January 06, 2011 | by Tom LeBlanc When AVI-SPL works on a project with an IT point person it makes sure to send certified IT technicians “to speak to him in his own language,” Thomas says, adding that he finds that it varies based on vertical market whether or not an IT person is involved. “With corporate accounts, the answer is yes, but with [HOW], the answer is no.”

Another variable, Hoyt says, is that not all IT point people know their stuff. “While IT directors are the ideal point people, we are finding many office managers having that role dumped on them, so we are dealing with lay persons who have the title of ‘IT director’ but don’t know as much about their infrastructure as desired.”

In those cases, Homeland Secure IT finds that the IT director doesn’t have as much decision-making power as one might expect. “They only influence the purchase, so we have to provide them with enough information to ensure they are able to pass on the correct data to their superiors as well as make ourselves available to answer questions or attend meetings with the real decision makers.”

Job-Costing, Bidding, Recurring Revenue
It’s clear from the survey that CIs are looking to tighten up operations and improve cash flow. About half of respondents emphasize how important job-costing and project management is to each project’s bottom line. At AVI-SPL, “proper job-costing and project management gains our projects approximately 4 percent in gross profit on average,” Thomas says.

Shrinking margins due to increased competition on bids has made job-costing more vital in recent years, according to Advent Pro AV’s Acton. “Every dollar counts and can be the difference in whether you are in business in two years,” he says. “Where your money is going and squeezing the most profit out of every job is critical.”

Improper job-costing can be devastating for CIs because it can turn potentially big-profit jobs into break-even affairs. Orange ProAV’s job-costing processes are pretty tight, according to Coxon. “We look at our percent of cost expended to total estimated costs before, during and after the job to make sure we are on track with our estimates.”

Coxon emphasizes that CIs should pay attention to margin on jobs, not revenue. “And the percentage is less important than the dollar amount. We ask how much money the company will net in what period of time. Is that enough for expending those resources? What are the opportunity costs if we are too busy now to take other work?”

In addition to upping the ante on job-costing, increased competition for projects has also led about half of surveyed CIs to hone their bid presentation processes. Count Homeland Secure IT among those, says Hoyt. He admits to being personally impressed by a competing integrator’s “beautiful full-color folder, linen cover page with gold foil logo” that he noticed while discussing a quote with a potential client. “I thought to myself that I wished we had that type of presentation,” but adds that “it’s a shame that [the other integrator] didn’t get that job. Sometimes a presentation is just better in person than a fancy package dropped off by a courier.”

Engaging the client is critical, according to Coxon. One way to neutralize the increased competition is to explain why competition has increased, he suggests. “We’ve tried to deal with increased competition by talking with project owners and raising their criteria. There are a lot of firms that unfortunately are making a very poor transition from residential to commercial work and we’re using that to our advantage. There are also firms with mediocre understandings of heat and power considerations in A/V systems, and we make sure that our prospects know to look for these pieces in a bid - and if they are lacking, raise a flag.”

The most important elements of bid presentation are honesty and flexibility, Thomas adds. “Know your audience. Say what’s in the bid. Say what is not in the bid. Offer alternatives and options. And be on time.”

CIs are likely to include more service contracts in bids in 2011 than in years past, according to the 46 percent that say they expect it to have a moderate or great effect on their businesses this year. Every CI likes the idea of recurring revenue through service contracts, but it’s easier said than done, Thomas points out. “The best way to increase service contracts is to actually provide a good product and performance on current service work,” says the AVI-SPL design engineer. “Many firms sell service contracts and then never follow up or even deliver the scheduled maintenance that was sold. Customers are not stupid. Service clients have to be maintained and cultivated just like any other customers. How many [CI] firms offer to provide service references? Not very many, because most A/V customers feel ripped off by service contracts.”

It’s a good point, and CIs that don’t have the infrastructure to provide elevated post-installation service shouldn’t be lured by the recurring revenues. Advent Pro AV would love to earn recurring revenues through service contracts, Acton says, “but we haven’t developed a solid service contract plan yet.” So the company is working on those processes.

Clients’ expectations when it comes to service contracts are growing, so CIs need to be well equipped, Coxon adds. “More folks are becoming conscious of the importance of remote diagnostics, reports, system health stats, etc. Since we have done that for years, [we’re] in a unique position to leverage that history for RMR [recur¬ring monthly revenue] purposes.”

The good news for CIs that aren’t in that unique position is that working toward putting those systems in place tends to elevate service for all their clients - not just service contract clients.