Growing Pains: How to Grow Through Threats to Recurring Revenue

Opportunistic integrators may focus on services, company culture, customer care and globalization as keys to finding recurring revenue.

Daniel Newman Leave a Comment
Growing Pains: How to Grow Through Threats to Recurring Revenue

There is a lot to be said about the old phrase, “If you aren’t growing, you’re dying.” For a long time, the AV Integration space defied that one to some extent. Many integrators treaded water with up- and down-years, and after 10, 20, 30 years, they often were much the same size. Now, of course, this isn’t the case with all integrators, as some held onto their recurring revenue. However, by and large, this industry has seen its curves with the construction and housing industries, and continuous growth remains difficult.

A big reason we are so heavily tied to the construction market is that, for a long time, our projects were mostly capital. When buildings were going up or being gutted, there was a lot of integration work to be done. When that slowed, so did the capital projects, and while small upgrades and services can replace some of the lost business, those slowdown years also often meant a lack of growth or worse, a downturn in revenue.

Today, things are different. As new challenges from disruption, IT, and SaaS change the outlook in the AV integration space, our sources of recurring revenue and the correlating strategy must be different. Perhaps more than ever before, we are in an industry where stagnation may truly mean the demise of an organization.

We simply can no longer afford to stagnate; but we can no longer afford to avoid change, either. Fast growth means big change, and this may mean a step backward before steps forward. That kind of change is OK when well planned for, but I believe emphatically that fast-growth companies in the AV integration space will do the following things better than the competition.

Service Transition in AV Integration

This discussion is ongoing: the migration from installation to services. We see companies like Microsoft and Cisco enter our markets with turnkey subscription solutions that are cloud-enabled and easy to set up. Sure, there will be custom integration, but that will become an increasingly diminutive section of the business mix as software and apps can oversee more of the AV installations. Companies that grow fast also grow their service models, leaning heavily towards subscription offerings that drive recurring revenue.

Culture Development

Small businesses often struggle with culture. Leaders wear many hats, benefits are hard to come by, and talent management takes a back seat. But stagnation is often rooted in culture — when employees aren’t growing in their careers, it isn’t always their fault. Strong cultures are the root of successful digital transformation, which in short is the ability to change rapidly to handle technological evolution. If you can change fast, you can win in the AV integration space, but it all begins with culture.

Customer Centrism and Continuous Growth

Studies show 90 percent of businesses are planning to lean on experience as a key piece of competitive differentiation. More than ever before, our customers have a voice and endless information — and they expect great service. This industry is often caught up in winning the next customer, but keeping the ones you have happy is critical, too. Replacing business is too expensive. Keeping what you have and adding on is the formula for growth. Perhaps obvious, but I wouldn’t bring it up if this weren’t a constant, observable problem.

Globalization and Recurring Revenue

Due to seamless connectivity, companies are hiring and adding customers around the world. Sometimes this is virtual, but often, companies look for suppliers that can care for their global needs. This is for consistency and continuity in the work delivered. Fast-growth companies consider their ability to deliver around the world, not in the way the industry typically did (straight outsource), but in a much more cohesive fashion where the experience is good no matter where the work is done.

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Unless you’ve spent the past five years under a rock, you can see that change is on the horizon, and the only guarantee is that it will pick up its pace. This doesn’t mean we should all retreat; but if we want continuous growth, we certainly should understand market forces and the importance of changing to meet the evolving market demands.

I believe the winners understand this and will execute accordingly. The losers are the ones holding on to dear life trying to make money the way we used to. And I don’t feel one bit of fear in predicting that those businesses will disappear. Good news though: it’s entirely in your control. Change is a choice. “Choose wisely,” they often say. Hopefully, you already have.