Earlier this year, we asked systems integrators across the country to participate in our Cost of Doing Business survey.
The survey results were then used to create the new Financial Analysis of the Industry for 2018, a benchmarking report that offers a reliable way for you to compare your company’s financial information with other integrators that run the same type of business you do.
The survey posed questions about:
- Company revenue (including RMR)
- Largest projects and customers
- New customer acquisition
- Numbers of full-time and part-time staff
- Overall financial health
- Prevalent systems and technologies
- Project backlog
- Success in specific vertical markets
The data in the report provides integrators with a more in-depth look at company operations and dynamics, as well as insight into how our members perceive the financial health of their own companies. By comparing your own business’ ratios and overall performance to the ratios of your industry peers, you’ll be able to pinpoint significant discrepancies and find opportunities for improvement.
“Early on in my position as vice president of Sound Image’s integration division, I needed to conduct a financial analysis of our division (which had been in business for over 20 years) as a key component of my business plan,” says Larry Italia, former vice president at Sound Image. “I had our numbers, but I needed some benchmarks for comparison to see where we sat in respect to fellow integrators. The Financial Analysis of the Industry report was an invaluable resource for me. It gave me the benchmarks I needed for comparison. It was comprehensive so that virtually any metric I wanted to benchmark was there (e.g. headcount, revenue per employee, bid vs. design-build, etc.). In particular, the financial data (SG&A, balance sheets, etc.) was an important tool for me.”
A few key takeaways from the 2018 Financial Analysis of the Industry report are listed below. How does your firm compare?
- Project backlog (unfinished work and sales orders that haven’t been fulfilled) has more than doubled in terms of dollars since the 2015 survey, from a median of $2 million to a median of $4.8 million. Expressing this as a percentage of total revenue also shows an increase, with the median moving from 26.6% to 36%.
- The percentage of revenue from recurring sales has been dropping since 2010, reaching a historical low point of 10.83%. The report also indicates, however, that most profitable and top-quartile companies consistently rely on recurring sales. For example, the Top 10 companies derive an average of 19.82% of total revenue from recurring sales, and post a pre-tax profit of 14.32%. The percentage of revenue from recurring sales drops to 9.44% among the non-Top 10 companies; their pre-tax profit is only 2.3%.
- “Video display/AV presentation and control” leads other options by a notable margin in terms of the system/technology that accounts for the largest share of total revenue in the last fiscal year. Selected by 37.3% of survey respondents, “video display/AV presentation and control” is trailed by “audio/sound reinforcement” (18.7%) and “nurse call/life safety/RTLS” (selected by 13.3%).
The report also includes verbatim responses about the biggest challenges integrators anticipate in the next few years. Recurring comments included:
- “Allocating labor resources in an optimal manner to execute on the robust pipeline our company has for the remainder of 2018”
- “Business mergers”
- “Clients not understanding the value propositions of well-thought-out designs”
- “Filling staffing needs for experienced technicians and designers”
- “Finding and keeping talented staff”
- “Finding dependable, qualified labor”
- “Hiring qualified people”
- “Moving more sales to service offerings”
- “Transformation from an on-premises system installer to a managed systems solution provider”
Need help making sense of the report and conducting comparisons? Want to map out a new action plan to make business improvements? To learn more about how to use this report to make better business decisions, contact NSCA!