Many electrical contractors speak of the glory days when new construction was booming and there was plenty of work to go around. Those of us who have been in this industry for a while know there is always a cyclical nature to the construction industry. The key to riding through these ebbs and flows lies in finding ways to produce continuous growth and, at the same time, closely manage your monthly cash flow.
During a new construction project, once all systems are inspected and turned over to the owner, the electrical contractor’s minimum responsibilities are to warranty the installation for the next 12 months. In the meantime, they start hunting for a new project. But what happens to the building’s systems going forward? If you’re not offering ongoing testing and inspection services, you’re leaving a lot of money on the table.
Our Unique Industry
The fire alarm market may not be exactly “inflation-proof,” but it does lead the industry with multiple ways to offer growth. The fire alarm field even offers a healthy profit margin in the face of a slow construction cycle.
Our industry is also the most proactive in ensuring that systems are maintained and operating at peak performance, well in advance of a breakdown. Various legislation and codes, including NFPA 72, ensure that all systems are monitored, inspected and tested on a regular basis. Again, this is not an option on the part of the owner: It’s the law.
The Key to Continual Profits
For all fire alarm customers, testing and inspection is required annually, quarterly or even monthly – depending on the use of the facility and the local ordinances. Can you think of another system that requires the contractor to come back to the building periodically to ensure equipment performance? For an electrical contractor, no other system reaches out and says, “Come fix me.” The owner is required to invest in that recurring service.
As a well-qualified electrical professional, you have an opportunity to earn significant income by providing testing and inspection services to your existing customers. Plus, you can earn a wealth of other opportunities from these visits. This ongoing relationship is a true collaborative effort between you and your customer, leading to a stronger, more constant customer base.
Additional Sources of Revenue
Not only are you paid for testing and inspection visits; each one could potentially lead to additional work. For example, as you arrive for your fire alarm inspection, you notice that the parking lot lights are on at 10 am. Being well versed in energy efficient lighting, you could take this opportunity to tell your customer about the savings and rebates available for LED lighting. Have you discussed back-up generators with them? Do they need any repairs done while you’re there? The opportunities are everywhere.
Fire alarm monitoring service offers another potential source of revenue for electrical contractors. Most commercial fire alarm systems in the U.S. are required to be monitored 24 hours a day. They are connected either by traditional telephone lines, IP or cellular. Monitoring service is typically provided by the installing contractor, who simply sub-contracts to a third party (a UL-listed monitoring company) and then charges the building owner appropriately. These fees can typically be $35 to $75 per month and offer a 50 to 80 percent margin. Since this is an automatic service, if a device in the building is not responding, who do they call? You.
As you can see, the opportunities for recurring revenue are there. So, the next time you’re talking about the good old days of non-stop construction and you have several employees doing busy work in the shop, remember this: Your customer’s building is calling. Is there anyone home?
About the Author
Steve McCurdy is Director of Business Development at Fire-Lite Alarms by Honeywell.