If your company chooses to sell equipment at a hardware margin of 5% or 10%, then you’re not conveying how important it is for your customer to have the level of technology you’re capable of providing.
Hardware margins. They’re slim—and getting slimmer.
In the 2022 State of the Industry survey report, released earlier this year by Commercial Integrator and NSCA, more than half of integrators said they make 20% or less in hardware margins. Nearly one-quarter of respondents report that they make 10% or less.
It’s vital that every project is profitable and contributes to positive cashflow. After all, you don’t “win” the project if it isn’t a profitable venture for your company. Given the need to cover your overhead costs—facilities, insurance, utilities, IT infrastructure, software, etc.—what’s the “right” hardware margin average to aim for?
Although there’s no perfect number that will work for everyone, we estimate that a (roughly) 30% margin on hardware is about right, given that most integrators have overhead-cost percentages that sit in the high 20s. Some integrators put out proposals that reflect low hardware margin on projects but charge more for labor to make up the difference. At the end of the day, the difference needs to be made up somewhere if your firm wants to stand the test of time.
But the most important thing to remember is to place the proper value on the work you do as a mission-critical solutions provider. Stop devaluing your work!
If your company chooses to sell equipment at a margin of 5% or 10%, then you’re not conveying how important it is for your customer to have the level of technology you’re capable of providing.
Just a few years ago, many NSCA members were finding themselves in a race to the bottom, undercutting prices by sacrificing quality standards and/or worker safety. They saw opportunities for rebates on the back end and took on more volume in hopes of making up the difference, but this approach ultimately leads to cashflow problems.
The bottom line: Integrators must sell value, not price. This is so important that we’re discussing the topic in more detail at the 2023 Business & Leadership Conference (BLC) in Irving, TX, on Feb. 28-March 2, 2023.
BLC will close with enthusiastic insights from Ian Altman, a service- and technology-oriented business leader who has become a leading authority on accelerating business growth. His session will challenge integrators to shift their focus from price to value and offer actionable steps to tailor solutions that add value. He’ll flip traditional approaches to competition on their head, covering key pillars from his bestselling book, Same Side Selling. Based on research conducted among thousands of executives on how they make and approve decisions, attendees will discover how to build on existing sales methodologies to shift the focus from price to value and stand head and shoulders above the competition. They’ll also be able to show clients why they have a superior solution—regardless of price.
Learn more about BLC 2023 at www.nsca.org/blc.