What Is the Importance of Revenue vs Profitability for Integrators? Statistics

IT
IPVM Team
•Published Mar 01, 2019 14:21 PM

A company can be highly profitable but if it is small, they will still not make much money. By contrast, a company can generate lots revenue, but if they have no profits, they do not 'take home' any money.

Whereas startup manufacturers and developers typically raise external funding and absorb losses for many years, focusing on revenue growth, many, if not most, integrators do not.

New IPVM statistics, based on a study of 100+ integrators showing integrators divided about what to prioritize as the chart below shows:

revenue vs profitability

Inside this note, we share the main reasons and dozens of integrator comments to better explain the tension between profits and revenues and why so many integrators focus more on profits.

****************

*******, *********** ****** **** ** * tendency ** **** ******** *** ***** conservative ** *** **** **** ** a ******** ** *********** *** **** more ******* *** ********* **** ******* revenue ***** ******* ******* ********.

Conservative / **** *******

** *** ********** ******** ***** *********, concerns ***** ***** *** ** ******** if ************* *** *** *** ***** were ***********:

  • "****** ** **** ********* **** ****** just *** ******'* ****. * ************ profitable ******** ****remain ***** long into the future. A company focused only on revenue growth may not have a solid base from which to generate profit."
  • "*************. *** **** ****** *** ***** in *** **** ** ****** ********* are **** ****** ***no *** ***** ***** ***."
  • "** **** *** ******** ******* ** the **** ** ************* *.*. ** selling ***** ** **** **** *** only ******* *** ***** ***risks *** *******'* ******."
  • "******* ************* ****** ****** *** *** every ***. ***** ******** ******* ** a ******** ****.Chicken **** **** *** ***. Busy but poor?"
  • "* *** ** ***** ** *** down *** ******. ******* ******* ** the ******* ** ************* ******* *downward ****** that is very difficult to get out of without incurring massive pain. If you're not profitable at a smaller size, you will still not be profitable at a larger size."
  • "************* ** *** ***. **** ** companies **** *** *******go *** ** ******** because they are insufficiently profitable"
  • "************* ** *** **** ********* ******* large ******* **** ** ******puts ********* *** ** ********."
  • "* ***** ****** ******** ************* - growing ******* ***** **** *** *** set **issues *** *********."
  • "*************. ******* ** ***** ****** *** arecan't *** **** *****"
  • "*** ******* *** ** **** * profitto **** ****."
  • "************* ***'* ***** ***.Who ***** *** **** ******* you bring in if most of it goes out again on costs."
  • "* ******* ********** *** ************* ** more ********* & ********** *** ********* situation ** *** ******* **revenue **** *** ******* **."
  • "******* ** *********** ** *** ***not ****** *****. We focus on profitability."

Scalability / ****-****

** ********, * ******** ** *********** emphasized **** ** ******** ** ******* revenue *** ******* ****** ****, ** the **** ****, *** ******* ***** be **** **********:

  • "******* ******* ** ****** **** ********** profitability. **** * ******* ***more ****** *** *** **** ****** ***** * *****. maximizing profit is not the work you should do."
  • "******* ******* ********* ********** *growing ******** **** whereas maximizing profitability may reflect budgetary events that maximize profitability on a short **** ***** ****."
  • "******* ******* *** **** ********* **** maximizing *************. *******when *** ****, **** ******** **** ***** that leads to profitability."
  • "******* ******* ** ******** ** ** opinion ********** ** *** ****** *** - ****** *** ****** *** ********* are ********. ** **critical ** ******* ****** ***** and bring added options to existing customers."
  • "******* ******* ******* ********** ******** ***realize ******* ********* much more rapidly than 5 or 6 points off a price quote or as some companies do by submitting un-neccesary change orders etc. Effort spent on new business and Bus Dev is key and should be any legitimate companies main focus."
  • "******* ** **** **** ********* ** those *** *** ********* **** ****keep ****** **** for smaller jobs."
  • "******* ******* ** **** **********in *** **** ***. If we can gain sales upfront we can continue to do service and get better pricing on equipment as we buy more."
  • "******* ******* ** **** ** *** focus ** *****-**** ************* ** * single ***. **-***** ******* ** *********** where ******/**** ** * ****** *** is *one-shot ****."
  • "******* ******* ** ***. * *** it ** ******** **** *******, *** more ** ****, *** **** ** can ******over ****. Plus we make a lot of money on the back end with SLA's so the more installs we get in the more RMR we can collect."
  • "******* ******* **build *** ******** **** and then maximizing profitability with no cost referrals to reduce marketing and sales costs."

Privately ****** ** ******** *******

** * *** *********** *********, *** we *****, *** ********* *************** ******* integrators ** ***** ****** ** *******. As **** ********** *****:

** *** *** * ***** ********* held ********, *** ***** ** ** taking **** ** *** ****** ** the ******* *******. ** *** ** this *** ********** ***** ******** *******, then *** **** ******** *************. *** larger ** ** ****** *****, ******* growth ** **** *********.

***** **** *********** *** *** **** private *** ******* **** ** *** owners **** ******* ****** ** ******** funding, *** **** ** ** ******** on ******* ****** *** *** *** company *** ** ********. *** * well-funded *******, ***** ***** **** *** be ******** ** *** ************ ** future ****** ** ******* *** *******, but *** * ******* ******* **** access, **** ****** *** **** ******** down *** ****** *******.

Questions ** *****

** **** **********, ***** (*.*., ******* ***) is *********. ************* *** ****** ********** are **** ********. **** ************* *** high ******* ***** *** **** ****** businesses *** **** *****, **** ****** larger ********* **** ****** **** ********** and ******** ******* ** ******* **** smaller ******.

**** ***********, **** ** **** ******* so. *********** ** ***** ********* * physical **-**** ********. *** **** ********** in ***** ** ********** ** ***** in ********** ****** *** ***** ********** builds * ***** ****** *** **** in **********. ********, *********** *** ***** heavy **********. ********** ** ********* **** new ******** ******** *** ***********, **** limited ******* ** ***** ***** *********.

******, ***** *** ** **** ************ or ********* ********, *** ****** *********** get. *** *******, ***** *********** ** so ***** *** ******* ********* (*.*., supporting ******** *** *****), *********** **** are *** *****, ***** ****** **** personal *** **** ********** **** ******* integrators ***** ********** ********* *** ********** more ********* ** *** ******* ** their ********.

** ******* ***** ** ***** ****** is **********, ***** ******* ********* ** ****** ** * ******* ****** **** acquisition ** * ******* ****** ****. ** ********** ********** ******** ** their ******** ** ** * $*+ billion ****** *******, ** ***** ******* the ******** *** ***** **** ************ integrators *** **** **** ***** *** wrong ***** *** **** **** ***** fail ** *** **** ** **********'* power. ** *** *******, **** ****-****** ones ***** ***** *****. 

Comments (4)
UM
Undisclosed Manufacturer #1
•Mar 01, 2019

The most reputable integrators I've seen put customers first. Growth organically comes from that via referrals and repeat business. Profit organically comes from that via outstanding reputation. I see it all the time, as soon as someone prioritizes profit over customer experience (hiring inexperienced labor for cheap, using a low-quality low-cost product, etc), they win battles for a while but end up losing the war. 

(7)
UI
Undisclosed Integrator #2
•Mar 04, 2019

"For a well-funded company, short terms loss can be absorbed in the anticipation of future growth in revenue and profits, but for a company without such access, such losses can mean shutting down the entire company"..............so true

also if anyone else says otherwise let me know.... but as an integrator net profit margins are tight to begin with.......that is why profitability and cash flow are king for me.............

the CEO of UTC once said 'the integration business is not a high margin business"......as an integrator I'm trying to figure out how to change that........    

(2)
UI
Undisclosed Integrator #3
•Mar 04, 2019

Having owned an integration company for 10+ years I would disagree that integration is a low margin business. I have an overall profit margin of over 40% on any product or labor I sell. I work on big projects for large commercial customer and have no trouble getting the dollars I need to make money. Otherwise, what's the point? I sell high quality cameras and access control and find that customers are willing to pay for the competence and experience. Trying to compete on price is foolhardy and I realized that if I didn't have customers with deep pockets than it didn't make sense to service them. 

(1)
UI
Undisclosed Integrator #2
•Mar 05, 2019
In reply to Undisclosed Integrator #3

If you noticed I was refering to net profit........for example on 5mil in annual sales I have yet to break 10% net profit on revenue in an given year...........the gross profit margins before overhead and operating expenses are similar to yours