Elusive Service Revenue: The Key to Sustaining Success

Published: March 5, 2014

I noticed a number of themes threading through 2014 NSCA Business & Leadership Conference, the first BLC I’ve attended

There were conversations about managing your team, creating meaningful partnerships and what technology will create an impact in the AV industry over the next few years.

One theme that came up time and again, however, was “services.” From the opening night’s panel discussion with the winners of the Excellence in Business awards through a recurring revenue panel with Dan Newman of Broadsuite and Joe Siderowicz of AfterMarket Consulting, the talk kept coming back to how services could save your business. Here is why:

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AV consultants, reporters, bloggers and integrators have written about the disappearing hardware margins over the last few years. If your business is based upon selling and hanging displays, you already know you are in trouble. With margins shrinking every year (see graph below), integrators need a source of income that is steady and recurring.

Look at what has happened to projectors and displays over the last five years. The amount you can make by simply selling products has all but vanished. One can see the same thing happening to switchers and video processing in the next few years.

I’m not saying it is inevitable that you will find an AMX DVX or Crestron Pro3 at Best Buy, but the hardware profits are dwindling. The reason is the move to an IT-like distribution model and the increasing availability of product through Internet based outlets.

This leads us to services. I am not talking about just service contracts. These are important, but let’s think a bit more outside the box.

Related: AV Nation and CI Live at 2014 NSCA BLC

We are talking about monitoring of a client’s systems, creating software that helps our customers maximize their AV investment and cloud-based storage. All of these services are things small- and medium-sized companies don’t have the capital or manpower to do on their own. If you create a situation for them to utilize these services you can be their savior and bolster your bottom line when the profit from the hardware you are selling today goes away.

If you’re on board and you want to start, you’re going to change your hiring practices a bit. You can teach your current programmers software development. This will take some time and effort.

What may be even better is to hire the best computer programmers—not just control programmers—that you can find. You can teach them the AV side and get them to develop systems and solutions for your clients.

Do this, and you will have a nice bit of recurring revenue as a foundation to stand on when the next downturn happens.

Source: CI Research’s Integration Business Outlook Survey

Posted in: Insights, News

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