Ed's AV Handbook.com
Home Theater & High Fidelity Stereo Audio

Chapter Ten
AV Business & Marketing

Page 1

Batting practice for the audio/video pro and a primer for the novice 

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          Business is straightforward.  Sell more than you spend.  The less linear issues are
to whom, what, where, and how?  The answers lie in a focused objective, defining the scope
of the playing field, framing a strategic business/marketing plan, implementing its tactics, assessing its results, and executing preplanned adjustments.
Establish a compass heading
          Aim your business & marketing scope at prospective customers.  Identify their desires. Define products and services to fulfill their desires.
          Next draft
trial run profit & loss statement with a rough estimate of your operating expenses plus the sales number needed to exceed break-even -- become profitable.  If the numbers look feasible, carry on.  
          Your customer prospects are now the compass heading of your business aspirations.  Consequently .....

..... all business activity should ultimately be aimed at
inviting your customer prospects to do business with the business.

Appraise the landscape
          Refocus your business/market scope to the following spheres of business that you cannot influence: the national and local economy, government, and the competition.
What are the gurus of finance projecting regarding the national economy?  
What are the global trends that influence key resources such as oil?  How are the major industries performing?
 What are the economic effects of the federal government?  
In particular, review the following four trend setting
               1. The Federal government's fiscal policy
                   Tax cuts & limited government spending will generate a positive economic trend.
                   Tax increases with increased government spending will generate a negative trend.
               2. The Federal Reserve's monetary policy
                    A low inflation policy and result will support a positive trend.
                    High inflation robs consumer purchasing power which leads to a negative trend.
               3. Energy prices
                    Stable or lower energy cost support a positive trend.
                    Increased energy cost decreases discretionary spending which leads negative.
               4.  Medium income
                     Increasing incomes puts more dollars in customers pockets -- a positive trend.
                     Decreasing medium incomes reduces discretionary spending -- not good.

          Next survey your customer prospect locale (trade area) to corroborate your data.
Real estate, automotive sales, and large retailers are reliable indicators.
 Identify and visit significant competitors.  How and what are they doing?  A personal visit and a handshake can generate significant information.  It may also develop into surprisingly unintended cooperating relationships.

Sales forecast

          Return to your trial profit & loss statement.  Replace its "sales number needed to break even" with a more probable number.  This is achieved with
 the assistance of the following
7 step sales forecast.  

    Handbook Note:

     Given the big box dominates the TV
, this forecast eliminates TV sales .  
1. Web search total
U.S. sales of independent audio/video dealers.  

     My search began with
the *CTA's 2016 $1.9 billion factory sales projection of home audio
     components.  I increased the number by a 33% gross profit margin to create a retail    
 ($1.9 billion) x (1.5) = $ 2.85 billion U.S. AV retail sales
                                                                                                                 *CTA- Consumer Technology Association
      Handbook Note:
      Factory sales reps & distributors - dismiss the retail number - use the factory sales number.

      If you're a custom integrator, add custom products to the forecast.  

2. Web search total U.S. retail sales.
     2016 U.S. Census report = $ 415 billion

3. Search for your market's total retail sales.  
For example -- 2016 U.S. Census SacramentoMetro total = $ 4.2 billion
4. Compute your market's share of U.S. retail sales.
     Divide your market's total retail sales by total U.S. retail sales.
     For example -- SacramentoMetro: 4.2 billion 415 billion = 0.01 or 1% 

5. Compute your market's total projected AV sales.
     Multiply total U.S. AV sales by your market share.
     For example -- SacramentoMetro: (1%) x ($2.85 billion) = $ 28.5 million

       Handbook Note:
Step 5.5 - Factory sales reps and distributors.
 Find your manufacturer's U.S. market share.  The CTA has the number.
       Multiply the number by the step #4 market share result.

you sell to big boxes and independents, 
bypass step #6 & #7.
       If you sell exclusively to independents, then continue to step 6.
6.  Assume the big box and department stores own 50% of total sales.
       In the SacMetro example, that's approx $14.25 million.  
Independent AV dealers
       own the balance
.  Therefore in our example, the projected sales of independent
AV dealers = $14.25 million.

Subtract the sales of your independent competitors from the result of #6.  
      Make best guess per dealer or divide #6 by the number of significant competitors.

Go or no go?
          Will the result of step #7 still support your trial numbers?  If yes, move forward.  
If no, then you must take market share from the competition to succeed.  Review your data and make the call.  If you still choose to jump into the adrenalzing waters of the audio/video business world, then proceed to the next page.

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Ed's AV Handbook.com
Batting Practice for the AV Pro and a Primer for the Novice.
Copyright 2007 Txu1-598-288   Revised 2018