New Parasound CEO Believes They Can Do More With Less

A Strata-gee Exclusive Interview with CEO David Sheriff

In a Teams interview with new Parasound owner and CEO David Sheriff, with VP of Sales and Marketing Larry Bennett joining in occasionally, I learned more about the company’s seemingly dramatic new direction. This new direction is defined not so much by a changed product strategy, but rather by revisions the company plans to make in policies, programs, and dealer structure that looks to redefine its approach to the market.

See what the leaders of Parasound told me

It was almost exactly one month ago when I was invited to participate in a Teams meeting with the Parasound national dealer network. This meeting, in which all participants other than CEO David Sheriff were muted, was called so the company’s new ownership and management could announce its plans for moving forward.

This presentation to dealers had a significantly different tone than the typical rah-rah, sell lots of products-type I usually experience. In this instance, Sheriff issued a quick-paced, no-nonsense, here’s-what’s-going-to-happen and here’s-how-it’s-going-to-be directive. It was lucid, transparent, and firm. And its meaning was clear – embrace our way or “let’s talk about parting ways.”

Almost the Opposite Approach in a Normal Acquisition

Normally after an acquisition, the new management is usually quite solicitous, trying to be reassuring and calm the dealer network from any nervousness over the new management making any crazy changes. They typically reassure dealers that things aren’t going to change, and promise great new things are coming…so stick around.

But in the case of this Parasound presentation, it was almost the opposite approach: Things are definitely going to change. In fact, things are already changing. Even, it seemed to suggest: Here’s what you need to know to decide if you want to ride with us…or go your own way.

Some Pretty Tough Stuff that Not All Dealers Appreciated

Fundamental to this new approach from Parasound is its declared “core values” that will dictate what they believe, how they will operate, how they will assess partners or potential partners, and what they expect from any partners. It was clear, concise…and pretty tough stuff.

It also pissed off some dealers…a few of whom reached out to let me know their thoughts about what they perceived as the new CEO’s “mandates.”

What follows is an excerpt with my discussion with David Sheriff and Larry Bennett, lightly edited for brevity and clarity.

Strata-gee – Your presentation to Parasound dealers seemed quite unique as compared to others I’ve heard from other manufacturers. What were your goals as you wrote the script for this presentation? And what was the motivation for the approach you chose?

SHERIFF – It actually took me a long time to learn the fact that I want to enjoy doing business. And what I’ve found is that trying to appease everybody for a long time not only added frustration and drama to my life but actually decreased business because I spent so much time worrying about what others thought – even when I knew I was on the right track. During my first probably twenty years in business, everyone kept telling me, ‘Well, that’s not how we do business…or that’s not how we do this or that.” And yet every time I trusted my gut, I was pretty good. Not every time, you know – you’re never perfect.

So when Larry Bennett, Darren Myers, and I got together, we really thought about how do we want to do business – what’s going to help us grow but enjoy that growth? Because I really believe that passion cannot be replaced. And when you allow exceptions and bad behavior and bad actors into a system, you lose that passion because you start focusing on all of the pain instead of all of the progress.

We’ve done more dealer meetings since then and we send an email at least every two weeks to all our dealers, continuing to refine and communicate what’s going on. That’s because we know we are approaching it a bit differently than they’ve been used to.

I like being direct because people either find out they want to be on board, or they self-leave. That’s the thing with our core values – if they’re not for you, you’ll exit yourself because you don’t want to have to deal with that stuff. And that’s OK because the people remaining are going to do a great job and we’re going to all be in alignment instead of constantly fighting every transactional decision.

Strata-gee – Since I wrote my post about the Parasound dealer presentation, I’ve heard from several industry folks, including some of your dealers. Quite a few of them expressed some pretty negative thoughts about what Parasound announced at that time. Have you been hearing that feedback as well?

SHERIFF – Yes, I hear a lot of the, ‘That’s not how we do it in our industry.’ Mostly from the people who bought one or two units in the past year. So the dealers who fit the model that we’re looking for, I would say it’s a 95% positive reaction. Some dealers are still waiting because our approach is so different.

The dealers who don’t fit our profile, it’s more like 75% not liking it.

Strata-gee – So, are you concerned about the level of pushback you’ve received, or are you happy with that breakdown between the positive and negative reactions?

SHERIFF – I’m very happy with how it’s breaking down. I think it’s exactly what we’re looking for. When I first got the dealer list after acquiring the company, there were something like 500 names on it. But a lot of them had only purchased one or two units in the past year. They’re really not what I would call a dealer.

There’s someone who sold Parasound opportunistically maybe one or two times a year for the majority of those people, and they call themselves dealers.

Whereas, I have other people who might have eight or ten Parasound products on active display in their showrooms – who love the product…who display the product…who help customers not just pick the right Parasound products, but [the right] accessories and other units and speakers. Look, we were losing those dealers because they’re saying, “Hey, the person down the street operating out of their trunk or their apartment can sell the same thing and they’ll sell it at a 20% or 30% discount because they just want to make a quick buck…right?

So 95% of what I call real dealers like what we’re doing.

Strata-gee – I thought it was interesting how, towards the end of your presentation, you said to the dealers that if they heard something they didn’t like to call you and perhaps something could be worked out.

SHERIFF – What we found is about half the people called and just yelled. And we did have several people that said, ‘I’m concerned about this policy.’ That’s where Larry engaged and said, ‘OK, let’s talk about why we’re doing that and try to get creative about how we solve it.

The great news is we also had just as many people call to say ‘I love your direction. Let’s talk about how I can do more business with you now.’ And some said, ‘It’s so refreshing that you’re looking at things differently. Let’s talk about what I’m doing and does that make sense for Parasound?’ Some of them helped open our eyes.

Strata-gee – So you are fully accepting the concept that perhaps for Parasound, less is more and that a, I think ‘streamlining’ is the term you used, is in order…correct?

SHERIFF – If we’re going to be paring down from almost 500 dealers…down to the 100 dealer range, the people who are truly able to promote and champion our product, understand our product, and support our product – and provide the value to the customer – that’s what we’re looking for.

BENNETT – Paring down is so important. If you have a disease or a problem, the first thing you need to do is cut that out as fast as possible. So we’re intentionally trying to downscale some so that with the people remaining we can reinvest in a healthy way as part of our expansion.

Strata-gee – So has that paring down, or dealer reduction, process begun? Have you been separating from dealers who don’t support your core values?

SHERIFF – Let’s call it sort of a soft termination program as we go through it. We’re working that but we’re using common sense. We’re not authoritarian…we’re talking long-term relationships. Where possible, we want to be the least pressure, but make sure everyone understands where we’re going and some of them will self-leave and there’ve been a couple of larger dealers who have done so.

Some of them we parted with on our own because we knew it never was going to work out. We let Crutchfield go about a month ago. We’re dealing with the fallout of that, but it was the right decision for us.

We’re evaluating the online dealers to make sure they can provide the same experience as brick-and-mortar dealers.

Strata-gee – Can you share a little bit about your background? Do you have audio industry experience? Where does your sense of business come from?

SHERIFF – That comes from consulting about 1,000 different companies from the point of sales through implementation. If you pick an industry, by tomorrow I have the ability to talk the talk and have an understanding of what’s going on. Within a week, I’ll be an expert in it. When you’ve seen 500 industries’ best practices, you start understanding what works…what doesn’t…and what people will tell you you can’t do. Then you go do it and wow, it works right.

[Sheriff says he was involved in ERP (enterprise resource planning) software consulting]

I did have exposure to other audio companies. However, I don’t really discuss that as I am subject to non-disclosure agreements.

But I know metal fabrication for chasses as good as anybody. I had probably 200 electronics manufacturers of all different natures, from PCB board manufacturers to stuffers and wave soldering – and understood their challenges along the way. Many of them imported from overseas, so I understand the challenges of overseas imports.

Much of it was, how do you have the right information at your fingertips when you need it? And how can you do things as efficiently as possible? I became very good at automating systems.

Strata-gee – Much of your presentation to Parasound dealers was focused on the issue of ‘open box’ items. You seemed to indicate that this was a big issue that needed to be addressed and you even announced some warranty policy and processing policy changes. How did open box become such a big issue?

SHERIFF – What we found is the open box issue was huge for us. You know, 75% of our returns are open boxes and it is ripe for games [being played by bad actors]. For the greater good, I’ve got to stop that.

[Sheriff indicated there were many sources of open boxes, sometimes known as “B” stock by some manufacturers. Dealer demo stock was certainly one source. Another source was customer-returned items to dealers with liberal return policies. These open box items, Sheriff told me, are then resold by the same or other dealers at 20% or 30% discounts, often destabilizing the market for their regularly priced goods.]

Some online dealers have policies that they’ve decided work for them that aren’t necessarily good for us. You know a 60-day return policy on something means you’ve just opened the box.

So we’d have stuff come in that’s 3/4/5/6 years old that was sold with a full warranty, which drives our [warranty] costs up. We’d lost control of the situation. And there were a lot of bad actors [abusing the system.] They were selling these open boxes at massive discounts and [our supportive] dealers were getting hurt losing sales or profitability [on their A stock sales].

We want to make sure our customers are buying from legitimate dealers and we want to make sure open box games can’t continue. So what we are doing going forward is every Parasound unit sold will have a one-year warranty. However, authorized dealers can extend the warranty another four years to equal the current warranty period. So if you buy Halo or JC from an authorized dealer, they will just register it when they sell it and you’ll get your five years from Parasound.

So in the end, for all good-acting dealers, the warranty will be the same as it is now. But this new process helps us stop the reselling and false sales and other stuff along the way because it’s registered when it’s sold. We know the customer has it. We know it was a new unit – it wasn’t an open box – and we understand that the customer doesn’t have to do anything [more to register a warranty]. Now when the customer calls, we already know who you are – simply give us a serial number and we know who you are and can help. You don’t have to fill out long forms. We believe that this will speed up the end customer warranty service process.

Final Note – Parasound Begins Sales Representative Terminations

My conversation with David Sheriff and Larry Bennett above was conducted on June 26th. As mentioned in that interview, the process of reducing their dealer count had already begun. As this story was about to be posted, I learned that the company has also begun terminating a group of their manufacturer sales representative organizations.

The company tells me that not all Parasound rep firms are being terminated, mostly just those in smaller territories with only a few dealers. For now, dealers in those territories will be handled directly by Parasound headquarters.

Learn more about Parasound by visiting parasound.com.