Selling Big Boy Toys

Selling Big Boy Toys

Electronic Specialists Inc. is poised for major growth. The custom integrator of home theater and audio equipment and wiring is building a new high-profile office replete with James Bondesque technology.

By Sean Roth

Real Estate Editor

Scott Osborne knows his company, Sarasota's Electronic Specialists Inc., is the small guy on the block. He has even heard from customers that his competitors say his audio, home-theater and wiring company is a one-man operation. That is just fine with him. Osborne knows his 13-person company is on an upswing with the addition of a new high-profile office and increased sales staff.

But he relishes his company's position as the underdog. "That is fine with me," Osborne says. "I don't want to be the biggest. We just want to be the best."

Electronic Specialists exists in the gray area between a Circuit City/Best Buy retailer and electronic equipment delivery and installation companies, such as Advanced Audio Design or Sound Advice. While it stays focused on the under $100,000 market, the company sells the newest high-tech audio and TV gadgets including ancillary items such as specialized seating for its home theater products.

The company currently operates from an inconspicuous 2,400-square-foot location in Northgate Industrial Park. However, Osborne purchased a parcel in Centre Park on U.S. 301 to build a 5,000-square-foot showroom and headquarters with greater exposure. And Osborne is growing the sales department from a one-person staff to four this year.

The company is projected to at least match the industry standard growth rate of 30% this year, but the 2005 projection is for tremendous growth due to increased retail traffic.

"It could be really scary we could be up by 100% or more next year," Osborn says.

Already, the $2-million company is doing significant local business. CE Pro, a custom-installation industry trade magazine, listed the company 17th in its ranking of the nation's largest structured-wiring dealers, based on reports from the three-major wiring vendors of its product purchases. And Electronic Specialists was awarded "The Most Monstrous Custom Installation Contractor of the Year" for its product purchases of monster cable.

In 1997, Osborne started Electronic Specialists after six years as a sales manager for Circuit City. "I saw at that time that it was going in a direction I didn't want to go," he says. "It wanted to become Best Buy. I also made more money the first year than the last. They were cutting pay and bonuses trying to drive down costs. At the same time, the only company that was doing installations - Advanced Audio had a reputation of only working on higher-end jobs."

Osborne, with referrals from his friends at Circuit City and DeSears Appliance & Home Entertainment, started installing satellite dishes.

"I had only been married for a year," Osborne says. "Thankfully, when I told her that I was quitting my job to start my own company, she was totally in favor or it. That was back when satellite dishes were worth something (to the profit margin)."

It was sink or swim. His wife, Michelle Osborne, supported the family on her $300 weekly pay as a lifeguard; and Scott Osborne invested the families entire savings in the business. Fortunately, for them the market stayed good and there was enough work for Osborne to employ his wife.

"I was working six to seven days a week - 14-hour days," Scott Osborne says. "I was working out of our garage to start. Michelle took a huge load off me. Eventually (the garage) got so packed we got a small installation office on 15th Street."

One of Osborne's interests had always been advanced electronics and home theaters, so he transitioned the company into installing those products.

"In the beginning, we used to send our customers into Circuit City or Best Buy with a list," Osborne says. "We knew that what we could offer our customers was knowledge of the products that they wouldn't get from the (retail giants). We are in business to sell them a full-package of electronics that meet their lifestyle. We want to sell customers on a concept instead of a product."

At about this time, the business plan came into focus. Osborne would market Electronic Specialists to homebuilders providing low-cost structured audio and television wiring. Plus, the company would offer to wire and install the latest high-tech technology in the builder's model homes for free. In exchange, Electronic Specialists would get a chance to meet the homebuilders' customers early in the planning process. The company could suggest pre-wiring the new house for emerging technologies, and it would be significantly easier to invest money in expensive add-ons when the customer could add it to the home mortgage. Another advantage is the cost for Electronic Specialists to provide wiring to customers, who are building new homes, is significantly less expensive than wiring an existing building.

"We want to meet with them right after the pool guy," Osborne says. "Right after our clients are done moving walls with the builder. This is all the market that we need. We don't need the retail market. ... We will certainly take it, but with the homebuilder business we don't need it. The model homes also allow us to have showrooms all over."

In 2001, Osborne made of his most important acquisitions - hiring Chris Gilray as the company's sales director. Gilray and Osborne had met in 1992 while at Circuit City and kept in touch. Gilray had moved on to work at Target Corp. where he eventually became a regional vice president in Baltimore. Osborne asked his friend to return to Sarasota and join Electronic Specialists.

"I saw that the company had grown tremendously through referrals," Gilray says. "The company had been in business for a couple of years and they were starting to see the light at the end of the tunnel. But it was a very risky decision."

Gilray took a leap of faith. He started beating the street, calling homebuilders for work. It took several months, but Gilray was able to sell three homebuilders on the deal. Today, Gilray contributes at least 65% of all sales for Electronic Specialists. Toward the end of 2003, the company grew to include 10 homebuilders.

"I would say that 90% of the folks decided to put something in their homes," Osborne says. "Just think, if you are spending $300,000 to build a home, how much is an extra $20,000 on the mortgage, it's only $10 to $20 extra a month."

In June, Osborne closed on the first parcel at Centre Park for $81,830. Osborne has contracted with the Centre Park owners ,through Carl Wise of Sarasota-based Preferred Commercial Inc., to buy two additional lots for about $193,000.

"We have grown out of every place we have ever been," Osborne says. "Already we noticed our new place doesn't have office space for the new sales people we are bringing on."

Osborne has grand ideas for the new headquarters. The main focus of the new facility will be on showroom space featuring devices worthy of a James Bond movie. The main entrance will feature a 42-inch screen Plasma TV screen made to look like a tropical fish tank. The bedroom showroom will feature a Plasma screen TV disguised behind a piece of artwork. A model bathroom makes use of technology to hide/reveal a TV screen behind a glass mirror. The center of the new headquarters will feature a large home theater area including popcorn popper. Almost the entire showroom, which also features a replica of an outdoor garden area makes use of hidden speakers and high-tech touch-panel control systems.

Constructing and equipping the new office is slated to cost about $1 million. The facility will be built by the company's first homebuilder client, Mark Cahill of Bradenton's Mark Cahill Homes.

Asked how important retail traffic is projected to be, Osborne says, "We don't know exactly, but from talking with our competitors we found that on average they get a sale from 6 in 10 of their walk-in clients."

Like most other businesses, Osborne's biggest challenge has been finding good employees and keeping them. "For several years, we weren't able to afford to pay benefits," says Osborne, "All or our installers had to be subcontractors. We just kept losing good people. So last year we decided we had to bite the bullet and hope to cover it on the sales side. Now we offer installers work trucks, most tools, workmen's comp, health, dental, optical, retirement plans and vacations." Osborne estimates training costs are about $5,000 a year per installer.

Electronic Specialists is getting ready to receive some of its biggest exposure through The Concession, a planned golf-course community on State Road 70 in eastern Manatee County. The company works with two of the six builders in the community: Westwater Construction Inc. and ML Collingwood. "Each of these builders has to do models and spec homes," Osborne says. "We have to give each of the builders something different ... something unique. We are going to use this opportunity to display some of the hottest technology out there."

Electronic Specialists

YearGross Revenue

2001$1.1 million

2002$1.6 million

2003 $2 million

Projected 2004$2.6 million