“That recurring revenue for us seems to be difficult,” McIntosh acknowledges. “Sure, we get service contracts, but the recurring portion of a monthly fee every month is not happening for us.”
Focusing on ways to find that elusive recurring and service revenue SMG began to think outside the box, McIntosh says. “One of those ways is consulting revenue. We have a really good CAD guy in house. We’re capable of Revit and BIM [Building Information Modeling], which is really important in the architectural phases of the project. We have really good designers. We’ve always been a design-build firm, but nobody saw [us] as a consultant because we had actual installers.”
SMG ultimately decided that in pursuing a straight recurring monthly revenue model, it was like fitting a square peg into a round hole. “Let’s just look at ourselves internally and discover where our strengths are,” McIntosh says. “We had guys that worked for consultants before, and we have marketing people that work with AEC [architectural, engineering and consulting] firms.”
“Buying a TV for $8,000 and selling it for $8,500 i make $500. If i sell $8,000 of consulting, I make about $5,000.” —Bill McIntosh, president.
Once SMG committed to the consulting strategy, it also hired “numerous team members from AV design consultation firms, architecture firms and national construction companies,” McIntosh says.
In July 2014, SMG launched BrightTree Studios, its consulting wing. A big challenge for most new consulting firms is the lack of a portfolio, but McIntosh says that wasn’t a problem. “We didn’t really have to wait for cool projects. We already had that with Synergy Media. We had our design-build projects. Yeah, we didn’t do the bid-management on those portions — they weren’t bid out because they were design-build — but we still did the design on those systems.”
SMG has what amounts to about six full-time employees dedicated to BrightTree. Within a year the consulting wing was in the black and all the investments were covered, according to McIntosh. “It’s just really high margin because it’s all intellectual property. Buying a TV for $8,000 and selling it for $8,500 I make $500. If I sell $8,000 of consulting, I make about $5,000.”
Given that the consulting world is very relationship-based and projects tend to take from six months to three years to come to fruition, according to McIntosh, SMG considers the $1.2 million it expects this year in high-margin revenue from BrightTree to be an enormous success.
Outlier or Outlaw?
There are reasons why specifying consultants don’t also sell and install products. The most obvious one is that for theircustomers to feel confident that the consultant is specifying the ideal equipment for their unique needs, it’s important that they remain brand agnostic and not make money on products.
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McIntosh dismisses that system of checks and balances as a myth. “The truth is consultants don’t make money on equipment, but the companies still come to their offices to provide product education with the hopes of having their products specified into new projects,” he says.
“If manufacturer ABC visits your firm six times a year and manufacturer XYZ visits once a year, you’re more likely to understand ABC’s full offerings so there’s a higher probability of their product being specified due to a comfortability factor. As a consultant, your responsibility is to eliminate any bias and provide the optimal solution to the client, but it would be ignorant to think that manufacturers don’t have some influence on consultants’ decisions due to the psychology of human behavior.”
Myth or not, SMG realizes that even by branding its consultant wing as BrightTree it can’t position itself as independent. “One of the concerns in the industry is that you need to be independent as a consultant,” McIntosh says.
However, SMG has found that independence isn’t a concern among the customers BrightTree has courted. “We found that customers actually like that we have the design or installation group because we can mock things up in our office,” McIntosh says. “We can test new theories. A lot of stuff works well on paper; specifications say things work, but in reality unless you actually tried and tested it out, you’re not 100 percent sure. You’re doing new, leading-edge things and it’s really nice to test things out.”
For example, BrightTree was working on a project with Clemson University that required PCs built into a wall to accommodate an equipment access challenge. “We virtualize PCs and put PCs into the wall, but how do we know this PC isn’t going to burn up over three months in an enclosed wall with insulation?” McIntosh asks. “We mock that up in our office. We just let it run. We built the wall, closed it with the same paneling and let it run for three months. Most consultants wouldn’t do that.”
