It’s time to place the proper value on the work you do as a mission-critical solutions provider. Stop devaluing your work and improve your hardware margin!
Hardware margin: For most integrators, it’s slim—and getting slimmer.
In the 2024 State of the Industry survey report, released at the beginning of the year by Commercial Integrator and NSCA:
84% of respondents report 30% or less on hardware margins
36% of respondents report 20% or less on hardware margins
Two years earlier, in the 2022 report, more than half of integrators said they made 20% or less in hardware margins. Nearly one-quarter of respondents reported that they make 10% or less, which dropped to 11% of respondents in 2024. It will be interesting to see what the 2025 report reveals in a few months.
Operating within extremely slim margins is risky; integrators that do so could sacrifice the ability to deliver on customer satisfaction.
It’s vital that every project you complete is profitable and contributes to positive cashflow. After all, you don’t “win” the project if it isn’t a profitable venture for your company. Given the need cover your overhead costs—facilities, insurance, utilities, IT infrastructure, software, etc.—what’s the “right” hardware margin average to aim for? This is a question that NSCA members often ask.
Although there’s no perfect number that will work for everyone, NSCA estimates that a margin of at least 30% margin is what you should aim for, given that most integrators have overhead-cost percentages that sit in the high 20s. Some integrators put out proposals that reflect low hardware margin on projects but charge more for labor to make up the difference. At the end of the day, the difference needs to be made up somewhere if your firm wants to stand the test of time.
But the most important thing to remember is to place the proper value on the work you do as a mission-critical solutions provider. Stop devaluing your work!
If your company chooses to sell equipment at a margin of 5% or 10%, then you’re not conveying how important it is for your customer to have the level of technology you’re capable of providing.
Just a few years ago, many NSCA members were finding themselves in a race to the bottom, undercutting prices by sacrificing quality standards and/or worker safety. They saw opportunities for rebates on the back end and took on more volume in hopes of making up the difference, but this approach ultimately leads to cashflow problems.
Why Do Hardware Margins Matter So Much?
Some integrators toss margins aside, focusing solely on revenue growth or high-volume sales strategies to increase transactions. But revenue doesn’t necessarily translate to higher profits, and attempting to churn out higher numbers of low-margin projects can burn out your team and impact quality.
Instead, focus on increasing your hardware margin. Why? Because they …
- Increase profits: Higher margins equal higher profit for each project. You can cover operating expenses and have money leftover to reinvest in the business.
- Improve cash flow: A steady flow of cash allows your company to manage expenses, pay employees, invest in growth opportunities, and not worry about financial instability during market fluctuations or downturns.
- Support scalability: Better margins can help you scale operations more effectively so you can take on more projects without compromising profitability.
- Create a competitive advantage: Strong margins can help ensure that you have money to invest in advanced technologies and attract top talent.
- Reduce risk: Strong margins help you absorb unexpected costs and better manage and work through complex projects.
The bottom line: Integrators must learn to sell value, not price.
