8 Business Models to Consider
A network-centric business model enables integrators to charge premium labor rates and opens the door for the sale of annual maintenance agreements, which builds RMR.
The custom electronics industry is continuing to transition from B2B business models where architects, builders and interior designers were the most important partnerships to a B2C model where dealers recognize consumers as the No. 1 target.
Here are eight business model bases to consider.
Internet: Many integrators have developed stores on their websites to sell product. These online stores boost total revenues, drive consumer awareness of their local brick-and-mortar shop, drive installation contracts, drive foot traffic to their showrooms, and even create better business relationships with their vendors by providing them bulk buying power.
Related: 6 Ways to Confront Internet Selling
Labor: Dealers are transitioning from earning most of their revenues and profits from equipment markup to earning it from labor. According to Steve Firszt of Fast Forward Business Coaching, integrators should only earn 20 percent of their gross profit from equipment. However, dealers report that 63 percent of total revenue still comes from equipment sales. Those who earn their revenue 50/50 from equipment and labor are better prepared to handle the commoditization of products.
Recurring Monthly Revenue/Security/Mass Market Home Automation: One way to mitigate lost equipment profitability is to build valuable recurring monthly revenue (RMR), primarily from security. However, only 8 percent of a typical CE pro’s total revenue comes from RMR. One in four CE pros earns zilch from RMR. That compares to security-based integrators, who are targeting to earn 50 percent of their revenues from RMR by 2015.
Commercial: As the resi market waned, many integrators turned to light commercial customers for bars, restaurants, nightclubs, retail stores, churches, hotels and other project areas. Video distribution, lighting control, security/fire/surveillance and digital signage became staple categories in commercial locales. Those who successfully made the transition hired or trained dedicated technicians, hired sales people with commercial experience, and obtained the proper licensing/bonding/insurance.
IT/Home Networking: The typical 2,500-square-foot U.S. home will soon have 60 to 100 devices connected to the network. Everything from security cameras to irrigation systems to solar panels can now be connected to the “mission critical” network. This reliance by consumers has spawned more integrators to become network-centric in their focus, making them the “go-to” resource for the home. This business model enables them to charge premium labor rates due to the specialty training required by their technicians. It also opens the door for the sale of annual maintenance agreements, building RMR.
Value: Not to be confused with the subsidized mass-market business model, integrators are carving out niches providing quick in-and-out services such as flat-panel TV mounting/ hookup, wireless audio installation, desktop audio, Internet radio reselling/installation, iPad/iPhone integration, remote control programming and more. These often become the building block for larger installations.
Energy: The role of the “Energy Contractor” is being filled more often by integrators, who are using the sea change taking place in lighting sources (from incandescent and CFL to LED) and the growing awareness of high cost of energy to install remote HVAC control and alternative energy systems, such as wind power and photovoltaics. Currently, only 12 percent of integrators offer alternative energy products
High-performance Audio: The fanatic audiophile community never really went away. Today, an audio resurgence led by vinyl and higher-quality digital audio is enabling some integrators to latch on to the audio community with margin-laden products. Turntables, tube amplifiers, freestanding and bookshelf speakers, even super-expensive CD players are staples in this arena. Which one of these models fits you?
Jason has covered low-voltage electronics as an editor since 1990. He joined EH Publishing in 2000, and before that served as publisher and editor of Security Sales, a leading magazine for the security industry. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He is currently a member of the CEDIA Education Action Team for Electronic Systems Business. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at [email protected]
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