(l-r) Mike Bradley, Jim Henry, Phil Aronson and Curtis Nikel gather to discuss ideas and best business practices.
Quick, you immediately have to trim 10 percent of your business' costs; what do you do? It's a bit of a trick question because if you find yourself in such a predicament you've likely been asleep at the wheel. Continuously monitoring and keeping a tight lid on costs is essential to sustain a business today. That nugget of know-how was just one of many bandied about during a recent meeting of leading integrator minds moderated by SECURITY SALES & INTEGRATION.
The roundtable, which took place behind closed doors during this year's PSA-TEC event outside Denver, represented a broad cross section of the industry with executives from companies spanning both coasts as well as Canada, and diverse operations ranging from alarm monitoring- to IT-based business models. Mixing it up with gusto and candor were company Presidents Phil Aronson (Aronson Security Group, Seattle), Mike Bradley (Safeguard Security, Scottsdale, Ariz.) and Curtis Nikel (Contava, Edmonton, Alberta, Canada), and Executive Vice President Jim Henry (Henry Bros. Electronics, Fair Lawn, N.J.).
The foursome assess the fortunes of 2011 contrasted against recent history; the realities and potential of managed services; the perils of not focusing on recurring revenues and emerging RMR opportunities to increase customer stickiness; bringing customers real, measurable value that helps them be heroes within their organizations; and techniques for getting the most out of your people and processes.
We're about halfway through 2011. Has it turned out better than expected? Maybe not quite as good as you had anticipated? Have there been any big surprises or disappointments?
Curtis Nikel: Our prediction in revenue for the year is right on target to the top line. We've felt some bottom-line squeeze so far, and maybe aren't tracking the bottom line that we'd like to see. The activity seems to be all there. Coming from Alberta, Canada, the oil and gas industry and tar sand is enormous, $150 billion that we spent in the past 10 years in developing that tar sand process. So that's driven the Alberta economy. The spin-off is security business for us.
Mike Bradley: I think we're meeting expectations, certainly not exceeding it. As we look back now in the past three years, we're very thankful for our recurring business. Arizona has been very hard hit, and our economy has not only taken an economic hit, we've got a political hit from the fall out of SB1070 and all the border security issues, etc. They've had some impact on tourism and others, so we've got a mixed bag of issues with the economy. The housing market was one of the hottest in the country, and along with Las Vegas and a couple other areas, it's collapsed somewhat overnight. So, if you were dependent on construction, then you're hurting. The larger customers are still fairly strong — government has still been spending. There are other pockets where the customer is still fairly healthy and still doing business, but there is no real growth right now, and it may not be for a number of years. So the recurring revenue has really been very important to us.
Every aspect of our business that depends on recurring revenue is growing and has grown through this entire process. We've had an uptick in attrition of the RMR customers, but we've also had a stronger uptick in the additions. I think that's a testament to the quality of work that we do and some of the marketing efforts that we put in place. So the construction market is probably about on par of where it is expected to be. It's probably half the revenue that it was three years ago for us. It's not insignificant, it's still a struggle and I think it will be for the foreseeable future.
Jim Henry: What Mike says is very true. We also are in the Phoenix market and our RMR is more managed services, security contracts and what have you. Overall, we're on plan or a little bit above plan for the year, but the reason we're able to achieve that is through the diversification we have in vertical markets and in geographies. And you're right; the construction business in Phoenix just fell off the table where it was so hot, and I thank God for having the balance of focus in those vertical markets and in those geographies that act similar to the RMR for you in mitigating the impacts of that on a regional basis.
Phil Aronson: Our 2010 and 2011 have been really good. During the past nine years, we've grown about 30 percent a year and we continue to do that. For us, 2009 was the toughest year. We do a lot of regional work, but it's our global clients that are in expansion mode and have budgets. The other thing is we really tried to build our strategic action plan for the year, and forecasting is a big part of that. We work really hard with our account executives so we know what's coming up during the next quarter. We have 30-, 60-, 90-day forecasts and we really drill into it. Hope is not a strategy. What's the buying process that the client's going to use? Is it going to be a bid project? How many people are going to bid? Is that really work we want to be spending a lot of time on? Can we go after more design-build? Then we can predict because with growth like we've had we needed to predict, for cash-flow reasons, what's coming in. We don't want surprises.
Henry: I just want to reinforce how critically important it is in the large integration business what Phil is saying because even good surprises are bad because they have ramifications. So you have to have that visibility out there, and if there is an expectation of something out there that's good, you've got to plan for it because otherwise it's actually going to have some negative impact.
Aronson: Yes, if you can't deploy that $2 million job that all of a sudden you get, it might be better that you don't get it. All we have is our reputation. We've been in business for a long time, and if you don't deploy well that's just a huge black eye that's hard to recover from. So you really have to know why didn't we know about this project three, six, 12 months ago?