Maybe we’ve been coming at this push to transform your AV business into a service-based company all wrong. Could it be that those companies who are resisting the change to this point aren’t doing so out of spite but more out of a lack of understanding about how to do it? [related]
Sure, we’ve written countless pieces about the importance of making the switch, whether recapping a session at our Total Tech Summit, NSCA’s Pivot to Profit or countless other industry events where service-based revenue plays a primary role.
But maybe we’re not doing a good enough job showing our audience why they should make the change. If that’s what it takes to turn around what strikes me as stubbornness, that’s what we’ll do in 2020.
Will 2020 finally be the year when we see recurring revenue and managed services take hold in a meaningful way in AV? It doesn’t look that way based on our State of the Industry survey results that show about 70 percent of respondents have 10 percent or less of their revenue tied to service contracts.
By 2025, about half of our survey respondents say they’ll be in the 0 to 10 percent range when it comes to managed services, with another third in the 11 to 30 percent range. So maybe we’ll just have to wait a little longer to see some real traction when it comes to recurring revenue in AV.
“So many integrators have built a business that’s based on selling 20 widgets this year, 25 widgets next year and 30 widgets the year after that,” says AVIXA CEO David Labuskes. “You start every year with zero sales. That’s a horribly difficult way to do business.
“If you can sell 20 widgets this year, then add five to it next year, then add five to that the following year, you only have to make five new sales to have the same growth outcome. It becomes elementary math,” he says.
Why to Start a Service-Based AV Approach
NSCA executive director Chuck Wilson has the same conversations with members about recurring revenue.
“We’ve talked for years about to do it, but we have to reinforce the why,” he says. “The biggest obstacles I see are supporting the promise, sales compensation and financing.”
It’s probably no coincidence that the largest integrators in the AV space have also figured out the how and the why of recurring revenue. It’s a model that’s present in almost every industry these days, but AV companies still focus their attention on selling boxes.
Read Next: State of the Industry 2020: AV Service Revenue is the Antidote for Recession
My Christmas wish this year is that 2020 will be the year when those survey results show that all those articles we’ve written have finally made some impact on the readers and that recurring revenue becomes a little bit like the term “convergence”: something we talked about for years before it just all of the sudden happened overnight.
