Integration firms know that relying on product- and project-related revenue isn’t a sustainable business model given dwindling margins. They know that need to strive for “product independence” with better strategies for service revenue via service contract and managed services.
They know this. I’m telling you, though, most integration firms are not doing it.
A survey for our 2018 State of the Industry Report shows that 20 percent of integration firms earn zero via service revenue. Almost one-third earn only 1-5 percent of their revenue from services.
The integration industry is “stuck,” said NSCA executive director Chuck Wilson in State of the Industry Report. “It sure seems like people are aware of the need to transition into a managed services company but they still struggle with it.”
For AV professionals that truly want to overcome this struggle, there are two resources that might help them move the needle when it comes to achieving more service revenue.
‘Product Independence’ Webinar by CI and Almo Pro A/V
You might wonder why a distributor that moves products preach product independence to its dealers, but that’s exactly what Almo Professional A/V is doing with its recently launched nobox program.
Basically, nobox reflects the distributor’s emphasis on providing its dealers with professional services including installation labor services, digital signage content creation, control system programming, voice/data serves and more.
By not having a service-based model, integrators are “limiting your revenue potential and will be subject to declining hardware margins,” says Almo Pro A/V’s Rhatigan.
Reading between the lines, Almo wants its dealers to have healthy, viable businesses.
Diversifying income streams is important to the health of a company, points out Almo Pro A/V director of business development Brian Rhatigan.
Products are important, obviously. But “we don’t expect hardware margins to magically start increasing as time goes on,” Rhatigan says.
Not complementing product sales with associated services that provide real value for customers is risky. “If you are not providing a service based model it is more challenging to differentiate yourself from competition,” he adds. “You are also limiting your revenue potential and will be subject to declining hardware margins.”
In a webinar hosted by Commercial Integrator and presented by Almo Pro A/V, “Product Independence: What It Is, Why You Need It and How to Get It,” Rhatigan will make the business case for striving for more service revenue.
Almo colleagues will outline some concrete offerings that will help dealers pursue that service revenue immediately.
NSCA’s Pivot to Profit Event
The transition to service revenue for its member companies has been a central challenge for NSCA over the past several years. “One of the first questions members ask me,” Wilson says, “is, ‘How do you make the transition?’”
“It sure seems like people are aware of the need to transition into a managed services company but they still struggle with it,” says NSCA’s Wilson.
Some integration firms are enjoying great success thanks to increased service revenue. Too many others, however, are stuck.
That’s why NSCA launched its annual Pivot to Profit even, specifically targeted at giving integration firms the information they need to make that transition or pivot toward a more service-oriented business model.
The 2018 Pivot to Profit, October 22 in Atlanta, features sessions on how to build and structure managed services sales operations; how to integrate cloud services into offers; services specific to education and health care markets; Internet of Things related opportunities and more.
Former Secretary of the U.S. Department of Homeland Security and governor of Pennsylvania Tom Ridge keynotes the Pivot to Profit event with a focus on how integrators can address cybersecurity concerns.
Both NSCA’s Pivot to Profit and CI’s “Product Independence: What It Is, Why You Need It and How to Get It” webinar with Almo Pro A/V offer specific steps that integration firms can take to earn more service revenue.
Nobody is saying the transition will be easy, but this two resources promise to help those who are stuck to get moving on a path toward product independence.