Between Us Pros: Why You Can’t Lose in Security
Friends, colleagues, I bring you great news from afar. Having just attended several key industry events and conferred with dozens of industry insiders and analysts, I can tell you that your business is in high demand and the future could not look rosier. Caveats such as having to work harder/smarter than ever before and a sluggish economic recovery noted, we are embarking on one of the security industry’s most exciting and opportunistic periods.
First off, deal-brokers like Ron Davis of the Davis Group and Mitch Reitman of SIC Consulting say the number of investors looking to acquire security businesses is far outstripping availability. Thus installing security company owners, particularly those with strong recurring revenue bases, are on the fortuitous side of a seller’s market. Suitors that have been sitting on stacks of cash waiting out the recession are now willing to pay a premium.
Ah, but why sell when the future looks so bright? Of course, there are always personal and strategic reasons to get out of the business, sometimes if only temporarily to profit now and then wait for a noncompete clause to run out. But two recent presentations indicate exiting electronic security right now could be construed as almost foolhardy based on convincingly bullish projections.
At PSA-TEC, Imperial Capital Managing Director Jeff Kessler told the audience: “Slowdowns in purchases by customers in some segments of the industry have rebounded strongly. Notably for those with high recurring revenues or those introducing managed service offerings in video and access control, pricing increases on the existing customer base from new and improved services seemed to offset any downturn. Today the security industry is attracting a lot of attention from the financial community. It is pretty simple why: the industry is growing, there are good macro-trend tailwinds, and the industry has been relatively recession resistant.”
Kessler cited robust prospects in government business. He said security funding is likely to increase due to priorities on protecting the homeland. Commercially, he projected new orders being driven by C-level and overall business improvement decisions rather than viewing security as an insurance policy. Hence, providers emphasizing solutions and services above installation and products will prevail.
Meanwhile, according to studies by the Electronic Security Association (ESA) unveiled at the ESX show, the beleaguered residential market is undergoing a major metamorphosis that holds high promise for security companies. ESA Executive Director Merlin Guilbeau discussed trends gleaned from responses of member companies and consumers, and bounced the findings off Vivint COO Alex Dunn, ABF Security President Joe Polizzi and Interlogix President Bob Haskins.
The data focused on expanded offerings beyond alarm systems (e.g. home automation, energy management, entertainment) and illustrated keen interest for both security companies and consumers. Providers report they presently earn 26 percent of residential revenues from products other than alarms, rising to 37 percent by 2013.
“The value proposition has to be better in order to continue as a viable business. You have to go beyond what security has been with offerings like door controls, HVAC, energy management and more,” said Dunn. “We are seeing a 50-percent adoption rate on new services. The customers really love them and are willing to pay for them.”
The research shows consumers find these offerings appealing, and also that security system owners tend to be early adopters of new technology. Also, home security companies top other provider types as the most trustworthy source for these products and services. “The existing customer base is very ripe. Integrators need to become more aware and jump in to make a lot of money,” said Polizzi.
Not yet sufficiently pumped up? Perhaps Haskins’ comment will do the trick: “The industry has changed more in the past two years than the previous 10, and I think the next two will be more than that. You are in a great position, so seize the opportunities.”
Editor-in-Chief Scott Goldfine has spent more than 12 years with SECURITY SALES & INTEGRATION. He can be reached at (704) 663-7125.
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