Finding work in the commercial sector is becoming an increasingly attractive option for residential custom installers – but how can you turn it into a profitable business decision? Dimi Kyriakou explains what installers need to consider before ‘crossing over’ into this market.

It’s no surprise that, given the current challenges faced in the industry, some residential custom installers are looking to new markets so their business remains viable. And when residential markets are tight, there is certainly the attraction of looking to work in the commercial arena.

That said, we’re not suggesting that a move to the commercial line of work will be an easy one, nor are we saying that it will solve all of your cash flow problems. While the advantages of such as decision are many and varied, it may not be a good fit for every business model.

For those who are considering making the move, we have spoken to some members of the connected home industry who have succeeded in crossing over into the commercial market to hear their advice for installers who are wishing to take their slice of the commercial pie.

Why go commercial?
The key to success in the commercial market is being professional, knowledgeable, highly organised, well-resourced and committed to performing in what can be a challenging market.

This is the advice of mySmartCTI, one of Australia’s largest commercial system integrators. The company operates across a range of markets including hospitality, education, health services, aged care, retail, defence and industrial, as well as residential.

“The commercial market is a very different place to be than the residential market. Projects in the commercial market all go to tender where the cheapest prices wins,” mySmartCTI managing director Peter Garrett explains.

“Relationships, while being very important, do not carry the weight that they do in the residential market. It is a given that anyone who is tendering on the project has the resources to make the project work to specification in the timeframe allowed.”

Marc Booth is the communications and marketing manager at RGB Integration, the Australian distributor of Extron Electronics, which supplies video interfacing, distribution, control and signal processing for the professional, commercial and education sectors. He says that in many cases, residential custom installers already have the desired skills set to work on projects in the commercial space.

“Installers specialising in high-end custom installations generally work on projects not too far removed from their commercial cousins. High-end residential projects can in fact be more challenging, as home owners are generally more fastidious about the build, fit and finish of AV technologies in the home,” Marc says.

“Generally, I have always been impressed with the high level of knowledge of individuals within the residential sector.”

Like so many others in the industry, Image Design Technology (IDT) chose to follow the commercial path due to the size and potential of the market. It has since allowed the company to carve out a niche product offering in a very competitive environment.

“I think, in essence, that a tough retail/residential market drives resellers to look to alternative and incremental revenue streams,” IDT general manager Mark Lowe explains.

“In addition, custom installers in the regional markets will find that corporate and commercial users are not being well serviced by the retailers in those markets. This presents a nice opportunity for a skilled and experienced installer to branch into the commercial market.”

Tips and tricks for installers
Given that commercial projects are usually put out to tender, a lot of work needs to be done in order to bid for a job – but there is no guarantee of securing the project. Additional costs must be factored in, as well as the possibility that installers may have to recover these costs from future projects.

“The biggest factors of commercial projects are their sales process and their structure. The size of commercial projects can lead to increased turnover, but it also leads to increased costs to secure and deliver the project,” Peter explains.

“Installation and commissioning is also very different as you will be working in a hard hat and boots on a busy and complex construction site. There is a formal site structure which must be adhered to and this comes without the flexibility that is often found on a small residential site or installation.”

Peter suggests that residential custom installers should consider the following points:
•    WHS requirements: A proper WHS program is imperative. You will be working on large commercial construction sites where accidents can easily happen. You need to look after your staff and yourself by following WHS requirements.
•    Liquidated damages: Commercial projects are always set to a defined specification written by consulting engineers and a contracted timeline. If the installation is not commissioned correctly and on time, liquidated damages will apply and may run into tens or hundreds of thousands of dollars.
•    Retentions: Building companies will hold 5% of the value of the project to insure themselves against non-performance of a contractor or sub-contractor. This is held for 12 months and must be factored into the project and the cash flow of the business.
•    Bad debts: In recent years there have been a number of failures of large commercial building firms which in turn has had an impact on their contractors. It is imperative that an appropriate level of debtor’s insurance is taken out to cover an installer should they have a client declare bankruptcy.
•    Professional indemnity insurance: Every now and then, despite your best efforts, something may go wrong with a project and insurance protecting you and your business is a must. While many businesses today hold this type of insurance make sure that a policy taken out primarily for work in the residential channel will cover projects in the commercial channel.
In addition to this, Marc says that installers need to consider the tighter installation times and limited flexibility that are the norm with commercial projects. If a residential installer has not carefully planned the cash flow to manage these projects, it can be very disruptive to the business.

“Time is money. Typically with most commercial jobs, the customer may take longer to pay and the project will have bigger initial overheads on labour, equipment and a larger bill of materials.”

He also suggests that installers seek out and build relationships with suppliers, customers and the manufacturers working in the commercial space, as they will know where the opportunities exist.

“Nothing beats a solid reputation and a string of happy customers. The commercial AV sector is very competitive; therefore installers will need to be very good at quoting against their opposition,” he adds.

“Also, commercial jobs need products designed for commercial applications.”

This is a point that is strongly reiterated by IDT. In a tough market with more price-driven tenders and quote opportunities, this often results in domestic televisions being specified into projects.

“We see examples where a domestic product is not fit-for-purpose due to extensive usage, orientation or exposure to harsh environments. The key here is to understand when a commercial panel is required and when a domestic product will suffice,” Mark says.

“The traditional residential installer should also consider the use of a professional product in place of domestic product when putting together a commercial signage solution.”

To bridge this gap, IDT has recently added commercial televisions to its portfolio, including an LG commercial television with a BrightSign signage player and Chief bracket aimed at providing a simple signage solution that might be used in a cafe, bar, hotel or club.

“This is an enormous technological step-up from using a domestic panel with a USB drive playing looped content, and provides the end user with a tangibly improved opportunity to see return on their investment.”

The final word
For those of you who are considering crossing over to this lucrative space, incorporating some commercial work into your existing business is a good starting point to evaluate if it will fit your existing business model. It is generally easier to break into the smaller jobs first, such as simple projector/monitor/boardroom installations.

“Think about what you can offer the commercial sector. If you currently install high quality residential AV systems and understand that the commercial sector requires the integration of the more dependable, robust, commercial-quality product, that is the first step,” Marc says.

“Most importantly, you should also ensure that you have the right design and installation skills to go along with this. There are no short cuts.”

Mark from IDT agrees, saying that while residential and professional installers have different strengths and areas of expertise, it might be wise to consider your existing customer base.

“A lot of the high-end customers who use residential installers are business owners and other ‘C’ level executives. Why not offer your services to your satisfied customer in their business as well as the residential environment?”

Above all else, it’s imperative to maintain your integrity and professionalism, no matter what the project.

“Commercial customers are looking for a professional, so behave like one. Be the expert but don’t pretend to know something you don’t. Engage advice from manufacturers and distributors when needed,” Marc suggests.

“You can gradually take on more commercial work and build on your skills and experience. There’s no point rushing in and discovering that the commercial sector is not for you – unfortunately the grass is not always greener on the other side.”