Persistence Payoff

Persistence Payoff

Companies by Janet Leiser | Senior Editor

Marty Schaffel took AVI from nothing to $225 million by reinventing his company regularly, creating one of the fastest-growing businesses in the audio-visual industry.

With $2,000 in savings, Marty Schaffel needed another $8,000 to buy equipment to launch his business. The undercapitalized 27-year-old entrepreneur took a leap of faith.

"I wrote an optimistic check," Schaffel says as he looks back 27 years to how he created his company. "Back then you had a few days to make a check good."

In 1979, it could actually take as long as a week for a check to clear the bank and most businesses didn't have personal computers for desktop publishing. They relied on typewriters and printers. Schaffel gambled he could sell a machine, made by Kroy, that would allow businesses to make their own fliers, brochures, stationery or other printed material.

Two days after he'd written the check for the $10,000 order, the minimum amount for a new distributor, Schaffel had sold 10 machines, enough to cover the check, plus $4,000 profit.

By the end of the first year, he'd sold enough Kroy machines to generate a recurring revenue stream of $1 million annually for the machine's ribbons and printers.

He'd struck black, inky gold.

Never standing still

Schaffel's company, Audio Visual Innovations Inc. (AVI), is much different these days than it was then. The company hasn't sold Kroy machines in many years.

It now installs and sells audio-visual equipment that can cost millions of dollars and look like they belong on a spacecraft. The equipment is used in board rooms, convention centers and combat control rooms, to name a few. With $225 million in projected revenue this year, AVI has about 800 employees in 19 locations in the United States, Mexico and Puerto Rico.

One of Schaffel's biggest struggles wasn't really the cash flow problems in the early years, or remaining profitable, he says it was a relatively recent decision to delegate.

"I agonized over that," Schaffel, 54, says. "I made a decision a year before I did it. I think we've reached a certain degree of stability where no single decision or no single action will be catastrophic."

He's still the top guy as sole owner, managing chairman and the only board member of Tampa-based AVI. But two of his top managers, Stephenie Scanlon and John Zettel, took over the day-to-day operations of the business last December. Scanlon, as president, directs sales/marketing, and Zettel, as chief executive, manages other aspects of the company such as accounting, finance, operations and corporate support.

Schaffel, who spends more time traveling to visit large customers, still worries about the decision, he says, adding, "Did I wait too long or did I do it too soon?"

But he knows delegating is key to success.

"If you own all that's going on in your organization, then you don't delegate and you have total chaos because you can't do it all," Schaffel says.

The one thing he has known all along is that the company had to change and grow to survive. Through the years, the company has diversified to survive economic downturns and changed as technology evolved. And sometimes technology has changed overnight just as prices have dropped in half or more.

Today, the company sells AV equipment on the Internet directly to consumers, it designs and installs AV equipment for companies and homes, it outsources AV employees on a fulltime basis to companies, such as Ford Motor Co., it rents equipment and it holds large events for corporations or conventions or hotels.

Staying profitable

"Our goal is to be the largest, most successful in our industry," Schaffel says. "And I think we've accomplished that."

He declined to release profit figures, but he says the company has been profitable all 27 years, except one. That was 1987, when the Dow Jones lost 587 points on Black Monday.

"It was the only time we'd lost money," he says. "It was really the first time I ever wondered whether the company could collapse. It was a scary time."

The company survived through belt tightening and bank loans, he says. AVI didn't have to let employees go. But the founder didn't get much pay that year.

When the economy slowed down after 9/11, AVI was prepared, he says, and more quickly preserved its cash. Plus, the company had more customers in recession-proof industries such as the military and health care.

Complacency on the part of employees is one of Schaffel's biggest concerns, he says, adding: "It was the complacency of my competitors that allowed me to get big."

The company's steady growth can also be attributed to the hiring of talented employees away from competitors, which are mostly mom-and-pop audio-visual shops.

"Turnover is death to a company," he says. "We grew because other companies didn't treat their folks well."

Schaffel's managers let him know when a long-time employee leaves and why at his request. If it's a pattern, then there's usually a problem with the manager.

Hiring employees who are good implementers is also key to AVI's success, he says. "Along the way I hired a lot of people who are good at taking an idea, embracing it and making it happen. What I observed in competitors that never grew, there weren't people that could implement ideas or who were given the opportunity to implement them."

But too many changes too fast can also be detrimental, he says.

"If you're trying to implement an idea a minute, the organization will constantly go all over the place like a lunatic."

Steady growth

AVI has grown at an average annual rate of 22.7% during the past five years, from revenue of $100 million in 2002 to $225 million projected for this year.

Most of the growth has been organic, says Zettel, the CEO. The company had five regional offices in 2000, compared to 19 locations today. Some of the growth was from what the CEO called "pseudo acquisitions." AVI acquired managers and teams from competitors but set up their own office at a cost of about $250,000.

AVI expects to continue growth at 20% annually by adding new locations and employees, as well as more aggressively going after larger national companies.

About 60% of revenue comes from AV system design and installation services, says Scanlon. A growing segment for the company is casinos. AVI recently did the equipment for Hard Rock Vegas.

Government work, including for MacDill Air Force Base and Central Command overseas, makes up about 10% of revenue.

There are no stock offerings or venture capital deals in AVI's future, Schaffel says. The company doesn't have a problem with cash flow and has little debt.

And there isn't any magic formula to AVI's success, the entrepreneur says.

"Success comes from getting up every day and focusing on what you do right and doing it day in and day out," Schaffel says. "It's not intelligence. It's focus and persistence."

By the Numbers

Percentage

Year Revenue increase

2002 $100 million n/a

2003 $125 million 25%

2004 $170 million 36%

2005 $200 million 17.6%

2006* $225 million 12.5%

Source: Audio Visual Innovations Inc. *Projected.