that our members have done over the years is they've given away a lot of these services. As I say and Max at our office, I think, gets tired of me saying this, but sell what's between the ears. That's the value, and that's where the services come into play and being sticky with your customer. So that pool contractor would even have a better relationship with you because you're not worrying about it. You're not running down to the place trying to do it on your own on a Saturday. And so forth. When you want to be using the pool instead of trying to fix the pool, you're willing to pay that $100, whatever it is. I think with technology; it's also how do you continue to upgrade technology on a three, five-year basis? Because it is changing that quickly now.
Ron: Yes.
Mike: With all the firmware, making sure all the firmware upgrades, making sure whatever it may be is getting updated and that your conference room systems or performing art systems or whatever is running efficiently and on time and even easy to use well.
Ron: Which means you have a guaranteed future replacement that will be necessary. I know in a lot of universities, as I've started to learn about the commercial space, number one, I've learned, my God, this is so much to learn. The more I've been learning, the more I realized, oh my goodness, I have so far to go. But I've learned a little nugget. That is on a lot of University projects; a lot of times, there are mandates within that school funding model that the technology has to be replaced every so many years, even if it's working perfectly. It just has to be replaced. I was dumbfounded when I heard that. It just seems like with so many of these customers, because this technology is going to become old and outdated, it's going to break. It just seems really smart to invent a model either in-house or use one of these other entities that these companies are springing up to help you better provide service and maintenance and monitoring for your customers and all that technology; there's just money on the table. It not only makes you a better business owner, but it makes your customer happy, happier.
Mike: It does. And if you look at it from a business owner. An owner of an integration firm, it brings additional value. If you're getting to that point where you're looking for an exit strategy, whatever that may be, if it's working with the bank or a buy-sell agreement or whatever that adds value towards your EBITDA.
Ron: No, a bank is going to, I mean, any buyer, whether it's private equity or valuation, is going to give you a higher valuation if a larger percentage.
Mike: Those multiples continue to increase.
Ron: If your RMR percentage is going in the right direction, you're worth more than someone that's only doing project work.
Mike: That is correct. That is correct. But like anything else. It's not easy to move towards that model. But I think, as I mentioned earlier, there are more tools in place now than there were previously from some of the manufacturers and what I mentioned, but also from partners like One Firefly and Great America from a finance, Great America Finance has a lot of tools, and so forth that can help you in the back end, the back office support side of moving towards this type of model.
Ron: Yeah, I agree. Mike, I could chat with you all day long, my man, but we're at the hour. How can the folks that are either watching or listening how can they get in touch with you directly and/or NSCA? What handles would we give them?
Mike: Yeah. So I'm on LinkedIn @MikeAbernathy, but also email here at NSCA,
Ron: What are we going to find on that NSCA?
Mike: You're going to find the National Strength and Conditioning Association. And after all these years of being at NSCA, we still get calls for I need to renew my strength and conditioning, and they don't listen to us. It's like, no, you got the wrong one.
Ron: That's rich. That's awesome. Awesome. Well, Mike, thank you for joining me on Show 211 of Automation Unplugged.
Mike: Hey, it was great to be here. Thanks for your partnership and the time here.
Ron: Awesome. Thank you, Michael.
Mike: Yes. Be well.
Ron: All right, folks, there you have it. Mike Abernathy, director of business resources at NSCA. We did reference on this discussion. We referenced a webinar that NSCA is going to be putting on this week with Dr. Keel, that economist. And Mike said it's open to anybody, so I recommend tuning in. I sat in the audience a couple of months ago, listen to this guy, and I always love these fortunetellers/economists. He's not a fortune teller; he's an economist. But he helps us interpret the data to understand what's coming around the corner. Because a lot of these things are cycles, a lot of these things have been repeated in the past. And it helps to understand the past in order to predict the future. I don't know. Personally, I find that stuff fun and fascinating, the interpretation of macroeconomic data and try to interpret that into our micro lives or what's happening here, where we're at. So I'm going to tune in. It's going to be Tuesday next week. We'll put that in the show notes. We'll put that in the comments on social media and definitely tune in. We got again lots of great guests lined up for the show. And if you have anyone you think that we should have an Automation Unplugged, don't be shy. Drop that into the show notes or reach out to us directly, either with a phone call or an email or message us on one of the various social channels. We have a team monitoring all of those channels. All of the time. So on that note, I'm going to sign off, and we will see you next time. Thank you all for tuning in, and look forward to seeing you soon. Thanks, everyone.
SHOW NOTES:
Mike has been part of the systems integration industry since 2001, when he started his career with NSCA as a Member Relations Manager. During his time in that position, Mike developed a broad understanding of the AV industry and how consultants, integrators, manufacturers, and independent manufacturer representatives interact and work together within the industry. He later joined a commercial audio manufacturer, where he managed international sales for ten years. In 2017 Mike rejoined NSCA and is now the Director of Business Resources. In this role, Mike helps members find and use business resources to more effectively operate systems integration firms.
Ron Callis is the CEO of One Firefly, LLC, a digital marketing agency based out of South Florida and creator of Automation Unplugged. Founded in 2007, One Firefly has quickly become the leading marketing firm specializing in integrated technology and security. The One Firefly team works hard to create innovative solutions to help Integrators boost their online presence, such as the elite website solution Mercury Pro.
Resources and links from the interview:
Mike can be reached directly by email at