The commercial integration industry has historically focused on project-oriented business. Working with clients to design cutting-edge solutions to address their A/V needs and integrating those solutions on-time and under-budget are the hallmark of the CI industry.
If you provided excellent customer service coupled with strong technical acumen and rigorous project management, clients would generally return to you for their next project.
The rapid evolution of technology is now changing the paradigm. The rise of tech-enabled workspaces that demand more IT-centric services combined with unified communications and the impact of collaboration on the industry are forcing traditional integrators to look for more ways to help their customers adapt to how workplaces have changed and continue to change.
The National Center for the Middle Market reported that mid-market companies recorded 7.2% average revenue growth in the second quarter of 2016, building upon already strong figures from Q1. In addition, positive sentiment among commercial integrators, as evidenced by CI‘s 2016 State of the Industry report, continue to lay the groundwork for growth in 2016.
Nearly a third of respondents to CI‘s 2016 survey expect revenue to grow by over ten percent, with two-thirds of respondents expecting revenue to grow by at least five percent. Improving financial performance combined with employment growth and record highs in the equity markets are keeping mid-market corporate valuations at near record levels.
Now is the perfect time for business owners to make a decision. They can choose to continue to grow organically as well as by making acquisitions, finding partners or additional funding or maybe it is a good time to exit out, when their company’s value could be at a record high.
The middle market is expanding, becoming more complex and facing significant changes that will create both challenges and opportunities.
For instance, the rise of increasingly complex standards and regulations in certain industries has driven brand manufacturers to seek partners who can handle their growing compliance requirements, as well as make investments in human resources, new equipment, more integrated information technology and other capabilities.
Related: Why the AV Industry has Venture Capitalists Seeing Dollar Signs
Similarly, the convergence of IT and A/V combined with the rise of managed services has caused integrators to take stock of their capabilities and determine if and how they can remain relevant to their clients.
CI‘s 2016 State of the Industry report confirms that the vast majority of the industry has experienced challenges in expanding recurring revenue through service contracts. Only one in five respondents to this year’s survey earn more than 10% of their revenue through service contracts, while 27% earn zero.
You may need to ask yourself if these are capabilities you have internally, and if not, how and where you will acquire the skills, experience and competencies.
Many executives and stakeholders are wondering what strategic direction is best for them. As a rule of thumb, the process should begin with a true evaluation of your own situation, both business and personal; a discussion with your management team; and a brainstorming session with an investment banker who is experienced in guiding your type of business through strategic alternatives.
The investment banker should understand your role in your industry as well as the needs of businesses of your size. The banker’s role is like that of a “strategic coach” who can help you start the process and navigate the intricacies of transactions; they know how to sell and buy companies, how to get the most value from a transaction and how to leverage your assets in different ways—from a partial sale to a strategic alliance to raising capital.
Do I Grow?
Once you’ve made the decision to invest in the company in order to keep up with demand, the next question is: How?
Can I grow my business organically or do I need to add external assets to keep moving forward?
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