“Let’s spend some time on this,” said NSCA executive director Chuck Wilson as we prepared for our 5th Annual Integration Business Outlook presented by CI and NSCA.
He was referring to a slide in the webcast that focuses on what surveyed integrators say they typically get for hardware margin and charge for technician labor rates.
Based on a survey of 137 integrators and consultants, 22.3 percent say their typical hardware margin is between 1 and 10 percent. Meanwhile, 26.4 percent get under $50 per hour for labor.
Getting less than 10 percent on equipment margins is “crazy talk,” said Wilson during the webcast. The only way less-than-10-percent margins is sustainable, he said, is if the integration firm is earning “way north of $100 per hour” on labor.
“If you’re doing this below $50 and below 10 points, you’re not going to be around [much longer].”
While there is probably not a lot of overlap between the two survey responses, many integrators misunderstand the relationship between equipment revenue and labor revenue, according to panelist Jim Bowie, president and CEO of Electrosonic.
The problem with that, Bowie added, is to break even after a project at 10 or 14 points, “the next project has got to be 35 or 40 points, and that isn’t going to happen.”
Wilson said to do the math. “I’ve proven it to [NSCA] members that by shaving 5 points off of your product, here’s what you have to do with your labor and people are just astounded by that when I show them the numbers.”
Integrators didn’t create the product margin conundrum, but that doesn’t mean they should cave to it.
At Electrosonic, “we have a water mark,” Bowie said. “We have a margin that if we go below that, it takes my signature.”
The industry should take a similar position, Bowie argued, “and I think consultants have to help and make sure that they put realistic budgets in for projects.”
