10.27.2008 — No magic bullet, golden umbrella or any other catchy euphemism will provide a quick solution for companies struggling through a dismal economy.

Integrators are being told it’s important to diversify; it’s important to run lean and mean.

Most companies already know this stuff and, if possible, are doing it. One thing most integrators are not doing — something that could provide a needed bump during a consumer credit crunch — is earning recurring revenues on service contracts.

CE Pro interviews countless integrators about their business processes for its CE Profiles. Many company owners tell us they would like to institute a recurring revenue structure. Very few, however, tell us that they are actually doing it — at least very few non-security dealers.

There is demand among audio/video/control customers for long-term service contracts that cover preventive maintenance, discounts on equipment replacement, emergency response maintenance, discounts on upgrades and more.

Creative Sound & Integration, a high-end automation and home theater installer based in Scottsdale, Ariz., is making good money selling service contracts.

Creative charges an additional 5 percent to 12 percent of total system costs for service contracts, according to owner Doug Greenwald. That’s a big bump.

Creative’s Scottsdale area client base lends itself to a recurring revenue model, Greenwald explains. He says many of the company’s residential projects are in clients’ second or third homes.

"They aren’t here all the time. So when they are going to be coming in, they can call and let us know and we can go out to their house before they get there to make sure everything is working.”

The company also sets its clients' systems up for remote access. “We can take a look at what is going on from our office and sometimes fix it from there, or be able to let a service tech know what to look for when they get there.

The contract structure is broken down so that it can be sold in levels:

• Clients can either purchase a 1-year contract or a 3-year contract
• They can either choose “basic” service or “premier” service.

"We also set up the system to email us when something is wrong so we can be proactive instead of reactive,” Greenwald says.

Creative Sound & Integration, which recently launched an IT department, is in the process of setting up computer-related maintenance agreements.

“For a monthly fee, we will clean up their computers, make sure their anti-virus is set up properly, make sure any spy ware is cleaned from the computer and that computers are running at top speed.”

There is no doubt, Greenwald adds, that service contracts add revenues that help the company weather slowdowns in business.