Across the river from downtown Kansas City, two former satellite dealers launched a home automation company with the motto, “If you are building a new home without integrated structured wiring, you are building an obsolete home.”
This business philosophy has convinced Kansas City builders, homeowners and developers to recognize the importance of structured wiring, which provides the wiring infrastructure necessary for computer networking, security, home theater and lighting controls.
Six years ago, Pete Stacy and John Kaye founded Millennium Smart Homes and started selling home theater equipment. Two years later, they broke into the home automation industry, right when it began to take off in the Midwest.
“We're the old guys on the block in Kansas City,” Kaye said. “Timing was everything for us. We know of a guy who started a couple years before we did and it didn't work out for him because he was too far ahead of the game. We were in the right place at the right time.”
“Stacy said one thing led to another.
“We looked at what companies were manufacturing products, took some training courses and really just tried to do as much as we could to get into the industry without making too many false starts,” he said.
While the home automation industry is relatively new in Kansas City, Kaye said he and Stacy often meet dealers from the East Coast and West Coast who have been working in the industry for eight or nine years.
“Right here in Kansas City, we are at ground zero when it comes to conservative thinking,” Kaye said. “Things just start out on the East and West Coast and they work their way in a wave.”
Homeowners and builders are now starting to catch on to structured wiring in Kansas City, Kaye said.
“We're a new industry,” Kaye said. “It's a learning process, both for us and the builders. There are growing pains on every front.”
Millennium also outgrew its tiny office in North Kansas City. The partners recently doubled their space by moving to a new brick building complete with a demo room. Kaye and Stacy set up a home theater system, lighting and temperature controls, security, central vac and distributed audio so they could show off their work to their customers. Kaye said the industry has evolved since they founded their business six years ago.
“When we first started out, this was clearly a consumer-driven market. People that were building homes called us,” he said. “That has gradually changed over the years to the point where we're working more with builders. Our next logical step is to work with the developers.”
This article will explore what Stacy and Kaye consider the three aspects of running a successful home automation business — educating the homeowners, teaming up with builders and working with developers.
Conventional telephone and electrical wiring is not the only thing running through new homes today. Many homeowners are now paying more for structured wiring, which could soon be the standard in new home construction, Kaye said.
“In a few short years, people are going to go into a home and say, ‘What? You don't have structured wiring or whole-home audio in this home? I can't plug in a computer anywhere in this house?,’” Kaye said. “That is what's going to happen. Technology moves along very rapidly. Old homes and old wiring are going to be totally unacceptable for the young people who have never known life without a computer. It will be a non-starter for them when they go house-hunting for their first home.”
Structured wiring allows homeowners to access the Internet from a variety of locations in their home, network their computers and set up a home office, Stacy said.
“I think home networking will be the thing that brings more people to the table than anything else,” Stacy said. “It is the thing that people understand the most. If you find someone who is interested in talking about home networking, then it opens the door to having more conversations about home networking on a larger scale.”
Like any other option on a new house, structured wiring adds to the cost of a new home. Kaye said the cost can depend on the size of the system and the square footage of the house.
“The biggest question that always comes up in conversations, is ‘How much is this stuff going to cost?’” Kaye said. “I have gotten to the point where I just look into people's eyes and say, ‘It will just cost you more,’ but so does a three-car garage as opposed to a two-car garage or a smooth-top electric range as opposed to a non-smooth electric range.”
Home automation companies and builders need to convince homeowners of the added value of the structured wiring.
“When a client or a potential homebuyer walks up and sees two identical houses next to each other and one may cost $5,000 to $10,000 more than the other one, they are going to want to know why,” Kaye said. “If you have the right answer, they will realize the value of the added price.”
Structured wiring and home automation do add to the cost of the house, but it is often more affordable than homeowners might expect, Kaye said.
“Does Cat. 5 wire cost more per foot than station wire or pulling two wires to an outlet versus one wire cost more? You bet it does,” Kaye said. “The cost is more, but the perception is that it is out of their league is one that we have to break through.”
Kaye said companies need to convince homeowners that the value of the structured wiring will far exceed the initial cost of the installation.
“The first thing that builders and clients have to understand is a lot of what we do is already a sunk cost,” he said. “They are going to put telephones, video distribution and security in their home and someone is going to have to run that wire. A lot of what they perceive as a big expense they are already going to pay for.”
Having structured wiring in a new house will greatly increase the house's resale value and futureproof it for further home networking possibilities.
“Even if they never use the structured wiring and sell that home in five years, I guarantee that people are going to be asking if that's in there when they sell it,” Stacy said.
Marketing Director Russ Mullholland said if homeowners want a house that is ready for the 21st century, they need to get their home prewired with structured wiring.
“Everyone wants to build more of a house than they can afford,” he said. “People want all the toys of a million-dollar house but can't afford it, so they just prewire the house. The finish side is a function of dollars.”
TEAMING UP WITH BUILDERS
Millennium not only works directly with homeowners, but has also developed long-term relationships with builders in the Kansas City area.
Russ Mulholland, marketing director for Millennium, said he finds that it is easier to work with younger builders who are open to new technology.
“Older builders who have been in the business for a long time sell everything that they build, so why should they introduce new technology?,” he said. “But if you can show how it benefits them and improves their bottom line, you've got a winner.”
Mulholland discovered that the building industry is a bottom-line business.
“No one is in business to build houses and to not make a profit,” he said. “Builders are extraordinarily conscious about the bottom line. They don't want to spend any more money than they have to as it relates to any subcontractor, whether it's a concrete worker, a carpenter or a smart home technology company.”
Many builders are accustomed to working with electricians, but not with home automation companies. Kaye said it takes a lot of work to convince builders of the value of structured wiring.
“It is a mighty big ship to turn,” he said. “You have more than 500 builders in the Kansas City metro area and a lot of them who have been around for a long time say, ‘This is the way we have always done it, and this is the way that we are going to continue to do it. There's big resistance to new technology, especially if it costs more.”
Kaye estimated that about 20% or less of the builders in Kansas City have structured wiring installed in their homes.
“It's a process of getting in the door and convincing a builder to have a vision,” he said. “We try to get them to see what is going on, where it is going and why it will benefit them. Although we are one of many subcontractors to a builder, we also want to take on the role as their marketing partner. What we have to offer will help him sell his home.”
Builders are often resistant to increasing the price of their homes, especially the smaller and less expensive houses, Stacy said.
“The toughest nut to crack with builders is that structured wiring is just as important in the lower-end homes as the upper-end homes,” Stacy said. “The average young couples who are getting out of school and starting their careers are going to want structured wiring and home automation, but they can't afford a $450,000 house. They'll be buying the $175,000 house.”
The lower-end priced homes in Kansas City's new construction market are the toughest segment for home automation, he said.
“If you get in that price range of a house, for builders, there is so little to work with that they are really counting pennies as far as what they put into a house,” he said. “They have to really be convinced that this will help them sell the house more quickly.”
Hiring a home automation company, such as Millennium, however, will often lessen the amount of subcontractors in the long run.
“Another benefit that we bring to the builder is that we can consolidate a lot of subs,” Stacy said. “In the past, the builder would have to go to two or three or four companies for central vac, home theater or security. With us, you have it all under one roof.”
Stacy said sometimes Millennium's entry to a builder has been through the homeowner.
“A lot of times there may have been builders that we would have liked to have worked with, but they are resistant. But if somebody wants to build a home with that builder and wants to do what we do, he or she is almost forcing the builder to have structured wiring. Some of those turn into long-term relationships and the next time the builder calls us.”
Other times, the developer requires the builders to have structured wiring in the homes they build.
“We have a couple of cases where we are working with the developer and it is mandated to the builders,” he said.
WORKING WITH DEVELOPERS
Partnering with builders can often lead to bigger and better things, such as establishing an ongoing relationship with a developer.
Millennium Smart Homes worked on two houses with Kalin Custom Homes before getting a major project.
“The first two were a test to see how we operated and how we worked,” Mulholland said. “We then graduated into this townhome project.”
Kalin Custom Homes asked Millennium to wire 150 four-, six- and eight-plex townhomes in the Post Hill Townhome Development. The homes are priced from $350,000 to $400,000.
“We have struck a deal with the builder,” Kaye said. “The developer was so curious that we went up and briefed him directly, and he was dually impressed.”
Each of the townhomes will feature an OnQ system, which will provide the wiring infrastructure for whole house distribution of phone, data, cable and satellite TV.
“The key thing about that development is that the builder and the developer made a commitment that every unit will have a minimal level of what we do, including the automation,” Stacy said. “They are providing basic security. Beyond that, whatever the buyer decides they want to go ahead and finish out, it's up to them.”
Millennium has finished about 10 townhomes and will soon wire two more eight-plexes.
“They are going to try to put up 16 units at the same time,” he said. “When that comes, it's crunch time. That will be a bit of a challenge. Hopefully, that will happen in the summertime or spring when we have longer hours and warmer weather.”
The completion of the project should take about three years. Stacy said the development is the first of its kind in Kansas City.
“There are a lot of parts in the country where they have planned communities, but it hasn't happened to almost any degree in the Kansas City area,” he said.
Kaye said the project is a giant step forward for the home networking industry in the Midwest.
“It is a great leap for us and something novel to the Kansas City area,” he said.
SEVEN SECRETS TO SUCCESS
Millennium's Marketing Director Russ Mullholland offers the following tips to taking care of a client.
- Listen to what the client has to say
“Build the package based on the client's wants and needs and not on what you think should be in the house and what you want to sell them.”
- Take a soft-sell approach
“If your clients get their houses prewired correctly, they can come back and add anything later. A mindset in sales would tell you that it's ridiculous to do it that way, because you are not going to get your money. But if you do it that way, people will trust you. They'll not only spend money with you, they will have their friends spend money with you.”
- Give excellent customer service during and after the process
“If someone spends money with you, don't forget them. People just don't want to be another number.” Keep in touch with them through e-mail or a monthly newsletter and stop by their house if you are in their neighborhood.
- Always remember that a client is a client
“The real key is that it doesn't matter what they spent. If they spend $500, they are no different than a client that spends $50,000.”
- Never embarrass a client
“When we build packages for clients, we build good, better and best. Generally I offer the better package because it gives the client the ability to step up if they choose, yet they can step down with no embarrassment.”
- Build trust
“You have to develop a sense of rapport and confidence with the builders so they don't worry about you when you are talking with one of their clients. If you can cause a client to walk away from a builder, then you are in serious trouble, because the reputation spreads quickly that you can't be trusted. Trust is very important.”
- Be on time for appointments
“About 99 out of 100 companies aren't on time. I try to never be late. I can honestly say that my track record is good.”
SPEAKING OUT ON STRUCTURED WIRING
Brad Hall, wire puller for Millennium.
“It's a pretty cool job and it's very interesting,” He said. “The best thing is prewiring a house and then getting to see the final results. The way it turns out it looks completely different. It's nice to see the different aspects when the house comes together.”
Darren Britt, wire puller for Millennium.
“You get to learn what kinds of things you can do to improve your own home through wiring and sound. I think more homes are going to have structured wiring in Kansas City, and a lot more people are going to be doing it.”
Jason Kalin, builder for Kalin Custom Homes.
“Regular electrical wiring is 75 or 100 years old and builders know what they are doing with it. Structured wiring is still new, but it fits pretty easily into the same construction practices. It just adds about a week to the schedule.”
TROLLING FOR BUSINESS
Russ Mullholland, who has worked for Millennium since July 1999, offers the following tips to drum up business.
Get to know the builders in your community. Millennium has been an active member of the Home Builders Association of Greater Kansas City for the past four years. “You have to spend a lot of time with builders,” he said. “I try to attend all of the meetings of the Kansas City Home Builders Association. I have become very good friends with a lot of its members.”
Showcase your work. Millennium set up a home automation system for a demo “Lifestyles Home” at the Kansas City Home Show, which is attended by builders, contractors and homeowners. The company also set up a demo room in its new office building in North Kansas City.
Troll area neighborhoods. Much like fishermen who troll a lake trying to hook a fish, Mullholland cruises Kansas City area neighborhoods looking for business. He stops at new housing developments to talk to builders and prospective homebuyers.
Once you have generated a lead, you can use the following strategies to develop a long-term relationship with a homeowner.
Ask the right questions. Discover what your client is looking for in a home automation system. For your first meeting, have your client bring a set of blueprints. If he or she is married, always ask to meet with both of them.
Educate your client. Homeowners may not know what is available. Teach them about the different kinds of wiring and features such as ceiling speakers, lighting controls and security.
Listen carefully to your client and take good notes. Then take the blueprints back to your office, mark the different wiring runs and systems and make a computerized estimate.
Create a good, better, best package to give the client the flexibility to select anything from basic prewiring to a deluxe home automation system.
Keep in close contact with the homeowner throughout the entire process. Bring your client by the house after you have marked the runs and before your crew starts the prewiring to make sure everything is in the right place.
SQUEEZING INTO THE SCHEDULE
Millennium Smart Homes prefers to work on a new home after the electrical wiring and plumbing pipes are already in place.
“We try to get all the other trades out of the way first,” Stacy said. “The biggest challenge for us is to get the builders to open up a window of time for us to go in and do what we need to do. Their schedule has historically been HVAC, plumbers, electricians, insulators and drywallers. We have to shoehorn ourselves in between the electricians and the insulators. That's the best place for us to be.”
Stacy said it's far easier for his crew to start working after everyone else is done.
“No one will be drilling any holes or pulling anything over rafters,” he said. We just do our thing.”
The builders who Millennium works with on a regular basis understand how long it takes for Millennium to complete a job, and they try to build it into the schedule. Builders who are unfamiliar with home networking and structured wiring, however, often overlap the trades so they are stepping on each other's toes.
“It's really tough for first- or second-timers if they don't understand what we do,” Stacy said. “They can't get it in their heads that they can't have the electricians finish on Tuesday and have the insulators start on Wednesday and still have us do two days of work.”
Trying to complete the installation of structured wiring before the insulators and drywallers arrive on a job site is often a challenge in a tight construction schedule.
“There have been times when we have been finishing a house and they're hanging the drywall,” Stacy said. “Sometimes we have to pull back insulation to get a wire in.”
Millennium's technicians also have to work around the electricians.
“What we put in is probably the most delicate wire,” Kaye said. “It's not that it's fragile, but it's more subject to damage than what the electricians or plumbers put in. We also have the most flexibility in how we run our stuff. It's much easier for us to work around what the electricians and other trades have done rather than put our stuff in and hope the electricians will work around us.”
Kaye said if they don't wait until the electricians are done, the wiring ends up in a tangled mess.
“When we drill holes and draw a path throughout the house, the next thing you know, it's filled with electrical wire instead of our stuff,” Kaye said.
Sometimes, the situation is unavoidable.
“There have been times because of a schedule of a job, we've had to go in and start before the electricians are finished,” he said.
The technicians try to avoid running their wiring in close proximity to electrical wire because of the potential noise interference. Cat. 5 adheres to performance specifications and must be handled carefully in order to work properly.
“You have to be more concerned with things such as bend radius,” Stacy said. “Our customers pay for us to put in Cat. 5. If you pull a wire too hard or bend it too sharp to make a corner, it's no longer Cat.-5 rated. It won't make a huge difference if it's just voice, but it is critical for in-home networks. Not to say that there aren't things you have to observe when you run electrical wire, but there's no comparison.”
Like electrical wiring, however, Cat. 5 is prone to cold weather.
“You can actually crack it when it's too cold out,” Stacy said. “That's a problem that the electricians share with us. If it goes below a certain temperature, they won't pull the wire.”
A DAY IN THE LIFE OF A WIRE PULLER
On a mild January afternoon, two technicians for Millennium Smart Homes were drilling holes and pulling wire for a 2,100 sq ft home in Smithville, Mo.
Brad Hall and Darren Britt started their day on the job site at 10:30 a.m. By 3 p.m., they were preparing to bundle the wires with Zip ties and punch the wires through the floor to a structured wiring service panel (similar to an electrician's breaker panel) in the basement.
Marketing Director Russ Mullholland said Millennium's technicians all start out on the rough-in side drilling holes and pulling wire.
“They do their learning in that arena, but we have another team of guys who will come back and put in the speakers, TV set and the controller for the audio system,” he said. “Everyone starts out pulling wire. Then they go from being a wire puller to being a supervisor. Then they'll trim.”
Brad Hall, who has been with Millennium for eight months, learned how to pull wire through on-the-job training, a beginner and advanced class from OnQ Technologies and weekly educational classes at the office.
“We learned to be very gentle with Cat. 5. We only pull with 25 pounds of pressure and watch the bend radius,” he said.
Kaye said he conducted one-hour internal training sessions every week for about six months.
“Every week, we would cover a little something as simple and basic as the bend radius of Cat. 5 to installing an elaborate video distribution,” Kaye said. “We found out who wanted to go to the next level and who wanted to keep pulling wire.”
Stacy said Millennium had up to 10 installers, but now has six, who work on the prewire or the finish side of the installation.
“It's interesting, because you'll find people who are good workers, but they really don't want to move beyond what they're doing,” he said. “It's not a bad thing, because we'll always need people to pull wire. If someone is the best wire puller in the world, that's great. I'm more than happy to keep them doing it.”
Stacy said Millennium tried to hire an electrical contractor to pull the structured wiring, but the company's work did not meet up to the specifications. Since an electrician is already in the house drilling the holes and pulling the wires, it would make sense to outsource the wiring to them, Stacy said.
“If there was an electrical contractor who could get all that done to our standards, I'd be more than happy to have them pull the wire,” Stacy said.
Electrical contractors with a firm knowledge of structured wiring are in short supply in Kansas City, but Stacy said more electricians are starting to catch on to the new technology.
“I think what you'll see over time is that electricians will realize that what we do is very closely related to what they do up to a certain point,” he said. “What you may see is bigger electrical contractors either start divisions or acquire companies that already do what we do so they can be more of a total solution to their customer.”
MILLENNIUM WINS HANA AWARD FOR SPECIALTY HOME
Brian Angell, a quadrapilegic from Kearney, Mo., hired Millennium Smart Homes to design a voice-controlled home automation system after a car accident left him paralyzed.
The project won Millennium the Best Specialty Home award in the 2000 Home Automation and Networking Association Mark of Excellence Awards competition.
“He has no use of his arms or legs and requires 24 hour a day/7 day a week care,” Stacy said. He's a young guy in his 30s and was looking for whatever could give him the highest degree of independence.”
Millennium installed eight microphones in different parts of the house.
“Through voice commands, he is able to arm and disarm security, control the lighting and the home theater and talk on the telephone.”
Stacy and Kaye both agree it was their most satisfying job.
“It made a tremendous difference in his life,” Kaye said.
GETTING TO KNOW THE OWNERS OF MILLENNIUM SMART HOMES
When John Kaye (left) and Pete Stacy first met each other, John's black lab, Missy, was a young pup. Today, the 12-year-old company's mascot, with gray hairs under its chin, sits on the stairs at the front door of the business to greet the customers.
In their 10-year friendship, Pete and John have built a home networking business from the ground up. Here's how they got in the business.
Pete Stacy, co-owner
Q: How did you get interested in home automation?
A: “I worked in the computer industry for about 22 years doing service, sales and software. I had always been somewhat interested in home automation, but for a long time, it was mostly a hobbyist industry. There weren't any huge companies that were seriously marketing and developing products specifically for that industry. I always thought that this would be a fun thing to do.
Q: Do you have structured wiring and a home automation system in your home?
A: Not much of one. It's kind of like how the cobbler's kids never have any shoes. I do this all day. I have some stuff in my house but not to the extent that we do in a lot of our custom homes.
John Kaye, co-owner
Kaye, a Wisconsin native and self-described avid, rabid, die-hard Green Bay Packer fan, said he was in the army for 20 years before partnering with Pete to start a home automation company.
Q: What did you do before you and Pete started Millennium Smart Homes?
A: “I retired in 1992 out of Fort Leavenworth and sold few satellite and security products for a few years. In 1996, we got together. Our origins are simple. We were satellite dealers and moved into wiring. We always had the vision to get into this industry, but the trouble is that timing is everything. The timing was not right at that point. We waited a couple years, did our research and moved forward.”
Q: How did you break into the home networking industry?
A: I didn't necessarily break into it. I fumbled into it. I followed him. I am not a techie or a wirehead. My sole purpose was seeing a business opportunity. I love what I'm doing. It was an exciting opportunity to watch a company grow, build a company and see the market expand.