*Originally published on CommercialIntegrator.com
Capital expenditures will be more rare as companies look to preserve cash after the coronavirus outbreak so AV integrators must embrace recurring revenue.
Managed services is nothing new in the AV industry, but it’s still a bit of a struggle to get some companies to embrace the idea, even in an era when project work is at a premium and a recession is looming in the post-pandemic world.
But, at a time when the “dollar protection strategy” is sweeping across the economy, being able to offer customers the option of monthly payments to pay for their AV installations and updates is critical for integrators, said Corporate Sales Coaches partner Bob Lobascio in an NSCA webinar.
“It’s a good idea to walk in your customers’ shoes so you can see what they’re going through,” said Lobascio. He notes most customers have moved from the shock and awe when the coronavirus first swept across the U.S. to the planning stage and are heading toward the execution stage.
A poll at the beginning of the webinar showed one-third of attendees expect their revenue levels to be flat this year, another one-third think they’ll see a drop of 10 to 20 percent, 20 percent expect their revenues to drop 30 percent or more and about 15 percent predict a growth year.
Those percentages contrast favorably to when about two-thirds of NSCA members predicted in March that their revenues would likely drop at least 30 percent in the immediate aftermath of the COVID-19 pandemic outbreak across the U.S. and around the world.
“Customers are trying to solve problems in a couple of ways: either by using familiar tactics or trying to innovate,” said Lobascio. Economist Chris Kuehl told NSCA members he sees a recession on the horizon with drops of 5 percent of GDP in the second quarter of 2020 and 2 percent in the third quarter.
“Cash is king during a recession, but subscription pricing and monthly payments are important to explore and offer,” said Lobascio. “If you try to use what you have in the past, it won’t work as effectively when cash is king.”
Managed services, he said, increases profits and creates recurring revenue streams. It’s important, though, to have the conversation about recurring revenue options during the planning stage.
It should be introduced early, not as a bolt-on, and integrators should realize only about 20 percent of customers will want to employ a recurring revenue strategy, but that’s enough to build a healthy business.
“That’s the best option in a market that’s trying to preserve cash,” said Lobascio.
How Managed Services Helps Integrators
PCD director of operation Bill Graham notes the company has used a managed services strategy for a little over a year and employed it with more than 20 customers, including one school district that was able to build performing arts centers in the schools about three years before they would’ve otherwise.
That strategy allowed the district to generate additional revenue from rentals, says Graham.
“[Managed services] isn’t for everyone, but if you don’t offer it, you’ll never know which clients want it and which ones don’t,” he says.
Automated Systems Design national account manager Heather Ducheney touted the company’s Technology as a Service offering, calling the initiative “a no-brainer.”
“Companies don’t always have that capital, and sometimes when they do, they don’t always want to use it,” she says. “When you present it upfront, there are fewer objections. It’s a proven way to conserve capital while getting the latest technology.”