“I want to know when a client’s home needs service before they do. System monitoring gives us immediate knowledge of a component failure and in some cases the ability to fix the problem remotely. This is a significant advance in a business where service is everything.”
Ken Johnson, President of Premiere Systems
CEPro-Integrators Need Service Contracts More Than Ever
Lack of recurring revenue makes many in the custom installation industry vulnerable.
We were surprised to hear Baumeister Electronic Architects went out of business.
The Niles, Ill.-based integration company always seemed ultra-professional. Its high-end installations often garnered coverage in CE Pro’s sister publication Electronic House. The company seemed like the crème of the integration crop, ranking No. 41 on the most recent CE Pro 100 list.
Its collapse is reflective of a scary reality in the custom electronics industry: integration companies are more fragile than they think.
A recent Webinar conducted by managed service provider Atomoo emphasized this point. Having a recurring revenue model is extremely important to integration companies, something CE Pro has been emphasizing for years.
There are plenty of exceptions, but the typical integration model is flawed. When most installers walk away from a project, the revenue stream ends.
An integrator can sell great products, provide superior service, do top-notch installations and even build strong relationships with clients. At the end of the day, however, the only thing that actually connects an integration company to a client is good faith — unless the integrator has sold that client a service contract.
According to Atomoo co-founder Thad Glavin, service contracts with clients increase the value of integration companies and improve cash flow.
“Fact: Companies with recurring revenues are sold for more than companies without recurring revenues,” Glavin said during an Atomoo webinar.
“We are starting to see consolidation happen in our industry. As such, it becomes even more important for [integrators] to create a recurring revenue model. It creates cash flow and it’s concrete. When companies need an exit strategy for whatever reason having a recurring revenue stream is imperative in terms of value to an acquirer.”
Now is as good a time as any to create a business model based on service contracts and reap the cash flow benefits of recurring revenues.
After all, if it can happen to Baumeister, it can probably happen to you.
The Niles, Ill.-based integration company always seemed ultra-professional. Its high-end installations often garnered coverage in CE Pro’s sister publication Electronic House. The company seemed like the crème of the integration crop, ranking No. 41 on the most recent CE Pro 100 list.
Its collapse is reflective of a scary reality in the custom electronics industry: integration companies are more fragile than they think.
A recent Webinar conducted by managed service provider Atomoo emphasized this point. Having a recurring revenue model is extremely important to integration companies, something CE Pro has been emphasizing for years.
There are plenty of exceptions, but the typical integration model is flawed. When most installers walk away from a project, the revenue stream ends.
An integrator can sell great products, provide superior service, do top-notch installations and even build strong relationships with clients. At the end of the day, however, the only thing that actually connects an integration company to a client is good faith — unless the integrator has sold that client a service contract.
According to Atomoo co-founder Thad Glavin, service contracts with clients increase the value of integration companies and improve cash flow.
“Fact: Companies with recurring revenues are sold for more than companies without recurring revenues,” Glavin said during an Atomoo webinar.
“We are starting to see consolidation happen in our industry. As such, it becomes even more important for [integrators] to create a recurring revenue model. It creates cash flow and it’s concrete. When companies need an exit strategy for whatever reason having a recurring revenue stream is imperative in terms of value to an acquirer.”
Now is as good a time as any to create a business model based on service contracts and reap the cash flow benefits of recurring revenues.
After all, if it can happen to Baumeister, it can probably happen to you.