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Installer Confidence Rising: CEDIA Survey

Indianapolis – The custom-installation business climate is getting warmer, according to a survey of installers conducted by CEDIA.

A total of 83 percent of CEDIA members surveyed in June said their business was improving moderately or greatly over 2003, up from 71 percent who used those terms in last year’s survey. This year’s survey also found that installation businesses will do a little more hiring compared to last year.

In a separate July survey, installers reported that distributed audio and home theater were their two biggest sales segments in the second half of 2003 and that the two categories offered the highest profit margins per job. A majority of CEDIA members in the survey also said they expect 2004 growth in all categories but telecom and security.

Here’s what the surveys found:

Business climate: Business has improved a great deal over last year, the June survey found.

A total of 58 percent of respondents said their business this year has “improved greatly” from 2003, up from only 18 percent of respondents who last year described their business in those terms. A total of 25 percent said their business was “improving moderately” this year, whereas 53 percent used those terms in last year’s survey.

This year, a fraction of a percent said their business is getting worse or much worse compared to 8 percent who used those terms in last year’s survey. A total of 16 percent called their business “about the same (within 3 percent of 2003 revenue).

The results are based on responses from 232 companies, up 23 percent from last year’s survey. Most of the companies – 218 – are U.S.-based. The rest are in Canada.

Hiring plans: Despite greater growth perceptions, almost the same percentages – 74 percent compared to last year’s 73 percent – said they plan to increase staff size in the following calendar year, according to the June survey. Those who plan to hire, however, will hire slightly more people on average.

Among the companies in a hiring mood, slightly more than 65 percent will hire two staffers compared to the 37 percent who said last year that they would hire two staffers. About 42 percent will hire three to five staffers compared to 27 percent who said last year that they planned to do so. Almost 8 percent – about the same as last year — plan to hire more than six. All told, the average company will expand staff by 2.9 people, or a median number of two.

On average, each respondent employs an average of 22.3 people, up from last year’s 15.3.

Expansion plans: Also despite greater growth perceptions, only 14 percent said they planned to expand the number of their locations in the following 12 months, down slightly from 16 percent who said so in last year’s survey. Less than 1 percent said they would cut back on the number of locations.

Business relationships: To remain in an expansion mode, installers have built up a network of relationships with builders, architects, and interior designers, the survey shows. Ninety-three percent work with one or more custom builders, and 75 percent work with mass-market home builders, the survey found. A total of 70 percent work with architects, and 65 percent of them generally initiate the contact. A total of 78 percent work with interior designers, and of those 56 percent generally initiate the contract.

Profit categories: In a separate July survey that generated 193 responses, installers reported that distributed audio and home theater were their two biggest sales segments in the second half of 2003 and the two categories offering the highest profit margins per job (see chart 1).

In ranking product sales from highest (one) to lowest (eight), installers gave distributed audio the highest average rank of 2.16, followed by home theater (2.34), audio/video (3.23), distributed video (4.12), home networking (5.15), telecommunications (5.27), lighting controls (5.31), and security (6.1).

In ranking product segments by gross percentage margin, distributed audio, home theater, and audio/video came out on top again with average ranks of 2.09, 2.53, and 3.84, respectively. They were followed by lighting controls (3.97), distributed video (4.11), home networking (5.1), telecommunications (5.24), and security (6.18).

Compared to CEDIA’s 2003 survey, lighting’s gross-margin rank slipped a notch to fourth from third.

Great expectations: In the 193-response survey, CEDIA found that a majority of installers expected 2004 growth in all categories but telecom and security (see chart 2), two categories that aren’t offered by a large number of respondents. Not all respondents carried all of the categories listed in the survey.

All told, 70 percent of installers forecast 2004 growth in home theater sales, followed closely by distributed audio sales. In last year’s survey, home theater and distributed audio also ranked first and second, respectively.

Lighting controls, home networking, and audio/video sales were each forecast by about 55 percent of installers to grow in 2004.

Among respondents expecting increases, installers were most optimistic about security and home networking. Installers expecting growth in those two categories forecast an average increase of 26.1 percent and 27.6 percent, respectively (see chart 3). The average growth forecast for lighting control was 25.7 percent, distributed audio (25.2 percent), distributed video (24.3 percent), telecom (22.2 percent), and audio/video (21.7 percent).

In last year’s survey, lighting controls came out on top with an expected average gain of 31 percent among installers expecting gains. Lighting was followed by security, home networking, home theater, distributed audio, audio/video, distributed video, and telecom.