The business model is changing for field services companies in the custom electronics industry.
An article on CEPro.com explains that the industry is transitioning from a business-to-business model to a business-to-consumer model in which dealers see consumers as their primary target.
The article outlines the foundations of four business models for companies to consider.
- Labor: Dealers are starting to make more revenue from labor than equipment markup. Equipment should account for 20 percent of an integrator’s gross profit. However, 63 percent of revenue is still coming from equipment sales, according to the CEPro.com article. Dealers who earn a 50/50 split between equipment and labor will be best suited to deal with the future shift.Service providers moving to a 50/50 split of equipment and labor revenue need to implement the tools to support the “labor supply chain.” Most equipment providers are experts in streamlining the equipment and parts supply chain. If field services firms want to grow labor services, they must streamline service calls to pay.
- Recurring monthly revenue: Building valuable recurring monthly revenue (RMR) from security is one way companies can mitigate lost equipment profitability. Only 8 percent of the typical custom electronic provider’s total revenue comes from RMR. One in four earns no revenue from RMR. Security-based integrators, on the other hand, expect to earn about half of their revenue from RMR by 2015.
- Internet: Developing online stores can boost total revenue by enhancing consumer awareness of the company’s brick-and-mortar shop and driving foot traffic.
- IT/home networking: The typical U.S. home soon will have up to 100 devices connected to a “mission-critical” network. Integrators who become network-centric can charge premium labor rates because their technicians need specialty training for this type of work. It also allows for the sale of annual maintenance agreements, which can build RMR.
Source: CEPro, November 2012