Driving sales and profits with IP networking: Data from the field
Let me state right up front that this IPIQ installment is different than most.
In our industry, we tend to get caught up in technical specifications and how products integrate. We don’t always focus enough attention on the business side of selling IP networking and integration services. With this in mind, I would like to share the results of a recently completed survey we at Luxul sent to our integration partners.
We’ve all seen the industry surveys that offer valuable insights into the state of the custom installation industry. The goal of our survey, however, was to get more specific IP networking data that accurately reflects what our customers are seeing as well as their attitudes towards networking and what it means to their business. The results offer some interesting perspectives that we are happy to share with Technology Integrator readers.
What kind of margins are you making?
We’ve all heard the pessimistic narrative: Hardware margins are shrinking and the industry is moving to a more service-oriented model due to pressure on hardware margins. IT providers are encroaching on what was traditionally integrator business, and residential installers are feeling the effects of a burgeoning DIY market. The results of our survey would indicate that this narrative isn’t entirely accurate, at least for Luxul installers.
We asked our installers to estimate profit margin on labor, equipment and design as it relates to networking. Nearly a third of installers surveyed are making margins of 30 to 40 percent. 21 percent of those surveyed realize 40- to 50-percent profit margins, and another nine percent make 50 to 60 percent! To put it another way, almost a third of the dealers surveyed make profit margins of at least 30 percent, while another third enjoy better than 40-percent margins on networking hardware.
This tells us that when a manufacturer builds pricing models and distribution networks with installer margins in mind, the results can be reassuring. The takeaway here is that integrators selling networking equipment and services are making money on networking.