Home Automation Podcast Episode #183: An Industry Q&A With Chris Edelen
In this weeks home automation show of Automation Unplugged, Chris Edelen, President at Sterling Home Technologies shares on the latest supply chain issues related to Covid Delta outbreaks in China.
This week's home automation podcast features our host Ron Callis interviewing Chris Edelen. Recorded live on Wednesday, August 18th, 2021, at 12:30 p.m. EST.
About Chris Edelen
Chris Edelen is a recognized leader of private equity and family-owned businesses. Chris started his career with Fox Photo, a New York company and advanced to the position of Executive Vice President/COO of company operations with sales over $250 million a year. Over the years, Chris has taken leadership roles such as President, CEO, and Vice President of Marketing at numerous companies including Grand Openings, Norwood Promotional Products, and Kohler Corp. Today, Chris is the President of Sterling Home Technologies, a custom home integration company. He also serves on the board of 2 high-growth companies as well as several charities.
Interview Recap
- How the Texas market has grown and developed over the years
- The rise and fall of Eastman Kodak Company
- The challenges growing a business in the custom integration industry
- The latest supply chain issues related to Covid Delta outbreaks in China
- Pulling out of CEDIA and the likelihood of other fall events potentially canceling
SEE ALSO: Home Automation Podcast Episode #182 A Custom Integration Industry Q&A With Marc Ayoub
Transcript
Ron: Hello, Ron Callis here with another episode of Automation Unplugged. Today is Wednesday, August 18th. It is a couple of minutes after 12:30. The topic of the moment is CEDIA is slated to occur here at the end of the month and the first week of September. I will be talking to our guest about this because I want to get Chris's input. But there's a steady stream of manufacturers pulling out of the show for safety reasons due to the Delta virus. We here at One Firefly, big fans of that show. I said this until last year; I'd been to every show since 2000. Here we are, sadly, with no show, no live show. Last year they did a virtual, and then this year, we were all in and everyone in the industry was full steam ahead. All systems go rockets on the launch pad, and the countdown had begun. Then here you have it, lots and lots of big brands pulling out. And I don't know what the success of that show is going to be at this point. I'm curious if anyone watching is planning to. As of right now, today is Wednesday, August 18th. We are planning to actually go to the show.
I'd love to know if you plan to go to the show that some people are already tuning in. Chris gives us a comment. "Great content, dude." Thank you, Chris. Greatly appreciated. And Tomas from Panama, our regular listener, a regular watcher. Thank you, Thomas, for tuning in. Anyway, just curious, I dropped that into the feed. I'm actually going to give me one of the first things I talked to Chris about because, frankly, I just want to know. Chris is a member of Pro Source, and he just came back from the conference in Texas. And I want to see what the buzz on the word on the street was from that event. Today we have Chris Edelen. He's the President of Sterling Home Technologies, and I've known Chris, I want to say, since his first moments in this industry. Before he found our industry, Chris has had fascinating many decades of experience out in the real world, in the business world. We're going to talk to him about what he thinks of our industry and what it is like running a business in our industry. He was out there in Fortune 500 companies for years. He brings a lot of that toolkit and that success and experience. He's brought it to our little piece of the world, which is here in the custom electronics space. So without further ado, let's bring in Chris. Chris, how are you, sir?
Chris: I'm great, Ron. Good morning. I guess it's still morning here in Texas, and thanks for having me on. It's a real pleasure and a real privilege to join you this morning.
Ron: No, it's my pleasure, Chris. You're one of those guys that whenever I want to ask you a business question or what should I do in this situation, or how should I think about the situation? You always have, frankly, a valuable perspective for me personally. I'm now honored to share you with the rest of our audience and let them meet you and kind of learn about your background. Again, thanks for coming to the show. Glad to be here. Let's start with what is Sterling Home Technologies? Where do you guys operate, and what's your role within the company?
Chris: Sure. So Sterling Home Technologies, we're starting our 17th year. We're based in Bernie, Texas, which is a suburb of San Antonio. We cover basically the greater San Antonio area. We have a hill country office, which we refer to as the Texas Hill Country up in the Highland Lakes area. We just opened that office last fall, not even a year ago, to cover the area of Marble Falls, Fredricksburg, all of the Highland Lakes as we've all experienced covid in the last year and a half or so, that area here has boomed as people have tried to get out of Houston, Austin, San Antonio and get more rural. We're basically greater. San Antonio within 100 miles is where we go. We've tried to stay out of Austin for many years just because of the traffic, but we have builders pulling us in there as well. So we're doing a little bit more business than we ever have in Austin.
Chris: Well, there's obviously lots of buzz about Austin, and Tesla has moved into Austin. I'm not dissing San Antonio. What's the buzz going on in Austin from your perspective?
Ron: We at One Firefly actually have one of our largest concentrations of staff is in Austin. It's a great town.
Chris: Well, it's a great city. Both of our boys live in Austin. They're in their early to mid-20s, and they love the city. It's high-tech. When things started diversifying outside of Silicon Valley, they started moving to Austin about twenty-two years ago or so. There's a lot of technology there. Apple has its second headquarters there. It's a billion-dollar building they built that started a couple of years ago. I think it's just recently opened, maybe not even totally open Tesla. I drove by it the other day, a massive factory they're building for their new gigatruck, I think they call it. It's as we were driving down the highway. I was saying to my wife, what the heck is that down there? It's a massive facility. A lot is going on there.
There's a lot of companies moving out of California to Austin, San Antonio and Houston. Quite frankly, the cost of living is great. Until this year, the last several years have been ranked number one place to do business, state for business on CNN. Just a lot going on there. There's a huge high-tech concentration of people in Austin. Quite frankly, it's a much younger city, and there's more money in Austin than there is in San Antonio. In a significant way. It's about 30 percent smaller than San Antonio but has a significantly younger population, more technology-driven.
Ron: I'm assuming. Is it a fair assumption that to be a CI business in that San Antonio, Bernie Austin Frederiksberg market, I mean, is business good?
Chris: Yeah, business is great. We've had our best year ever—the last 12 months or so. We've seen some things slow down a bit, but still very strong this year, year to date. So I'm pretty confident that we're going to have our best year ever this year when the bottom falls out for some reason. But we've had a very strong start to the year, and the growth in the Hill country market is especially exciting for us. But San Antonio is on fire. Austin's on fire. All of Texas really is is on fire.
Ron: We have a global audience here tuning in or listening to the podcast. Do you want those people to stay away, or are you welcoming them? What's the message here?
Chris: I grew up in San Antonio. I was born overseas, but it's just growing like crazy from a traffic standpoint. We want people to stay away. Austin's traffic is really crazy. It's like San Francisco. But, Texas is luring companies left and right from all over the country and worldwide. San Antonio just had a big European company announced their U.S. headquarters would be in San Antonio. Navistar is building its smart truck factory in San Antonio. That's underway. Toyota's based here with a big manufacturing facility there. Their U.S. headquarters is in Dallas. Texas is really on a roll. Economy-wise, I say bring it on. Bring it on.
Ron: Alright, Chris, I got so many things I want to go through, talk to you about with our audience, but I always enjoy going into the past. Let's go to the way, way back machine and tell us about some of the highlights from your background that ultimately brought you forward. You joined this industry about six years ago. Right. Tell us about the career you had before that.
Chris: I'll actually start. I was born overseas. My dad was a World War Two fighter pilot. I'm really proud of that. So I kind of grew up in the military, one of 10 kids. We joked that we grew up in Edlands Military Academy because that's kind of the way it was in my family, but it was a great upbringing. I graduated from St. Mary's University here in San Antonio and went into the management training program at Fox Photo, which was we were in about twenty-six states. I had a job offer, interestingly enough, from Allstate Insurance back in 1981 when I graduated from college, and they offered me $22,000 a year in their management training program. I took a job with Fox at $11,900 a year. I think my parents thought I was crazy. Why had they sent me to college when I made that decision?
But what was attractive about it is Fox was a bunch of young, aggressive people who would make a difference. We had a great aggressive CEO. We were trying new things. We were building new businesses. And you were promoted and moved up based on your performance, not how long you were with the company Allstate. Very, very different. You were reviewed every eighteen months. At that time, there was a very strict path that you were on. I always felt from a really young age that I wanted to be judged based on my performance.
I joined Fox Great decision really started at the bottom. I was supposed to start in the corporate office. They moved me to Colorado because somebody quit the week before I started, and I loved it. I spent a couple of years in Denver, got promoted to Houston, went to Hawaii as we started buying stores. Our chairman was big on Hawaii.
Ron: Let's remind our audience what Fox was because this is not Fox News. This is not the Fox on TV.
Chris: Not at all.
Ron: And many of our younger listeners are not going even to know what you're talking about. It was a Fortune 500 company. It was a publicly-traded company.
Chris: We were, so Fox was in the days before the smartphone, and we took our pictures on our smartphone and before digital photography. Silverlight photographer, you take your pictures. Thirty-five millimeter one ten one twenty-six. You'd go on vacation, and you would drop those off at the drugstore, the grocery store. We had a standalone little kiosk on the street corner. We had 1200 of them across the country. We had huge regional facilities that did all the grocery and drugstore business across the country. We had a mail-order business, and we were also the single largest owner of Hallmark stores globally at that time. I spent a lot of time and managed Hallmark stores as well. That was a really interesting business. Fox's trajectory when I started digital didn't even exist. I'm sure somebody was thinking about it somewhere, but 99.999% of the rest of us were not.
At the time, Kodak ended up buying our company. We were in New York Stock Exchange company Kodak, the second best-known brand in the world, year in and year out, and they don't exist today. We can talk more about that later if you'd like, but we grew the business really aggressively as a company. I was part of six different sales. The company sold six different times. I was part of it when we took a private in a management buyout. Part of it is going public as part of it being sold to a strategic acquirer out of St. Louis myself. I was the COO when I left my boss, the President, the CFO put in an offer to buy the business Kodak Press. At that time, we were a wholly-owned subsidiary of Eastman Kodak, and fortunately, we weren't successful. We knew digital was coming. We were doing all the digital testing for Kodak.
Ron: Didn't Kodak invent digital?
Chris: They did. They actually have the patent in it. They absolutely did. Kodak spent about two billion dollars in 1995 and built digital labs worldwide, including in China. The last investor call that I was part of with Wall Street Kodak took an 800 million dollar write-down for the quarter, and it was the third quarter in a row that I wrote down assets related to digital because they were too early in the process that they introduced that we had all these cameras and they spent billions. The consumer was not ready for digital, at least digital the way they envisioned it. We were already producing digital images for customers. When they brought a roll of film, we put it on a digital disk and gave it back to them as well. We were doing all the testing, and it was really fascinating. We had digital imaging centers across the country where we were converting documents digitally and really at the forefront of the digital, I guess, revolution or whatever you want to call it.
But they were very, very early on. The company was valued at 24 billion dollars. The day I walked out the door today, that would be about 75 billion. And they don't exist today. They're bankrupt, really just lost their track and lost. They got gunshy when they made that massive investment in digital. Wall Street is not very forgiving. Fortunately, I had left the company. I went on to do a technology startup in Austin. It was the guys that were working for me who are now running TripAdvisor and Travelocity. And I still remember sitting in strategy meetings and these guys trying to help me understand that the future is in having your customers or people associated with you put the information on the website and that it was much more believable. Quite frankly, I was really slow to get that these guys were not. They were really on target. That was a really interesting business. Then I took over a struggling company on the verge of bankruptcy back here in San Antonio. Got that.
It was losing 2.1 million a year got that profitable in eight months. The investors sold it. I went on to the world's largest promotional products supplier, Norwood, and we were about half a billion in revenue. I was a Division President running seven of our companies there. I moved to Indianapolis, and then our youngest son got sick, and we had to move back to San Antonio. And I took a job with a small family-owned business. When I say small, it was 20 million in revenue, small for me, and I was really blessed to have a great team. We took that to just under 80 million, 79 million and three and a half years.
Ron: What type of business was that?
Chris: That business was in the home improvement business. We had 14 offices around the country and grew it. We started selling through Costco. We started expanding our product lines and just a great, great team of people. We had a lot of fun, really, really grew that business. And I left there after nine years and wanted to buy my own business or retire. Colar Corp. up in Wisconsin called me and asked me to join them and moved to Wisconsin. My wife, being a Texan, said, you know, if you want to go, I won't change the locks on the doors, but I'm not going with you. So I ended up consulting and commuting once or twice a month for a week, each time to Wisconsin. I absolutely loved it, did that for four and a half years, built them two business units that are now doing 100 plus million each. That's when I got a call from Todd Jarvis, who founded Sterling. I was literally sitting in Colas corporate office working on a strategic plan for a new business. He said, "You want to have lunch?" And I said, "Sure." He said, "How about this afternoon?" I said, "Well, if you've got a jet you want to fly to Wisconsin, I'd be happy to do that anyway."
Ron: How did he know you? How did he know that you existed?
Chris: A mutual friend. I was also kind of another side gig. I was interim CEO of a Renewably Anderson franchise, and the owner of that and Todd were friends. We would have some strategy lunches that I was helping. Just flesh out some things for both of them and a couple of other mutual friends. But Todd and I met for six months. I really fell in love with the industry, and he asked me to join. And today, I'm the 51 percent owner—Todd's very involved 39%. We have one other partner who owns 10 percent of the business. He's not involved in the business. Well, he comes we meet every two weeks for a couple of hours with him. He was a managing partner for Deloitte for their small and medium-sized businesses worldwide. He brings a great perspective to us. Todd's wife, Cheryl, is still our CFO. So we've got a great team. We've got a management team that we have here as well.
Ron: But it sounds like this management team could be running a Fortune 500 company, much less an integration firm in San Antonio.
Chris: Well, Todd came out of Honeywell and IBB and the big Fortune 50 companies like myself. He got tired of flying around the world every week, literally. He got into this business because he built a custom home, and the automation was really haphazard. He said there's got to be a better way. He was doing it for massive. He was selling 50, 100, 200 million dollar industrial automation packages to refineries or massive factories. He was familiar with the big industrial side of the business. He's an electrical engineer. Todd's role is really the operations side of the business. And I really tried to focus most of my time and energy on sales and marketing. But I run the company day today. But we're a team. His strengths are my weaknesses and vice versa.
Ron: What is it like? I'm going to give you the layup obvious question. What is it like running a smaller, I don't know, the exact size of Sterling, so I'll just say some ten million dollar a year integration firm compared to these 50-100 million-plus enterprises that you were running previously.
Chris: It's really interesting. I love it. When I first got here, I had more, I hate to say it, but I had more Vice Presidents and Senior Vice Presidents than we have total employees working for me. It was a big adjustment. It was a really big adjustment. But it's you can really make a difference. We try to run our company. It really was strong Christian principles. We try to make a difference in our employees' lives and our customers' lives and not just run a business for profit. I'm really different from most of the people who will hear this podcast and most people in the industry because I didn't grow up in this industry. I can be from outside. And I will tell you. I've said this internally many times. This is the hardest industry I've ever had to grow topline revenue. That's the truth. It is more challenging than any other industry I've ever been in.
Ron: Well, let's jump on that. What are some of the characteristics of this industry from your perspective that make it challenging to grow?
"We think we're the best value in the market. We're not the cheapest by any stretch. But it's all about relationships in this industry."
Chris: There are two sides to this coin, but obviously, as a subcontractor to most of our builders, they view subcontractors very differently than I would view a partner. Not all of them. Some of them were really partners. We do 100 percent of their business, and we've got a great relationship, and we watch out for each other. But some of them just use us. It's a race to the bottom. Who's the cheapest. We don't like to play in that sandbox. We do. And we need to. We think we're the best value in the market. We're not the cheapest by any stretch. But it's all about relationships in this industry. You're not in most of the other businesses that I've run, you could advertise the product, whether you're advertising it to distributors or the end-users, and you can drive value. Fox Photo and Eastman Kodak, you couldn't buy film photofinishing or film processing more expensively than us.
I've always been really in businesses that are high touch and high customer service. That's this business today, which is what I like about it. But there are so many guys working out of their garage and out of their truck. When I got here, we had a handful of competitors. No, we don't. We've got a lot of competitors. Most of them we never see or hear about. I bet you hundreds that you don't know that is even there. Absolutely. There you just go to the distributors and sit in the parking lot and watch these guys come in and out all day by and product, and you'll see who your competitors are.
Ron: I remember someone. Texas is a great state for our industry, and it's a great state for One Firefly. We have a lot of customers throughout Texas. And I remember I was talking to somebody in Dallas, and they were considering working with One Firefly, and they were saying, but you work with other people. I was like, and at that time, I gave it no. I said, yeah, we work with about this many people. He said, yeah, you work with everybody. Do you know how many people are in Dallas calling themselves an integrator? And I actually know because I had some intel from one of the distributors in Dallas, which is a few years ago. Still, they were doing business with over a thousand companies buying CI Channel gear from them for local Dallas Fort Worth jobs.
Chris: Yeah, we actually did a battle plan here, which kind of came out of another industry. We've got somewhere between 300-350 of those guys just in San Antonio. Dallas is probably two to three times bigger, Dallas, Fort Worth and San Antonio. So is Houston. That doesn't surprise me at all.
Ron: In that competitive landscape, you really have to find a way to be different. And I'm assuming that's a part of your strategy. For those listening, your peers around the country and every major market in the world have integrators, and that is your small towns, your big towns. I've learned there are wealthy customers everywhere. Right. There is no bias on where they live. There just might be more concentrations. But there are wealthy people everywhere, and wealthy people are the top 1-3% percent of the marketplace that are at least more likely to have an integrator in their lives, which is the industry we serve.
How do you think about just curious, differentiating yourself? You mentioned customer service and that you enjoy customer service. Is that an area where you guys try to be different? How does the customer know to hire you and not that one-person operation offering operating out of his home garage?
"For the most part, we're all selling the same products. What's going to differentiate us is our relationship with you. When you call, we're going to pick up the phone, OK? If it's on a Saturday, if it's on a Sunday, Friday night, we're going to pick up the phone, and we're going to support you."
Chris: Great question, Ron. I tell builders all the time, for the most part, we all sell the same stuff. OK, we have a few products exclusively or that the small guys can't get. But for the most part, we're all selling the same products. What's going to differentiate us is our relationship with you. When you call, we're going to pick up the phone, OK? If it's on a Saturday, if it's on a Sunday, Friday night, we're going to pick up the phone, and we're going to support you. The second thing is that we offer a service available to everybody else in the industry or most people in the industry where we have 27/365 customer service coverage.
That phone will always be answered that email that text message doesn't matter if it's in the middle of the night, and that's a real differentiator in our clients are the upper end of the spectrum from an income level. And that's what they expect. We're not doing in homes. We're doing custom homes like the majority of our counterparts across the country. Those clients have the means and the ability. That's the kind of service that they expect. We offer that. We think with that quality and that service and the technicians that are on call. We've got the best value in the marketplace. We're not for everybody, obviously, but Todd and Carol built a great business here. We've essentially doubled it since I've been here. But you're grinding it out every day. But it's been great. As I said earlier, it's been a great year, year and a half or so. Who knows how long it will last. But we're taking advantage of it while we can. I want to go through a couple of just hot very now issues. And then I want to circle back actually to Kodak because I know you you teach at university level classes sometimes. Right. And you'll talk about Kodak in those classes. I do, yep. We can touch on that, if you'd like, later on.
"The demand for our services is so high, but we have a people shortage."
Ron: Yeah. I just have a couple of questions there, but bring it to the present and some of the challenges our industry faces right now. First is workforce, workforce, people, power, woman power, just people resources are of finite supply. I'm hearing that there are people that are saying I can't do anymore. The demand for our services is so high, but we have a people shortage. What are you finding in your market, and do you have any do you are experiencing that or do you have any ways that you are approaching that that might be helpful to others?
Chris: Yeah. A year ago, we had the same issue that everybody else was facing, but we had this business bubble. We were doing an MDU project downtown, really the first luxury MDU in San Antonio. We were doing the top two floors, all the penthouses and all the large units. We knew this bubble was coming off a significant business that we had to hire up, and we did. Before that, we were really struggling, and we just put a real focus on it. Our H.R. person was very aggressive. We worked with a couple of recruiters, both from the industry and outside the industry, and we were able to hire four or five people about a year ago, last late summer and fall. I think that there was some commercial fallout on the commercial side of the business. Some technicians were looking. We were lucky in that regard. We were able to staff up. I will tell you. We currently have a job as a Customer Service Coordinator that we have posted on Indeed. I've been shocked.
We have over in less than a week over 120 applicants for that position. And I don't know what's changed. Texas cut off the additional unemployment support about six, seven weeks ago, I believe now. I don't know if that's part of it. I really don't know. But we've never had the kind of response that we've gotten.
Ron: Can you give us a comparison before that? There's an interesting correlation that does not equal causation, but there's an interesting correlation. The state turning off that funding, and now you have a spike in applicants. What would it have been before that?
Chris: I'd say 20 or 30. Yeah, we're just shocked. As a matter of fact, there was a Slack message this morning internally, and somebody counted them up. There were over one hundred and twenty. We think it's great because we've got some great candidates, and we also changed up our job posting made it a much hipper I guess we use the third party to write it up. So that's probably part of it, probably a lot of things. But we're really excited that we've got some great candidates that we can look at for this position.
Ron: Tell us about this third party. What can you do either name them or name the type of entity? Again, I know so many people in our industry are hurting around this people issue. And if you have any tips or tricks, that sounds like a trick. There so is there anything you're willing to share?
Chris: Yeah, I'll share it. I don't know if they're ready for me to share it, but because I think we're a little bit of a pilot project, but we're part of One Vision, and One Vision is creating a new resource for their clients, which we're their client, where they're going to do the screening and do the promoting of the position and help us hire. They wrote the position. We gave them all the key data they wrote, and they used to remember this young girl. She's probably in her 30s, but they follow her suggestions on writing position descriptions and job descriptions.
Ron: They're following some methodology. They're not just pulling it out of there. They're following a method. Because you're a One Vision customer, that's a part of the service bundle that you're getting from them or working with you.
Chris: That's right. They've got two parts to it. I don't know if it's totally finalized, but we're a beta program for them on this. I don't know if they're ready to roll it out. I think they are very close. But so far very pleased with what's happened. The whole interaction with them so far on this project has been great.
Ron: Now, that's awesome. Alright. The next subject is, and Joey and his team at One Vision got a nice shout-out there, and we'll make sure we tag him after the show. The next subject is shortages of chips. I want to say I was just this morning on Twitter watching a feed coming out of China that I guess there are covid Delta outbreaks at some of the ports in China. And it's going to further back. There's a port. I guess the largest port in the world has now been backed up for a week, fully closed. And that is supposedly not even hit the U.S. market yet. So in terms of the impact, I don't know your thoughts on your manufacturers and their ability to get you gear and what you guys are doing about it.
Chris: Yeah, so I actually pay close attention. In one of my prior companies, I spent a lot of time in China, so I know the country fairly well. Our youngest son was working over there til covid broke out in Shenzhen. It's actually the port is Ningbo, and it's actually the third-largest in China. What it's done is it's backed up Shanghai and Shenzhen, which are the two largest ports in China, just dramatically. They've been closed for about ten days. Everything I've been reading, there's also, you know, there was a lot of flooding about a week or two before that in China. A lot of the copper products and chips that have copper in them are coming out of that region of China. So I think that everything I read, I think there's more to come there. We've done what we've done at Sterling, and as you mentioned earlier, we were just at the Pro Source conference two weeks ago. And a lot of people, I'd say the majority of the integrators, they're doing exactly what we've done. And we used to really be a Just-In-Time shop.
A week or two before that job was ready to go, we would get the product started coming in, and we'd stage it. Now, when we get an order, we pretty much order it immediately. And our inventory went from just in time of about 160,000 to close to a million. We've avoided a fair amount of that. We still have the same struggles. But some of the things we've also ordered, some of the Sotos product, and some of the things we've ordered back stock that we don't stock that stuff typically. So we're still having the same challenges everybody else has. I think that it's anybody's guess. Is this going to get worse? How long is it going to go? I will tell you. China doesn't play games. Much easier than the US, they can shut a city, a factory, a port town in a heartbeat. And I think they're proving that they're going to continue to do that. What I read this morning is that its day by day. And I also read this morning that it's not the whole Port of Ningbo. It's a third of it. It's hard to know exactly what's coming out of China. But I think before all of this, what I had heard is the chip shortage should be resolved for the most part by the spring of next year. But we're still going to deal with it.
As a matter of manufacturing capacity, because they're rebuilding that massive factory in Taiwan and so we should be coming out of it in the Spring, whether that's true or not remains to be seen. So we're going to continue to do what we've been doing, and that is order the product as soon as we get that deposit check from the client.
Ron: Is it a fair statement in your observation that there might be more pain in front of us as it relates to shortages of gear?
Chris: I don't think there's any question. The question is the degree is it going to go along where it's been going along, or is it going to spike up for a month or two because of this port and the flooding damage? I don't know the answer to that.
Ron: OK, and your recommendation, or at least the strategy you're practicing, is that as soon as you book the job, you order all the gear.
Chris: That's right. And quite frankly, if you've got a client who is trying to make a decision, that helps motivate the client. We want to have your house ready when you move in. So the sooner you write that check and accept this proposal, the sooner we're putting it on order.
Ron: That's another silver lining, is it not? They see it every day in the news, cars, appliances, furniture. They know it's real. They know it's not made up. They accept it, and they buy into it.OK, alright, next third hot topic, I told you had a bunch of a couple of hot topics lined up. You were at the Pro Source event two weeks ago. I watched it on social media. I don't think I saw one person wearing a mask. Here we are now. It's Wednesday, August 18th, and it's breaking news nonstop for the past week, manufacturer after manufacturer pulling out of CEDIA over a delta. What is your opinion of let's just talk CEDIA first and then the rest of the events for the fall? Will you guys go to CEDIA? And if so, why or why not?
Chris: Well, real quick, just because I was at the Pro Source event, there were some masks there. There wasn't a lot, but there were some.
Ron: There were some. Just saying what I saw on social media with the rest of us voyeurs. We're only watching Instagram and Linked In, and Facebook. But no, I trust there would be some.
Chris: But the topic of conversation at the happy hours and lunches really did you think is going actually to happen? Are you going and most people, this was two weeks ago. We're taking a wait-and-see. We were actually in that camp very quickly thereafter. We decided we're not going to send anyone. We started getting some of the major manufacturers kind of whispering in our ear that they were not going to be going. So we canceled our hotel rooms, and we are not sending anyone to CEDIA. That's a decision that we feel good about. We've got three of our technicians out with covid. As I sit here today, we had a fourth, but he came back. He recovered. Greg did his fourteen days of isolation, and he started back yesterday. We want to do the right thing for everybody in the company.
Quite frankly, honestly, with the Delta variant, I didn't want to go in a hole with three, four or five thousand other people and not knowing who has the vaccine, who doesn't. So we're going to look at shows and events for the rest of the year. I'm hopeful that the Delta variant actually driving in this morning. I was listening to CNBC, and the former CDC director said he thinks this will be a huge shock, but it's going to be really short-lived. If that's the case, we'll look at things on a case-by-case basis and see where we go. We have reinstituted our mask policy for our technicians going to a house any time our salespeople go to a house. We haven't gone back to the strict measures where we took the temperature of everybody coming in every day. You had to wear a mask full time in the office. If you're vaccinated in our office, you don't have to wear a mask. But we have we when we're dealing with clients, we've gone back more cautious.
Ron: Do you have a prediction? And I'll say it'll be worth five dollars or a cup of coffee, but do you have a prediction from these from the CEDIA show? I'm going to say I don't want to insult anyone, but many of the big, big names have pulled out. But yet the show and I would imagine Emerald does not have a financial obligation to cancel the show. In fact, I don't even know if they can afford to cancel the show. But do you have a prediction on whether the show will go on or not?
Chris: My gut is just from a pure business standpoint that unless the city puts a lockdown or says no more meetings or that type of thing, the show will happen in some form because financially, Emerald, if they cancel the show, I think they've got to start giving refunds to all of the manufacturers who reserve space and put money down. I don't know what your contracts or manufacturers' contracts are if they don't cancel them. My guess is they probably don't have to do that. So I think the show's going to happen in some form or fashion. I only know of one significant manufacturer who has said, come hell or high water, they're going. I've probably seen 20 to 25 of the bigger names who have canceled, including several today. I've talked to fellow integrators around the country who, a week ago, were attending, and today they're not.
Ron: Today, they're not.
Chris: I talked to a guy last night on my way home, canceled eight hotel rooms yesterday.
Ron: For those watching live and or our podcast listeners, today's August 18th. And this morning, news broke. Lutron pulled out, Crestron pulled out, and Sonance pulled out. That's only to add to the list of all the vendors that had pulled out of the previous week or so. It is definitely an interesting time in your business career, Chris. Have you ever seen anything like this? Is there any precedent, or maybe even in your research? You sound like a well-read man. Is there anything you can compare this to?
Chris: No, not at all. I have read about the pandemic early in the century and am trying to figure out what happens to this thing, and it kind of just disappeared. I don't know that that's what's going to happen here. Everything I read is we're going to have to live with this like the flu going forward. But I've never seen anything like this, and I hope I never see anything like it again in my life.
Ron: Well, amen from your mouth to God's ears. Let's make that happen. Alright. So take me back in time here. I want to jump to Kodak. And I just want to pull this thread that they were one of the largest companies, most well-known brands globally, 20 years. Is it 30? We'd call it 30 years ago. Today they're gone. They invented digital and today digital. I mean, people buy the new iPhone because of the digital camera. That's why people move into that when my son or wife lobbying me for the next phone. It's because it has this many more pixels, or it's better at taking pictures at night. What's your perspective? What was a takeaway there from you? Because you were out. When that, I'd say when the downfall began. You have this interesting, you were inside, then you were on the outside, and you watched it implode.
Chris: Yeah, I think several things happened, and I watched them unfold. We were a wholly-owned subsidiary of Eastman Kodak. We saw both from the inside and the outside. Kodak was so profitable for so many years on a roll of 35-millimeter film. They were printing money. They were, you know, you'd go to the grocery store drugstore, and you'd buy it for, you know, two dollars and fifty cents back then. It probably cost them a quarter to make OK at the most. OK, it was a cash cow. There's a lot of businesses like that today. And so Kodak started seeing this cash cow maybe was going to go away because digital was out there. It wasn't really in the industry, but digital was out there. The one-hour photo labs had come along, and there was a lot of technology from the camera manufacturers, the Nikons and the Canons, who had nothing to do with Silverlight photography, development, per say. Kodak said rightfully so. We need to be at the forefront of this. There were a lot of mistakes made in the rollout of that technology. They got timid, and they didn't really, in my mind, have a coherent strategy. Then they got scared, OK, because it failed. We were all part of that. We thought the timing was right. We were doing all of the testings, and the customers loved getting both the digital and the traditional. None of us knew that the customer wasn't ready to make that drop off the cliff and go totally digital. That was the case. And that's OK.
For a company that size to write off eight hundred million dollars in a quarter. But they got scared because Wall Street is really unforgiving, and it just cratered their stock. For all of the senior-level guys at the corporate level, a huge amount of their compensation was stock-based. So they started making decisions based on propping up the stock, in my opinion, and stock buybacks, things like that, buybacks and just making decisions on the product to keep the cash cow going and not actually not really saying, OK, we were too early here. We've got these patents, and they started selling off patents. I don't remember a quarter for a year after that that they didn't have a reorganization and take charge of a quarter of a billion dollars or so, and a company like that. That's a lot of money. But you can still get over that. There was a lot of that going on. But I think the biggest thing was, and you hear it so much in Wall Street there, we're looking at the next quarter. I can say this today, but there were times at the end of a quarter where we would get a call from the factory. They would send out 18 wheeler tractor-trailer loads of film and paper, and they would sit in our parking lot until the first of the next quarter so they could say it was sold and show the profit, and we would turn we'd send them back the first day of the next quarter.
Ron: It almost sounds like stock manipulation.
Chris: No. And let me tell you, you'd be shocked at what companies do. I don't think it was illegal, but it was all designed about the quarterly earnings. You get the quarterly earnings announced, and now you're worried about the current quarter or so. They didn't take the long-term view. And I think that's really what happened there. They replaced the CEO about every six months because they couldn't get a strategy that was working.
Ron: Alright, so let's bring it to the present. I know that you have been. I'm going to use the word you've been a disciple of Paul and Steve over at Vital, and you've been following or utilizing their business metrics, tools Bi4Ci. Why did you initially investigate that? And I know you were early pre-Bravas. How has it helped you with your business today, and then are you still using it?
Chris: We are absolutely still using it. We look at those metrics every month. And what drove me to that is I'm always a benchmarking and best practices person. Whatever industry I've been in, I look at who's performing the best. When I came into this industry, you know, everybody probably listening. Most people in the industry know what good looks like, OK? Or at least they think they know what good looks like. I didn't know what good looks like. We were profitable, but I didn't know if our numbers were good, bad or indifferent. And so I needed something. There's not any group within the industry, or at least that I was aware of, where you could share that data and where it was apples to apples. And one of the things Paul and Steve did, and for a lot of us, including us, it was like pulling teeth to get your chart of accounts. So everybody's counting the numbers the same way.
But every month, I can look and even if I think I had a great month or a bad month, and I can look in really six core metrics, and I can see how I perform against about 40 other companies. Now, I don't know who those companies are, but I know they're all within similar ranges of volume and revenue that I produce. So I can check and say we're sixth best out of forty here, but maybe we're twenty-third in this category. Then I sit down with my team every month, and we go through those numbers and quite frankly before we head that they really, they thought they were doing pretty good, and they were, but there was so much more upside. It's really benefited us from what I call best practices and benchmarking. I can look out and say this gross profit or this net profit or this efficiency with our technicians and benchmark what we're doing against 40 other companies around the country, measuring it the same way. Because, quite frankly, when I go to Pro Source, or I go to CEDIA and talk to the other guys at lunch or dinner over drinks, and somebody says, "Well, my gross profit or my labor is you know, we're all measuring it differently." There's no standard in the industry, and they're still aren't. But, at least for the companies in it, Vital has put together a standard that we can benchmark ourselves against each other.
Ron: Why do you think so few in our industry have adopted this method of benchmarking data and joining the Bi4Ci Club?
Chris: Well, first off, as I said, you've got to change really how you report. You've got to change your chart of accounts. You've got to change how you recognize revenue in most cases. I mean, there might be an occasional company that does it the way already, but it's a lot of work. OK, and quite frankly, we had a lot of pushback internally. Is it worth all the effort and energy that you have to put into it? And I would say the answer is a resounding yes. I think I talked to someone at the Pro Source show, and they were really close. They told me that the reason that they didn't pull the trigger and what and Paul told me early on is exactly what this guy said is it's a lot of work to get on that program. That's what he told me. That's what Paul and Steve shared. I think that's the biggest reason. Fortunately for us, Carol, our CFO, came out of corporate America as well. She's really great at numbers. We have great financials, and she adopted it and has championed it all the way through as well.
"In the last six years, we solely focused on marketing is the idea of comparing our benchmarks to other marketing agencies and North America. I was missing the ability to do that, and when we brought in this consultant, he said, I can help you do that, but you have to change everything."
Ron: I'll speak from the first-person experience. One Firefly recently hired a consultant, a management consultant and this management consultant helping us in multiple business areas. One of those elements that I've been missing in the 14 years of this business. But really, in the last six years, we solely focused on marketing is the idea of comparing our benchmarks to other marketing agencies and North America. I was missing the ability to do that, and when we brought in this consultant, he said, I can help you do that, but you have to change everything. So it is Taylor, our VP of Operations and Finance, and I are sitting on about six months of change that has to happen behind the scenes between our finances and our CPA. But on the other side of that work, we're going to be able to compare our performance across all of these important KPIs to the rest of the world of marketing agencies.
Chris: I'll add, Ron, that for some people, there's not the need or the value to do what I needed because they've grown up in this business and they know as long as they have a financially healthy company or in their mind, financially healthy and they can make payroll, and they've got, you know, a cushion of cash or whatever, then they're comfortable with that. I can tell you have bought and sold over 30 businesses or companies and been directly involved a lot of times. We bought a company here, a small company, and the guy thought he was profitable. And we sat down with him and showed him on a piece of paper he was not profitable. It's really valuable if you really want to know. But I think most people are comfortable with where they are, and they say ignorance is bliss. They didn't have the need that I had to do that.
Ron: Could you imagine yourself running and growing and improving Sterling without that data?
Chris: I really couldn't. And it's not a secret. But one of the things, when I finalize the agreement, is to buy 51 percent of the company. As I said, I'm happy to do this. I want to do it. But I'm going to do it only if we agree as a company to go on Vital. It was so important that I felt that I might not be here today, honestly, just because I need that, because that's how I grew up, and that's how I was trained to manage a business. I think it's indispensable for me, but for others, maybe not so much.
Ron: Well, guess what, Chris, you have the one and only Mr. Paul Starkey right here tuned in, and he goes, "Thanks, Chris, for totally getting." And I did not know Paul was going to tune in and watch this show. So that's great, Paul, that you're tuned in. Do you know what I'm going to do? I'm going to give Paul a shout-out because sitting right over here. I have Paul's new book Hitting For the Cycle. I was fortunate enough to get an early draft from Paul. And no, I will not send this to anyone. You got to buy the book. But I was able to review it for Paul, and I was honored. He asked me to give a testimonial or quote for the back of the book. And Paul really and the team at Vital really have a formula for success for this industry.
To have someone like you, Chris, advocate that and validate that puts further wind in the sail that there is a better way, a more profitable way to run an integration business. I mean, you can be busy and not necessarily be productive or profitable. You've clearly understood that. So, Chris, I want to thank you, sir, for coming on show 183. It has been a pleasure having you on the show. If folks want to learn more about you or follow you or get in touch, what would be the recommended ways to have people reach you?
Chris: Well, you can reach out on LinkedIn, reach out on Facebook, or you can. My email is
Ron: Amen, I see my team has dropped down into the show notes. Chris's email will also put the website at sterlinghometech.com if you check out their business site. This will go into the podcast. I'm going to give this audio. Paul is making sure I shout out that all proceeds from the purchase of the book are hitting for the cycle. All proceeds are going to charity. Paul is running really a fantastic charity. He is helping people in need, and he's doing amazing things over there. We'll put links down to the charity in the show notes as well. Chris, thanks for coming to the show.
Chris: Ron, I appreciate it. It's been a pleasure. I look forward to talking to you soon. Take care.
Ron: Thanks, buddy. Alright, folks, there you have it, the one and only Chris Edelen from president at Sterling Home Technologies. He joined us here for show 183. Chris is really a force of nature, and he's one of the good guys out there running a great business. I know a lot of people. He sits on various committees and boards around our industry, and people look to him for advice, and that is yourself included, or myself included. So definitely appreciate him coming on the show. And then Paul is here in the notes, and he did drop that. The charity is the website URL that is receiving the proceeds of the book. Hitting For the Cycle is bblfund.org. Definitely check that out. Regardless of whether you buy the book, donate to Paul's charity is helping women that have been harmed or in some way involved in sex trafficking, the dirty underbelly of the world and sex trafficking.
They're building homes for women that are coming out of that world and helping them transition back into a safer, normal life. BBL stands for building better lives, and I know that it is near and dear to Paul and his wife Jerry and their hearts and church there in Southern California. They're really doing amazing things. Paul will have to drop in the notes where they can buy the book and all of those details. But on that note, everybody, if you have not subscribed to the podcast, definitely do. Go to your app and just type in Automation Unplugged. I think they actually changed at least one Apple Apple podcast. It's now called a follow. You follow the show. They just change that up. I just want to say in the last month or so, so definitely tune in there. Here is our website, onefirefly.com. You can also give us a call. Again, thanks for tuning in, and I will see everyone. I'll see you next week. Thanks.
SHOW NOTES:
Chris is the President of Sterling Home Technologies, a custom home integration company. He also serves on the board of 2 high-growth companies as well as several charities. Chris started his career with Fox Photo, a New York company and advanced to Executive Vice President/COO of company operations with sales of over $250 million a year. Over the years, Chris has taken leadership roles such as President, CEO, and Vice President of Marketing at numerous companies, including Grand Openings, Norwood Promotional Products, and Kohler Corp.
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:
To keep up with Chris, you can email him directly at