Financial Benchmarks 2008 from NSCA
report. The numbers reveal a trend toward evolving business models.
LAST FALL, NSCA RELEASED ITS ANNUAL “Financial Analysis of the Industry” report. It focuses on three main areas of interest: company background, balance sheet and summary information, and sales ratios. Looking at year-to-year comparisons, there are subtle signs that many systems integration businesses have been shifting their business models to reflect changing in the industry.
Many of these changes have been outside the control of AV professionals. Advances in technologies such as digital signage and videoconferencing have attracted previously unrelated industries to ours, creating a more competitive environment —though, it doesn't seem to have hurt; the average company size grew about 26 percent from 2006 to 2007.
Another clear trend since 2003 is the shift away from “bid” jobs to more of a direct/negotiated design/build model. This does not necessarily spell trouble for AV consultants. It may simply be an indication that AV integrators are developing better skills at marketing their companies and pursuing small to midsize projects on their own.
Over the last seven years, AV companies have derived only between 15 percent and 20 percent of their revenues from re-occurring sources. Nearly every other industry in the United States, including some which are providing stiff competition for AV integrators, is evolving toward a model that emphasizes re-occurring revenues.
In light of pressure from product commodization, shrinking product profit margins, and increased competition, this seems like an area where AV companies should seek to re-align their business models.
SOURCE: NSCA 2007 FINANCIAL ANALYSIS OF THE INDUSTRY