Commercial Integrator + Security Sales Jan/Feb 2024 - 19

D-Tools Data Analysis
Profit Margins: How Do Yours Compare?
By Jason Knott,
data solutions architect and evangelist, D-Tools
The lines between residential, commercial and security
integration businesses continue to become muddier. And that
softening of the boundaries is readily apparent based on new
data focused on profit margins from D-Tools.
Data from nearly 1,000 commercial, residential and security
integrators who sold and installed systems in the first nine
months of 2023 using D-Tools Cloud Software-as-a-Service
(SaaS) end-to-end business management solution uncovered
some key differences between market sectors in terms of
margin and revenue:
■ Residential integrators on average experience higher
profit margins from both products and labor than their
commercial counterparts.
■ Commercial security-centric integration companies
experience the highest margins in all facets.
■ Collectively, integrators in all three sectors report 48%
profit margin on their projects. More specifically, profit
from equipment sales averaged 43%, while profit on labor
averaged 55%.
■ Security-centric integration companies are much less
reliant on earning revenues from equipment compared to
other integrators.
Among projects sold between January 1, 2023, and October
31, 2023, the profit margins remain strong in the three
disciplines, with some subtle differences (see Figure 1).
Figure 1: Equipment vs. Labor Margins by Market Sector
MARKET SECTOR
Residential
Systems
Commercial AV
Commercial
Security
CUMULATIVE
EQUIPMENT
MARGIN
45%
32%
50%
43%
LABOR
MARGIN
57%
50%
67%
55%
BLENDED
MARGIN
48%
37%
54%
48%
Meanwhile, in terms of revenue sources, there is a stark
contrast between security-centric integrators' sources of
revenues and traditional smart-home dealers and commercial
AV integration companies (see Figure 2). The statistics cover only
revenues drawn from the installation phase of the projects; they
do not include recurring revenues such as monitoring or service
that occur post-installation.
Commercial Integrators
Achieve Solid Margins on Labor
For the first nine months of 2023, commercial integration
companies derived an average of 74% of their installation
revenue from product sales and 26% from labor. In terms of
Commercial Security Dealers
Work on Strong Labor Margins
For the first nine months of 2023, self-identified security
integration companies derived an average of 53% of their
installation revenue from product sales and 47% from labor -
both respectable percentages.
In terms of profit, according to the D-Tools data, securitybased
companies experience on average an impressive 50%
margin on the products they installed and an even more
impressive 67% on labor. Overall, security companies report a
sturdy 54% profit margin on their installations for the first nine
months of 2023.
Jan/Feb 2024 | Commercial Integrator+Security Sales & Integration
19
Figure 2: Equipment vs. Labor Installation Revenue
Sources by Market Sector
MARKET SECTOR
Residential
Systems
Commercial AV
Commercial
Security
CUMULATIVE
INSTALLATION
REVENUE % FROM
EQUIPMENT
77%
74%
53%
67%
INSTALLATION
REVENUE % FROM
LABOR
23%
26%
47%
33%
profit, they experienced an average of 37% margin overall on
their projects, earning 32% margin on their products and 50%
margin on their labor.
One caveat to consider regarding labor margin reporting is
that some integrators cite their " fully loaded " labor costs in
their D-Tools proposals, meaning that they have included direct
and indirect costs, such as benefits, insurance, vehicle costs,
etc., when calculating their labor costs. On the other hand,
other integrators only use the specific wage rate they pay their
staff as their cost of labor in their D-Tools proposals. Thus, the
actual profit margin on labor is likely somewhat inflated.
Residential Integrators Rely
Heavily on Equipment Markup
For the first nine months of 2023, residential integration
companies had a similar product-versus-labor revenue blend
as their commercial brethren. They derived an average of 77%
of their residential installation revenue from product sales and
23% from labor.
Looking at profit margin specifically, residential integration
companies experienced, on average, overall profit margin of
48% on their installations for the first nine months of 2023.
Breaking that down by product versus labor, residential
integration companies earned an average 45% profit on the
products they installed and 57% profit on their labor... both
higher percentages than commercial projects. Again, the same
caveat as noted previously regarding labor margin applies to
this percentage.

Commercial Integrator + Security Sales Jan/Feb 2024

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Commercial Integrator + Security Sales Jan/Feb 2024 - Bellyband1
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