CEOs Roll With the Punches, Plot Higher Profitability
In an exclusive roundtable, executives from four installing security contractors shed light on how their firms successfully navigated the recession to emerge primed for future growth. Find out how they adapted to changing market conditions, among other strategic moves.
As most any installing security firm executive will attest, they are continually involved in their organization’s process of structuring and restructuring to stay ahead of and respond to marketplace changes, as well as the whims of their subscribers. At least the successful ones are, especially during times of prolonged economic turbulence.
SSI recently sat down with four such individuals who have gainfully steered their security companies through difficult marketplace conditions. Their strongpoints lie in the ability to cultivate an adaptive approach that has allowed their companies to maximize leaner resources and ultimately meet organizational goals.
The exclusive roundtable was conducted during the recent First Alert dealer network convention in Hollywood, Fla. It included Dave Hood, president of First Alarm in Aptos, Calif.; John Lindberg, president of Dial One Security in Cincinnati; John Loud, CEO of Loud Security in Kennesaw, Ga.; and David Morris, president of Modern Systems in Lexington, Ky.
In following conversation, find out which technologies and services they have adopted moving forward, how they have become better managers and which market niches they are nurturing after traditional cash cows evaporated, among other topics.
Quickly introduce yourself and give a little background about your company and your markets.
John Lindberg: I have been in the security business for 32 years. Dial One Security is based in Cincinnati with about a 100-mile radius. Our customer mix is 50/50 between residential and commercial.
David Morris: I started Modern Systems as a teenager in 1979. We have three offices in Kentucky — Somerset, Lexington and Bowling Green. We service a big part of Kentucky and touch in some surrounding states. Our customer mix is 55% residential, 45% commercial.
John Loud: We are located in Kennesaw, Ga., which is really the Atlanta marketplace. I started the company 17 years ago. Prior to that I was a flight attendant for six years with Delta Air Lines. We are about a 70% residential, 30% commercial mix.
Dave Hood: First Alarm has five business locations in the San Francisco Bay Area. We serve more beach-oriented communities as well as the higher-end communities of Monterey and Pebble Beach. Our mix is close to 50/50. I would call us a traditional, kind of an old school company. We try to sell hardwired systems, and do a lot of commercial and commercial fire.
Give me a review of how your company performed in 2012.
Lindberg: In 2012, Dial One Security was relatively flat. It feels like the economy just hasn’t quite gotten going again. Our biggest disappointment in 2012 was the lack of larger commercial projects. Those just have not come back like they were before the recession. It seems like everybody is dragging their feet on spending money on capital improvements.
On the other hand, residential has gone very well. We have enjoyed an increase in residential. We are still doing a lot of commercial, but it is just smaller projects. Before the recession there were many, many more larger projects. Those dried up entirely when the economy really tanked. The recession got everybody to tighten their belts and any kind of maintenance that can be deferred is being deferred. They still haven’t opened their checkbooks for capital spending.
Morris: The year was quite a surprise for Modern Systems. Business for us was better than anticipated coming out of a challenging 2011. I really had no reason to think 2012 would be significantly different. But, fortunately, we experienced double-digit growth every single month with the exception of September.
Although we had a good 2012, it was very unpredictable. Unlike John [Lindberg], who does a lot of large commercial, we don’t. We service more of a rural market in a lot of smaller towns where we don’t have a lot of competition. Where we were devastated by the housing market, we picked up a lot in commercial. We doubled our state certified fire alarm inspectors on staff; we now have four. We picked up a lot of work where companies were cutting back and they were no longer willing to pay a large fire company $175 per hour, so we picked up commercial business that we didn’t formerly have.
That has had its challenges. It is difficult to plan when business is so unpredictable. You don’t have any idea what to plan for. We may have had a good July, but we didn’t know it until the end of July. Same way with the other months.
Loud: It’s been an off-the-chart year. We had so many unanticipated things going on in 2012 that I could not have forecast. With some of my new hires that I did at the beginning of the year, our commercial business by midyear was up 39.1%. We don’t seek the high industrial commercial. From an access control, cameras and fire aspect, we are more of a smaller scale system. We are little under a 6,000-account base.
Certainly the big change for us is on the builder side. Years ago we were used to dealing with 40 to 50 custom builders. But all of that went away during the recession. Over the last few weeks we have signed contracts with Beazer Homes, Pulte Homes, D.R. Horton. We picked up John Wieland Homes’ 31 communities in Atlanta. They have other states; we didn’t pick up the other states. We said, “Let us focus on our core where we really can be successful.” As a whole in 2012, we moved into a newer facility from 3,700 square feet to about 10,500 so that was a big change after being in a place for 10 years. If you would have asked me that in the mid-2011 I would have said no way.
Hood: We are a little disappointed in our recurring revenue growth. That is flat year over year. That is probably my No. 1 thing on my report card is to grow that, organically grow it. We’re about at a 0% increase in recurring revenue. We’re selling recurring revenue, but we want to sell at a faster pace than in previous years. I predicted 5% to 10% increase in that recurring revenue volume and it’s just the same as the previous year. Our installation business bounced back a little bit, it’s up about 8%.
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