Diversify Your Security Portfolio and Services or Risk Paying the Price Down the Road
Diversity doesn’t just apply to race or point of view; it’s also imperative in a security company’s offerings.
WHAT BETTER TIME to consider the importance and value of diversity than on MLK Day? As it so happens I am writing this during the national holiday for one of America’s most revered civil rights leaders, the great Martin Luther King Jr. One of the most moving experiences I have had was visiting the MLK National Historic Site in Atlanta in 2013. So I got to thinking about how critical diversity is – and not just from a racial or people point of view. It’s a concept equally applicable to myriad facets of existence. The power and necessity of diversity extends across most everything, from life itself on our planet to the health and growth of an installing or monitoring security systems business.
During my decades of experience in the world of business, investing and the electronic security industry, I have observed how much better companies fare when they have a more diversified or balanced portfolio. This was reinforced by firms that best weathered the recession. As the saying goes, Don’t place all your eggs in one basket.
“Diversity is key to building your business as it is to managing your own personal assets,” agrees Joe Nuccio, a member of the SSI Editorial Advisory Board and Industry Hall of Fame. “Had we [ASG Security] not been diversified over several channels like residential, small business and commercial, we would have suffered from majors dips in our business. At one point in time, all three channels had downturns while the other channels propped them up. If we were not as diverse we probably would have never enjoyed the success, stability and consistency that helped us sleep at night.”
CHECK OUT NEXT: For Security Companies, Take a Page Out of a Football Coach’s Playbook
I view diversity as an insurance policy for a security business. Sure, you need to be skilled and excel in chosen target niches like small retail, home automation or commercial fire, but you can’t afford to be backed into a corner from having limited cash flow to just one or two sources. The balance I am speaking to applies to markets, technologies and types of service offerings within those sectors. And if you do restrict your operations to, say just small retail, then at least be sure to offer as wide a variety of solutions as possible.
“Think of diversity a bit differently to flex your growth opportunities and lower business risks,” advises SSI Business Fitness columnist Paul Boucherle. “Diversity does not always need to be brand new markets, products or customers, all of which take some discipline to do well. Think of different ways you can deliver core products and services to existing ‘new’ diversified customers. I explain it as having 5UCR, or five contacts under a client’s roof. Diversify who, how and where you sell your products.”
These points are especially salient because security dealers and integrators come in all specializations and sizes, with most actually on the lower end of that spectrum. Thus, diverse operations will mean different things to different companies depending on their scale and resources. The non-negotiable is not whether or not to embrace the virtues of diversification, but rather how to proactively structure the business as diversely as possible within the framework of that particular company.
“Diversification is not an option for those who want to succeed; it is an imperative,” asserts SSI Monitoring Matters columnist Peter Giacalone. “The extent of diversification is what requires further thought. Not all organizations can diversify successfully to the same extent. One needs to know and respect their boundaries and limitations, which may include knowledge, manpower, capital or all of the above. No matter how a company decides to diversify, a healthy balance of profitable installations and growing RMR will bring the best valuation.”
CHECK OUT NEXT: Why Security Companies Saw Stocks Drop in 2015
The bottom line is having more irons in the fire reduces the chances of all business segments simultaneously tanking. A savvy manager is one who plays the odds so when one area falls down another is there to help carry that extra load. And when the economy is humming that diversified approach maximizes overall growth.
Regardless of your business’ size or focus, I challenge you to pledge initially taking on or strengthening at least one type of market, one type of technology and one type of service offering during 2016. Good luck and keep me posted.
Security Is Our Business, Too
For professionals who recommend, buy and install all types of electronic security equipment, a free subscription to Security Sales & Integration is like having a consultant on call. You’ll find an ideal balance of technology and business coverage, with installation tips and techniques for products and updates on how to add sales to your bottom line.
A free subscription to the #1 resource for the residential and commercial security industry will prove to be invaluable. Subscribe today!