A subset of the Internet of Things (IoT), a connected home is fundamentally a residential building with an ecosystem of devices, services, and apps that are linked together to enhance livability and occupant experience. The devices might be as sophisticated as a communications hub or as simple as a basic sensor that alerts a homeowner when, for example, a gun safe or liquor cabinet is opened.
Since all these products are “powered,” they should fall under the domain of the electrical contractor. This is true whether they are powered by low-voltage or standard voltage systems — and whether they’re connected by wired or wireless networks. Given this reality, no one is better suited to integrate electrically powered devices than the electrical contractor.
Lucrative Business
You might be surprised to learn that the greatest financial opportunity in the connected home market does not lie with the installation of connected home products, such as panels or hubs, cameras, thermostats, door locks, garage door openers, simple sensors, flood sensors, air-quality monitors, and so on. Instead, it falls with the monitoring or web services (Wi-Fi or cellular) associated with these devices.
The smart home market value is expected to double by 2024, according to Research and Markets.
Monitoring and web services necessitate the use of a central station monitoring service, resulting in a small monthly charge for each customer. However, this charge should be marked up significantly and resold to the homeowner. This recurring monthly revenue accrues month after month. Moreover, the revenue stream can be contractually locked in for three to five years.
Markups can equal or exceed $20/month. Multiply this amount by one thousand customers, and it adds up to nearly a quarter of a million dollars of annual profit, increasing a company’s value at exit by more than a million dollars. A thousand homes may not sound substantial until you consider the market growth. Few homes are connected today, and some estimates project that more than 20% of all homes will eventually become connected.
Homeowner Barriers
The connected home is not a DIY proposition. Homeowners struggle with TV remote controls. Few want to attempt a connected home integration on their own. Nevertheless, they desire the solutions.
In addition, homeowners struggle to wade through the plethora of connected home offerings, such as the different communications protocols (e.g., Zigbee, Z-wave, WeMo, etc.). Each manufacturer seems to have separate solutions that exist in separate silos, requiring separate apps. This does not simplify the situation; it only frustrates customers. They just want it to work; when it doesn’t, they want someone they can rely upon for help.
Contractor Barriers
Establishing a connected home business offering challenges contractors. This is encouraging, not discouraging. Why? Because it limits the competition.
The first and greatest barrier is occupational licensing laws. These vary by state and even by locality. Security licensing is often the most zealously guarded and protected credential. The simplest way to overcome it can be simply hiring an individual who holds a security license to lead your connected home program.
Depending on the state, an air conditioning license might be needed to install thermostats, a locksmith’s license might be required to install connected door lock, and so on. Since the connected home cuts across multiple trades, multiple licenses are required. This may limit a contractor’s ability to offer a complete connected home package initially and/or require the use of licensed subcontractors.
Contractors must also find a central station to provide the monitoring service. These can be found in every major city. Monitoring can also be performed remotely.
Monthly billing requires software most electrical contractors lack. Fortunately, off-the-shelf packages designed specifically for this purpose are readily available. Some central stations can even provide the necessary software.
Other barriers include the fundamentals of identifying the right physical products to offer, getting them to work together, and finding the hubs and apps to unify the homeowner experience. However, solutions currently exist, and more are arriving each month.
This is a technology growth arena, which means it will be dynamic and continually changing for the foreseeable future. Nevertheless, it represents a lucrative business opportunity that electrical contractors with a vision should seize and
prosper from.
The Service Roundtable offers electrical contractors sales and business support, a buying group, and much more. Visit www.ServiceRoundtable.com or call 877.262.3341.
