Subscriber Discussion

How Much Annual Revenue Is Needed To Make An Integration Business Viable?

Avatar
Armando Perez
Oct 21, 2016
Hoosier Security and Security Owners Group • IPVMU Certified

This brings up a good question... At what point is an integration business viable?

Ive always said it was somewhere between 2 and 2.5M in revenue.

Between insurance, vehicles, tools, employee benefits, actual W2 employees, etc, it seems very difficult to make it work in this industry below that without alot of RMR or some other advantage.

anyone care to share their thoughts without alienating other members?

NOTICE: This comment was moved from an existing discussion: ADI Asks What Type Of Trunkslammer Are You?

JH
John Honovich
Oct 21, 2016
IPVM

That's a good question.

I've seen functioning integrators as small as 2 - 3 people. In those cases, these were typically experienced professionals who had a strong reputation and could leverage that to be the preferred vendor for a few large organizations.

Related, I wouldn't be surprised if the 'average' 'integrator' did under $2 million in revenue. For example, the SDM 100 integrator list (which absolutely leaves out lots and lots of integrators since each integrator has to apply), requires only $2 million in annual revenue to make to the list. Moreover, through the years, I have known / seen lots of integrators which are no more than 5 or 10 people (which almost always means less than $2 million in revenue).

Also, related, What Do You Consider a 'Large' Integrator?

Interesting topic. I'd like to hear what others think here.

(1)
MM
Michael Miller
Oct 21, 2016

We have been profitable since I started by myself 9+ years ago. Now we are at 12 people + 3 more that I am currently hiring and we are doing very well.

I also know a lot of small 1 or 2 man shops that do very well (not as much overhead) without all the headache managing many people, projects and service. These guys seem content going job to job want the freedom to work as they see fit.

(2)
(2)
UI
Undisclosed Integrator #1
Oct 21, 2016

We have 3-4 people and do $1-$1.25 mill/year and we are profitable. Started 15 years ago.

(1)
Avatar
Armando Perez
Oct 21, 2016
Hoosier Security and Security Owners Group • IPVMU Certified

Im confused. the link on your name shows alot mroe than 4 employees.

http://www.excelengineer.com/company

Avatar
Jason Neubauer
Oct 21, 2016
IPVMU Certified

Yes Armando - we have a division inside of the company shell.

Avatar
Armando Perez
Oct 21, 2016
Hoosier Security and Security Owners Group • IPVMU Certified

I think there are alot of benefits you are seeing in that arrangement that bely the size of your division being seen as a standalone business, no?

(1)
Avatar
Armando Perez
Oct 21, 2016
Hoosier Security and Security Owners Group • IPVMU Certified

I figure I should chime in since I asked the question that got turned into a post. I normally keep this very close to the vest, but I dont mind sharing a bit in this venue and for the sake of learning. We currently have 9 W2 employees and around $1.4M in Revenue. Profitable since around day 10 with no real debt other than vehicles, but pushing for more growth isnt cheap. I dont feel we became viable until we broke $1M, but just like everyone else thinks about themselves, I think we are the exception.

(3)
JH
John Honovich
Oct 21, 2016
IPVM

Armando,

Thanks for sharing. One thing to consider is that as you continue to get bigger, management will be more complex, and there will be new challenges.

With 10 or so employees, you can interact with most everyone personally on a regular basis. But get to 20 or 30 employees and then you need more organization, layers of management, etc.

When I was an integrator, we went from ~10 to ~30 employees and there was challenges, mostly from the owners who were used to having a smaller, simpler business.

(4)
Avatar
Armando Perez
Oct 21, 2016
Hoosier Security and Security Owners Group • IPVMU Certified

So far our biggest challenge has been going from using contractors as needed to having full time on-staff technicians with benefits and.... GASP.... taxes. Im fully expecting bigger challenges on the way.

(1)
Avatar
Tyler Blake
Oct 22, 2016
BCI Integrated Solutions

My assessment is similar to the OP's from looking at various acquisitions and deals over the years. A straight integrator shop without RMR isn't even worth acquiring unless it's over 2mm in rev, unless you are buying out a specific dealership like Notifier that you can bring on to your other markets or specific accounts or some salesman you are looking to pick up. A better metric is probably analyzing revenue per employee at the sub 2mm level.

With that little revenue and room for error at the sub 2mm level the p/l statement moves consoderably based on the owner(s) abilities and business sense. The other hard thing is that they have to outsource a lot of back office duties that larger companies just in-house for a fraction of the price. Not to mention in larger organizations you get individual sale staff that generate in excess of 2mm. However 2mm of alarm revenue is worth a heck of a lot more than 2mm of cameras or access control rev.

(1)
UI
Undisclosed Integrator #2
Oct 22, 2016

I get the access to product item, but who buys a company with less than $2 million in revenue to acquire their sales people?

Avatar
Tyler Blake
Oct 22, 2016
BCI Integrated Solutions

I didn't intend for this to sound like it was a good idea buying a company to acquire multiple sales people. The instance is that I would look at a business with 1 sales person that generated 2mm or close to 100% of the revenue. If it were a business where the owner(s) were the sales person(s) and generated a substantial portion of the revenue it would be worthless at or below 2mm.

The idea behind this being you could buy the business, on board the single salesman and jettison the small business office staff. This isn't a bad idea if you were say buying a company doing a type of low voltage you do not already do. E.g. a camera company buying a door/access shop or picking up a fire alarm/security alarm sales/install department.

With much larger of a company, you are correct in that buying a 2mm business is going to be a headache more than anything as usually the company processes are not very mature and you run into culture issues. E.g. "I used to manage and be in charge of everything and now post acquisition I have a defined role with reduced scope of duties."

(1)
Avatar
Armando Perez
Oct 22, 2016
Hoosier Security and Security Owners Group • IPVMU Certified

More of your thoughts on Rev per employee please...

New discussion

Ask questions and get answers to your physical security questions from IPVM team members and fellow subscribers.

Newest discussions