State of Security 2022: Success Amid Scarcity of People, Products
As security companies look to at last move past the pandemic they are hamstrung by hardships like personnel shortfalls and supply chain slowdowns. Executives from four savvy dealer firms share how their businesses will emerge from the morass all the better for it.
Feeling safe and protected is one of humans’ most base needs. That’s why truly delivering on the promise of premium customer care has always been one of the leading competitive differentiators among professional security dealers and integrators.
The mental and physical anguish along with a host of life and work consequences wrought by the pandemic has served to even more deeply entrenched that dynamic. Thus, it has also demonstrated the mettle of the industry’s best run, most committed and most resilient providers.
Executives from four such companies were recently assembled for SSI’s annual Security Dealer Roundtable, featuring participants (see sidebar) from the Resideo Premier Dealer Program. They discuss challenges faced the past two years along with lessons learned, reasons for optimism, new opportunities, market differentiation and what they anticipate for 2022.
▶ Patrick Monroe is general manager for TC Tech Systems, headquartered outside Austin, Texas, in Round Rock. Founded in the early 1990s, the company solidified itself in IT services and telecom before adding security five to six years ago. In that regard, its primary focus is on new construction and developments.
▶ Joey Rao-Russell is president and CEO of Kimberlite Corp., with its base of operations in Fresno, Calif. The company is a Sonitrol dealership but also has a fire company and owns a central station that specializes in verified alarms.
▶ Marvin Smith is president of Florida’s Orlando Emergency Signal, which was founded in 2007. The firm attributes its success to treating everyone like family; no long-term contracts; no sales pressure; no scare tactics; and reasonable prices for exceptional service and products.
Looking at the pandemic’s ongoing impacts, how has your business persevered and what is your present outlook?
Jordan Jackson: We survived it well, thanks to being in an essential service and continuing doing what we do. The second quarter of 2020 we got hit significantly, with fieldwork dramatically reduced and people not wanting us to come into their homes or businesses being shut down. The monitoring and support services and recurring revenue is a great thing, especially in those situations. We retained all our people and used the time to do additional training with our technicians to try to make the best of it. The second half of 2020 was super busy, and that year ended up being about even with 2019 from revenue and profitability standpoints.
Right now, in some ways it’s harder than at the height of the pandemic, fighting supply chain issues, availability of parts, labor issues and inflation. Also, the mindset and shift to hybrid working of some people at home is going to be a permanent thing going forward for lots of businesses. Adapting to that new model in how we do it well and maintain the culture we worked so hard to build will be challenging. I always say, business is always tough but it’s getting tougher.
Marvin Smith: In the early days of the pandemic, our client base was very selective as to who was coming into their home. Fortunately, they already had a trusting relationship with us so we were able to work through many of the emergency service calls. With products like AlarmNet 360, the majority of our service calls were remote, so that helped. At the same time, we were able to really focus on increases in training with our team because it could be done virtually. One of the biggest things we’ve always talked about was becoming more paperless. Suddenly, when everyone’s working from home, you find ways to become more paperless and so that actually helped us in that way.
Right now, we’re strong again in sales. The market has changed slightly. We’re not doing a lot of new home construction. Our focus has been homes that have existing systems that were not being utilized, or new homeowners that have moved into a home that has a system from a prior owner where we’re going in and either taking over or activating.
Joey Rao-Russell: When it first happened, California was very, very shut down. We’re still shut down. We’re still in COVID compared to a lot of places. Revenue wise, we had a really rough second quarter; third quarter got better and fourth quarter I couldn’t finish all the work if I wanted to. We’re a super-regional company, so we have over $1 million in recurring revenue and that helped get us through. We pulled together and it showed a great thing about our team. To be honest, it was stressful, it was horrible, customers were stressful, but our team pulled together and supported each other. A really hard part was it felt like you were constantly in flux. You’d have a plan, and then by Monday it changed. We’re the people customers rely on and all of a sudden we were wearing tap-dancing shoes every day.
However, in some respects it made us stronger because it made us open to different ways of doing things. That was a good thing as we have evolved. However, this year has been even harder. We do a lot of small business where we’ve seen a lot of consolidation, people taking multiple offices and moving it to one. Inflation of wages, materials, gas is painful because all our installations are either subsidized or run on extremely thin margins, so 3%, 5%, 10% can be painful. Also, there’s severe supply chain issues and we have the 3G sunset happening.
All of those layers have made 2021 harder. We finished 2020 flat year-over-year, down a little bit on install revenue, but more profitable in some other areas. Not only has 2021 been more difficult, but I believe it’s going to be harder still in 2022. We are beholden to technology and the supply chain, and we’re having difficulties in that respect. The biggest challenge moving forward is how to stabilize our supply chains because the growth is there.
Especially with the pandemic, people realize there’s value. There’s value in the smart home, there’s value in having their home protected, they want to have emergency services, they want to have fire on their small business, they want to have visibility and some lifestyle stuff so they can manage their employees when they’re not there. There’s a lot of opportunity for us in this business and we’re very lucky to be in it.
Patrick Monroe: In 2020, we definitely saw a slowdown in activity because our security business is so construction oriented. Whereas an electrician, plumber, drywaller or a framer couldn’t get onsite to finish or work on a project, we had those same challenges. We were fortunate to be recognized as an essential trade, and so for the most part we were able to continue working. It slowed us down by maybe as much as 50%. Financially, we weren’t really impacted in 2020. This year, we were able to ride the wave of the recovery with some new opportunities, new business.
This year’s challenges are certainly different, with the supply chain and personnel, which is why we’ve backed off a little bit in our marketing. We’ve pulled back so we can focus more on larger projects with larger margins. We have 20 employees but saw an unprecedented five resignations this year of people with seven or more years of tenure. So not only did we lose people, but we lost our most tenured, experienced people. I had one fellow who, because of the pandemic and all the things that happened, took stock of his life and decided he wanted to be a farmer.
These are the kinds of things people are going through, the human element of what’s happening with folks. We have a lot of new folks on staff and we’re focusing a lot of our time and attention on training and development, unlike anything we’ve done before. At the same time, we’re trying to ensure our customers that the company is doing well and is healthy. I believe 2021 is going to be our biggest financial year ever by 10% or 15%. But I do worry a little bit about the customer service component. Again, just based solely on personnel and the supply chain.
Continuing with the supply chain challenge, what strategies are helping?
Jackson: We’ve changed the way we purchase. We tried to do close to a just-in-time type of inventory in bringing equipment in just a week or two ahead of time. We’ve extended that out by trying to order a month ahead in hopes of getting it in time. We’ve beefed up our inventory of parts, especially those we suspected would be a problem in the future, such as the cellular communicators for the sunset replacements. We’re doing what we can and yet we’re still running into roadblocks with certain parts not being available. If you only have 99% of the parts, that doesn’t mean you can get the job beyond 99% working. It means it doesn’t work at all until you get that last part.
As mentioned, we have not been upholding one of our four core values of responding quickly to customers’ calls and needs because we’ve been so backlogged. Yet, on the other hand, it’s great to be busy and have a nice backlog of work. It is a challenge for sure. We have been having the discussion about having to say no to things and identifying what type of work is our best type and what type is not as profitable. We have to say no to that stuff because our most precious resource is our manpower and we have to spend it wisely.
Smith: Jordan hit it on the head. We used to look one week out to schedule and called clients the day before to confirm appointments. We are now looking a month out. From an inventory standpoint we’re having to plan ahead to make sure we have items on the shelf. Also we tend to now be more reactive and last minute as it relates to the supply chain. We may have an appointment scheduled three weeks out that looks good today but tomorrow I may have a shortage or not received that product. We have to closely watch that inventory and are at times, unfortunately, having to reschedule clients. But as long as you’re communicating that directly to the client, sharing with them what the issue is, they’ve been forgiving. We have had to work around it, doing some product changes based on what’s in stock. We’ve adapted in that at times we are going to install the inventory that’s on hand.
Rao-Russell: As a large company we’re fortunate in that I do have a centralized warehouse where we keep a lot of products. It’s only been the last two or three months we’ve felt a pinch. We’ve changed how we order. We have had to employ Marvin’s process where we contact the customer and say, “We know we sold you these cameras, I can get this many of this brand. This is a comparable other brand, it’s compatible with your system. Do you want to do this now or do you want to wait?” The communication piece is very time-consuming. I have a robust outside customer service rep team that used to be just about retention and keeping customers happy. They’re spending a lot of their time right now overcommunicating and making certain people understand we have a service challenge.
The best thing I can say is you try and over-order, but you also have to be more in touch with it. It’s not like it once was where you can just order and forget about it. I had technicians who were horrible planners. They would know they had service and were like, “Oh, I’ll just run by ADI and pick it up.” That’s not working anymore. The biggest challenge is changing the mindset of all our departments to be cognizant and communicate that. Even my salespeople never used to communicate fulfillment issues. It’s a complete change from how we were because most of our leads, especially on the residential and small business are very reactive.
From a customer’s perspective, it doesn’t matter if we are able to get an intrusion system up right away, or maybe a small access control system up, or maybe some smart home devices up. Until they see it all working and in their app — either Alarm.com, Resideo Total Connect, whatever they’re using — to them it’s not done. COVID has been an exercise in patience for me personally and professionally, and I’m not one who has a lot. Society as a whole got very used to everything at our fingertips with our phones and immediate gratification. It’s become a different world. To some degree, it’s out of our hands. We do the best we can and we plan the best we can.
Monroe: Our supply chain challenges are very similar to construction trades. We’ve gone back to our developer, our general contractor, and used something that’s been available to us for a very long time. That is the progressive invoicing process. If you’re a subcontractor on a large construction project, your billing processes affords you the opportunity to bill for materials that you have ordered and received and have on hand. They may or may not be installed yet. It’s designed this way so you can manage cash flow. As mentioned, in the past we were so damn spoiled by just being able to walk into our local ADI office but now we’ve got to plan more effectively.
We’re stocking items, which is a new dynamic for us, and the progressive billing allows us to charge in advance for those materials before they’re installed. We’re ordering far, far in advance. I have materials on hand now that are not going to go in until probably the second or third quarter of 2022. That’s something I couldn’t have fathomed six months ago. The funny part is we have so many people working from home now that I’ve made their offices into stockrooms and storage units. We’ve moved their desks out and there are boxes stacked all the way to the ceiling. That’s what we’re doing to attempt to solve the problem.
Keep reading to hear what these integrators plan to improve in 2022 as well as the technologies and solutions they’ve found to be in high demand…
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