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Profit is arguably the most important business metric to monitor for integration companies. But where does that profit come from: labor or equipment? According to new data from D-Tools, the answer to that question varies widely among integrators depending on which market niche they are focused on: security, commercial AV, or residential smart home.
According to the data, which was drawn from nearly 1,000 commercial, residential, and security integrators who sold and installed systems in the first nine months of 2023 using the D-Tools Cloud Software-as-a-Service (SaaS) end-to-end business management solution, there are key differences between market sectors in terms of margin. Notably:
- Residential integrators on average experience higher profit margins from both products (45%) and labor (57%) than their commercial counterparts.
- Commercial security-centric integration companies experience the highest margins in all facets, at 54%.
- Collectively, integrators in all three sectors report a 48% profit margin on their projects. More specifically, profit from equipment sales averaged 43%, while profit on labor averaged 55%.
The full, free downloadable report reveals the specific margins earned by security, residential, and commercial integrators for both labor and margin. The report also shows the percentage of revenue derived from equipment versus labor among the three disciplines.
Digging deeper, it is clear that residential integrators still rely heavily on marking up their equipment to achieve their desired profit margins. That tactic has become increasingly more difficult as the smart home market faces the continued growing influence of consumer-grade products with much-publicized MSRPs. Often, those consumer-focused products, such as smart speakers, TVs, and network thermostats, do not have large delta between the dealer-level pricing and the MSRP. Thus, integrators are not able to mark those products up to boost their equipment margins.
On the flip side, smart home integrators mostly utilize niche brands that have little to no consumer awareness. Thus, those products, which can include high-performance projects, motorized shades, loudspeakers, and other categories, allow for the ability to be marked up, helping to boost margin.
DOWNLOAD THE FREE SPECIAL REPORT ON MARGINS HERE.