Plugged in: Buoyed by the 'smart buildings' concept, LOGIX Communications is dialed in to increased dollars
LOGIX Communications has created a spark by rewiring its business model.
By Allison Wollam
Houston Business Journal 11/21/03

The Houston-based telecommunications company has experienced tremendous growth in a short time by implementing a new "smart buildings" concept, which consists of an existing, access-ready solution pre-wired in a building so tenants can plug in immediately.

According to LOGIX President Ron Henriksen, the 350-employee company had wired 32 local buildings as of September, up from 25 in March. And during that time, LOGIX has seen a 50 percent increase in its access line count, which Henriksen credits to adoption of the smart buildings concept.

LOGIX is so high on the concept that officials predict it will account for 85 percent of the company's total revenue in the next several years.

"It's our primary growth vehicle," Henriksen says. "We've found a way to serve our customers better at a lower price, and we're set on moving forward with it."

Henriksen says companies are realizing that readily available technology is just as important in selecting office space as traditional factors such as location, parking and security. And more developers are smart wiring buildings to attract tenants, he says.

Although Henriksen is eyeing rapid expansion, he's not planning to go too far from home to grow his business.

"Why should we leave Texas when there are still customers that we can get here?" asks Henriksen. "We're not at that point yet, and we're not willing to be a failure in two states when we can be extremely successful in one."

Henriksen says he's watched many of his competitors attempt to make too big a footprint across the United States and sacrificing service, rather than focusing on the current customer base.

Indeed, Charles Land, executive director for Texalltel, a trade organization for competitive telecom carriers in Texas, says LOGIX has been successful as a niche player that has found a geographic region and a target market for its products.

"They know exactly who they are serving, and that's what has made them a profitable venture," says Land.

Although Land downplays the term "smart buildings," saying it is as much a marketing expression as it is a technical term, he says LOGIX is making a wise marketing move by using the concept to appeal to customers.

Land adds that the telecom industry went through a "nuclear winter" following the 1996 law that allowed phone companies to compete for local and long-distance business. The industry saw a surge in new businesses, but Land says that after the initial shake-out, most of the surviving businesses were customer-focused and had solid business plans.

Indeed, Henriksen has led LOGIX to steady growth over the years by keeping an eye on profits rather than gross revenue.

LOGIX brought in $84 million in revenue in 2000, staying steady with $84 million in 2002.

Henriksen points out that although revenue has pretty much stayed flat, the company's profit margin has been increasing each year as LOGIX transitions its focus to smart buildings.

Second chance
Most small business owners don't get a chance to do things a second time around, but Henriksen got that rare opportunity when he bought back his original company.

Henriksen created American Telco in 1983 and sold it to Oklahoma-based LOGIX in 1998 for $130 million. In September 2002, Henriksen bought back his old company for a fraction of what he sold it for after the previous owner filed for bankruptcy.

Preparing for a turnaround, Henriksen made sure he was well-funded upon his return. He says most small business owners start out under-funded, which often causes problems.

"It's hard to anticipate how much cash you're going to need and everything that is going to go wrong," Henriksen says. "Read all of the business-related books that you can and have your eyes wide open because it's really hard to think of ways that you're not going to be successful."

Henriksen says he approaches his business simply and works hard to keep costs in line. He believes business owners also must pay attention to the smallest details in order to be successful.

According to Henriksen, overlooking something as simple as having a network that can support sales and provisioning systems can cause many large telecommunication companies to falter.

"Customers switch for price, but they stay for service," he says. "You're just treading water if you're gaining new customers but losing your old ones because they're not happy with your service."

The right ring
LOGIX is also different in that it has set up a compensation model that awards salespeople for retaining customers rather than going after new ones.

"We try to anticipate the needs of the customers," Henriksen says. "Getting a customer is only 1 percent of the effort. Executing your service and keeping the customer is where 99 percent of our efforts go."

Meanwhile, Matt Asmus, chief operating officer of LOGIX, says one of the toughest challenges the company has faced is distancing itself from the false promises that some competitors have made that have painted the whole telecommunications industry with a bad brush.

He says LOGIX makes an extra effort to ensure there are no surprises on customer's bills. In addition, Asmus says the company is open and honest with its financial records when customers ask for proof of financial solvency.

"We're the only telecom company I'm aware of where the chief financial officer is involved in the sales process," Asmus says. "But it just proves to potential customers that we have nothing to hide and it sets us apart from the fly-by-night companies in the industry."

Asmus points out that the company has grown as much from strategies it decided not to implement as from the ones it has.

For instance, Asmus points out that the company's decision not to focus assets and manpower on re-selling telephone services has worked out well. He says it's more difficult to control costs and quality of service when re-selling a product.

"It's sometimes hard to say no to business that may seem like it's a good fit for your company, but you've got to really examine it before jumping into it," Asmus says.

© 2003 American City Business Journals Inc.