The August Bright Ideas Issue of SSI includes a CEO roundtable featuring company Presidents Dan Budinoff (Security Specialists, Stamford, Conn.); Jeff Nunberg (Integrated Security Systems, Miami); Ron Oetjen (Intelligent Access Systems, Garner, N.C.); and Vice President/CEO Andrew Lanning (Integrated Security Technologies, Honolulu). The conversation I had with them was much more expansive than could be conveyed in the mere printed page. So here is the first of my two blogs giving you more great insight from these astute gentlemen. In the installment, they discuss the fortunes of 2012.
I’d like to have you assess how 2012 has been for you so far, how it’s looking for the rest of the year; has it met expectations, projections, your budgeting?
Jeff Nunberg: We’re very busy. Our business really started to pick up in the last quarter of 2010, so 2011 was a record year for us, which surprised me actually. It took me by surprise because we about doubled in size from 2010 to the end of 2011, and we really expect to do the same thing this year. We’ve budgeted for that. Our financial customers and our critical infrastructure customers have really been the driver but our other sales are really starting to pick up. In 2008 our company was predominantly, 75%, new construction at that point. Florida is one of the heaviest construction industries in the nation and all of a sudden we lost 75% of our business pretty much in one month’s time. The faucet was turned off so it was a tough time. But we’re doing well. I’m excited.
Did you actually anticipate that level or did it take you by surprise? Sometimes when you get a lot of business, that can be as much challenge as when you’re not getting enough.
Nunberg: It’s certainly a challenge that I welcome. It beats what we had in 2009, which was survival. In 2010 we made a small profit. In 2011 we made a tremendous profit, and the work that we have in 2012 is anticipated because of the groundwork that we did in 2011 to get us to this point. So it’s not a surprise. In 2011 I probably wasn’t paying as close attention to the financial statement as I should throughout the year because things were just so good. So when I started to review the numbers, it was a pleasant surprise.
Dan Budinoff: Interestingly, we were pretty flat for 2009 and 2010 during the turndown in the economy and so forth. So we had done a pretty good job, my general manager did a great job of managing staffing levels and cutting back where we needed to. At the end of the day we were off quite a bit gross wise, but percentage wise our profit we was up quite a bit. Probably a lot of things we were forced to do now we should have done earlier. Hindsight’s 20/20 and now we look and say we’re going to be more diligent about watching performance and so forth that we were a little lazy about when things were fat and happy. So we learned a little lesson there. Right now we’re seeing business picking up quite a bit. I set a goal of about a 35% growth rate this year. My people looked at me like I had two heads, and I said, “Listen, my two heads are going to make it work, and if you can’t make it work we’re going to have a difference of opinion.” All of a sudden they’ve gotten on the ball. We’ve hired a bunch of new salespeople and done a very good job of hiring, by the way. We’ve got a couple of people that are just dynamos who had no industry experience at all and in two months they’re up and hitting the ground hard running.
I find it really interesting that these two people are just willing to cold-call knock on doors and stuff that our fat and lazy sales reps in the past wouldn’t do. They were waiting for the phone to ring. So things have changed. It’s interesting just to see the difference in the psychology of the new hires; their willingness to work. They both came out of corporate world and to a small company by all intents and purposes. They’re doing okay. I think we’re going to make the growth goal this year and we’re looking at some new ideas on other things we can do to grow the new products and services. We’re all talking about video as a service, the recurring revenue model that most of us have been smart enough to know well anyway, but the new things like video as a service. I think there’s a significant potential for that market. We’ll see where it goes.
Andrew Lanning: The market in Hawaii is good. Their quote volume is very good. I would say Q1 has been slow on adoption, so I think we’re off from what’s budgeted a little bit but with the quote volume that we have I’m not worried. Last year was a record volume, record profit, all those things. So after a year like that, we had one really large project which drove a lot of that so I don’t really count that in the forecasting for this year. I just took the other business that we have and added some to that. I think we’re projecting, we really make three budgets, our budget for 15%, 30%, and then off-the-hook growth. We make three different budgets and then we watch those as the year goes along and see how we’re hitting them, and how our expenses compare to those budgets. For right now I think it’s off a little so it’s what we call a conservative-type budget. We’re in that zone right now. I think it’s about flat, it’s not a flat-growth budget. So we’ve just go so many potential projects for Q1 that haven’t come in yet. They’re starting to come in. So we’ll see. I have years, and there’s the whole DoD budget year which in September always adds a lot of volume we don’t even know about right now, so there’s a lot of things happening.
Nunberg: I don’t know if you guys experience this but I’ve always—I think we’re like in a fourth-quarter business. I notice that my business sometimes can be a little flat in the first quarter with it building, but that third and fourth quarter really seem to have the momentum. I don’t know if you guys have experienced it. I seem to experience—this year March thank God has been very good for us, but March has always been a horrible month for me. It’s always a month where all the insurance is due and you’re paying taxes, a lot of stuff going on.
Ron Oetjen: I think you’re right, Jeff. I’ve found that March and April, historically if I look back to 2003, they’re our torture months. We get better in the summer because of the university market. We do a deal with so many universities. They’re closed and that’s when they’re doing all their maintenance and all their project work. We start really picking up right at the end of May, first of June, and we go crazy over the summer. Fourth quarter is where it all hits.
Lanning: I agree. I hadn’t been in the education vertical so I’ve got three campuses now that we’ve closed. That work all starts in the summer because they all wanted to wait until they were out.
Ron, can you continue with what you’ve seen this year and what you expect looking forward?
Oetjen: Over the past three to four years we’ve had significant growth every year. This year is kind of tracking the same for us. We forecasted 36% for 2012 and we’re tracking above that right now if we look at year-over-year quarter; we’re tracking above that, significantly above it right now. So the first quarter for the first time we’ve actually had a lot of volume. The difference for us is we just reinvested—with all of our growth we reinvested in infrastructure so growth is one of those stair-step things. You invest and then you hold your breath because it goes like this. Your business will go up but you’ve got to make that investment. Your business goes up and then you’ve got to invest again, hold your breath. So right now we’re seeing the benefit of that. We brought on additional sales staff. Really 2013 is the year we expect to be our big year. That’s the year we’re really looking at doing well. We say that because we continue to work in that critical infrastructure market and to further our brand recognition and brand awareness in there with the power companies and the co-ops and so right now our sales team is really excited about that vertical market and we think the marketing that we’ve done is going to pay back for us in 2013.