You would be hard pressed to find a custom home integration company today that doesn’t do minimal business. Before the pandemic, the percentage of revenue from commercial work had reached an astonishing high of 41.7% for the typical commercial technology installation company in 2019. Of course, COVID-19 put the kibosh on that diversity so that the commercial market was almost completely closed. .
In 2020, the percentage of revenue from commercial projects plunged to just 17%. In 2021, there was a slight increase to 20.5% in revenue as bars, restaurants and offices reopened, but who knows how long it will take to return to pre-COVID levels.
Meanwhile, the same pressures limiting the growth of residential space are just as prevalent in commercial projects. The lack of equipment due to the supply chain, the shortage of labor and inflation are all obstacles to growth.
The median number of commercial projects completed in 2021 by integrators was 10 (compared to 37 residential projects). For 2022, dealers plan to achieve just 7.5 commercial installations.
According to the 2022 CE Pro Resimercial Deep Dive study conducted in June this year, dealers report that their business activity has remained virtually flat over the past 12 months, with an overall median decline of 0.4%, a decline of less than half of 1%. And for the rest of 2022 and into the first half of 2023, the news isn’t much better.
Dealerships are only anticipating a 1% increase in trading revenue over last year.
This weak growth outlook is sobering, especially since CE pros tend to always be overly optimistic.
Even in the midst of the housing crisis, during which the average integration business lost more than 50% of its turnover, the concessionaires expected double-digit growth rates. So seeing the industry anticipating such a small increase in business activity is a clear sign of pessimism.
Given that COVID restrictions are virtually nil at this point, the weak growth forecast is likely due to fears of an impending recession, as well as the other pressing issues noted earlier.
However, the data could also be a sign that dealers plan to focus on their core business, which is residential space, given the uncertain economic environment. Despite a not-so-rosy outlook, 97.7% of residential integrators say they have completed at least one commercial project in the past 12 months.
The most popular commercial verticals continue to be the “usual suspects” of boardrooms, bars/clubs/restaurants, retail and education.
Meanwhile, in terms of equipment categories, lighting fixtures topped the list of the most anticipated growth categories for commercial work for the rest of this year, with 21% of dealers citing it as their top area. of growth.
The lighting category has exploded on the residential side of the business and dealers clearly see an opportunity to become specialists in commercial lighting as well.
Lighting and cybersecurity are the hottest business categories
Interestingly, the equipment category that dealers believe will experience the second highest growth rate is commercial cybersecurity, with 20.2% of integrators citing it as their #1 growth area.
While networking has become a staple, it’s worth noting that dealerships expect cybersecurity to be a key part of their business growth, as the category has yet to see similar momentum on the residential side, even if consumer studies of Parks Associates and others show that distrust of hacking and privacy are among the top concerns of potential buyers of smart home equipment.
CCTV/Access Control/Intrusion Security Systems are also listed by dealers as a top business category for the remainder of 2022 and through 2023. In total, one in five integration companies ranks the security as its priority business market opportunity.
Business networks, AV conferencing, digital signage and room acoustics are other categories of business equipment that dealers expect to be healthy.
While some work-integration firms deliberately migrated to add more commercial work when the Great Recession hit in 2008 and the housing market crashed, others do not necessarily seek commercial work but rather let it come. to them.
The commercial equipment category expected to see the second highest growth rate for 2022 and into 2023 is cybersecurity.
Indeed, according to the study, referrals are by far the most common source of business leads with nearly four in 10 (39%) coming from a referral.
Breaking this down, 20% of commercial jobs are referrals from another commercial customer, while 19% come from residential customers referring dealers to commercial employment. Only 10% of commercial projects handled by CE professionals involve a competitive bidding process.
In fact, when asked what their biggest challenge is in the commercial market, competitive offerings are listed as the #1 inhibitor. bidders win”. Other challenges cited include maintaining cash flow and non-traditional work schedules such as nights and weekends, which is sometimes necessary for commercial jobs so as not to disrupt customer operations.
Revenue, CMA Outlook for Business Technology Jobs
In terms of revenue, the median price for a commercial installation in 2021 was $30,073 according to CE Pro’s State of the Industry Study.
With a median of 7.5 projects, this equates to $225,547 in average revenue per integrator for 2022 if the price remains the same. The Resimercial Deep Dive survey did not assess 2022 average prices.
Still on the revenue theme, integrators recognize the potential for recurring monthly revenue (RMR) from commercial customers.
In total, nearly three in four dealerships (72.4%) report earning some type of RMR from a commercial customer.
However, even though most dealerships earn some RMR from commercial customers, the percentage of projects with RMR is very low, only 6.3% of installations. And the amount of RMR per business project is low – just $53.38 per month.
One area of the commercial market that seems to be very similar to the residential market is that of the main points of contact for the integrator.
In 31% of commercial projects, CE pros deal directly with the property owner. Facilities managers, general contractors, and IT managers are next on the list in descending order.
Finally, the CE Pro Resimercial Deep Dive survey asked dealers what their favorite aspect of commercial work is.
Unsurprisingly, higher earning potential is among the top answers, along with avoiding having to deal with a potentially picky householder or interior designer.
Read more : Why Resimercial, Business Integrators Should Offer Managed Services to Customers
In commercial work, the direct business relationship with the commercial end user seems to be coveted.
Ease of installation is also a key draw, with enterprise cabling often able to run in drop ceilings.