The benefits of AV service revenue have been discussed ad nauseam in the integration industry. Even at the risk of annoying our audience, we’re not going to stop.
Check out these data points from CI’s 2018 State of the Industry Report that highlight why, as a publication that supports the AV integration market, we have to continue to beat the shifting from product- and project-based revenue to more AV service revenue drum:
- An inexcusable 20% of integrators say that they earn zero via services.
- Nearly a third, 30%, earn only 1-5% of their revenue via services.
- A mere 9% earn more than 1/3 of their revenue from services.
- Only 22% deem it an important priority to have more than 1/3 of their revenue recurring by 2020.
So, not only are most firms earning far too little of their overall revenue via services, instead relying on one-off projects and product sales, but an overwhelming majority don’t even have a goal to significantly ramp up their service business.
This is a problem, said Brian Rhatigan, Almo Professional A/V’s director of business development, during a recent CI webinar.
“There are several risks” for businesses that don’t have a reliable and significant stream of service-based revenue, he said.
Business Risks from Lacking AV Service Revenue
In the AV market, like in most industries, the margin that can be earned selling hardware is diminishing quickly.
Besides, Rhatigan added, customers have options when it comes to what companies to buy products from – and that’s coming from a products distributor.
“Your customers’ experience and the potential for repeat business is going to be based on the overall delivery of the hardware, the customer service that you provide and the associated services that go with it,” he said.
“So if you’re not providing a service-based model, [it will be] more challenging to differentiate yourself from your competitors.”
By not offering those associated services companies are limiting their revenue potential.
Another factor, is that “hardware margins aren’t going to magically start climbing as time goes on,” Rhatigan pointed out during the webinar.
“As a matter of fact they’ll probably continue to decrease.”
So by not offering those associated services companies are limiting their revenue potential.
It also creates vulnerability. Rhatigan pointed out that integration firms make it difficult for themselves, especially with tough economic times hit, when they don’t have a source of recurring revenue.
With service as a significant part of a company’s business model, “you know that you’re going to have some recurring AV service revenue to help get you through those slow months.”
The webinar, “Product Independence: What It Is, Why You Need It … and How to Get It,” covers the risks of businesses being too dependent on product sales. It also runs down Almo Pro A/V’s nobox program which offers services that its integration firm partners can, in turn, sell to their customers.