Deciphering Today’s Security Dealer Program Landscape

Beauty is in the eye of the beholder, and likewise dealer programs targeting professional security dealers and integrators are in the eye of the provider (see SSI‘s new interactive directory).

The industry, its technologies and business models have substantially evolved the past many years. With them, so too have the offerings, descriptions, perceptions and claims associated with what was once a fairly uniform conception of the types of features, benefits and support mechanisms ostensibly inherent in the administration of dealer support programs.

Variances due to whether the provider was other (larger) dealers, third-party wholesale central monitoring stations, manufacturers, wholesale distributors or other service vendors notwithstanding.

Historically, dealer programs supported participating members with an array of components such as access to sales & marketing, financing, insurance, legal, networking, back-office, purchasing discounts, and training & education benefits.

However, having covered this topic for more than two decades, in more recent times I have observed that many either don’t understand what constitutes a dealer program or choose to present their organization as running one when all they do is supply goods through the channel.

It’s akin to how other industry definitions like integration, convergence or artificial intelligence are sometimes relegated to the lowest common denominator.

“Over the years, I have often found there is confusion relative to the real meaning of a dealer program,” says Tony Smith, president of Security Funding Solutions (SFA), precisely echoing what had been on my mind. Tony has been a friend and mentor since I came into the industry, and I consider him a consummate pro. I asked him how he sees today’s landscape.

Following in italics are his four classifications (indulging a plug for his company), with particular focus on the financial impact to participating dealers’ businesses.

1. Marketing & Technical Programs — The most common type of dealer program, where there is value added to a dealer’s relationship with one or more equipment providers through a structured association. The suppliers are very disciplined in how they initiate and manage each relationship to ensure participants are technically adept at installing and servicing their equipment. They offer technical training, marketing assistance and other “soft” services. They create award programs and pricing tiers to encourage and reward participation. Program managers’ main focus is to increase the manufacturer’s volume, reputation and profitability.

2. Account Purchase or Acquisition Programs — Many programs are run by larger companies seeking to grow through customer acquisition. These providers, such as Brinks Home, Alarm Capital Alliance and North Star, purchase customer contracts from a contracted group of dealers who may continue to receive a portion of the RMR along with service revenues. The acquired customers may require a guarantee from the selling dealer along with other recourse. A dealer selling their accounts or company on this basis may expect to receive, on average, approximately 35x RMR, in addition to any residual payments.

3. Alarm Company Acquisition Programs — Many superregional or national alarm companies have chosen to grow beyond their normal sales and marketing by buying alarm accounts, alarm companies or both. Examples are ADT, Vivint, Bay Alarm, Guardian Protection and Vector Security. As in scenario No. 2, the acquired customers may require a guarantee from the selling dealer along with other recourse. A dealer selling their accounts or company on this basis may expect to receive an average 35x RMR, plus any residual payments.

4. Alarm Customer Financing Program — Several entities provide debt financing, or installment sales, for their dealer customers. Most are limited in what can be financed to the equipment installed. For example, SFA has expanded the installment sales window to include monitoring fees, renters and up to 20% of the equipment portion, as an advance. SFA also manages each financed account to assure the funding bank that the customer is using the system, the alarm dealer is properly servicing the account and it is monitored. The breadth of assets being financed provides the alarm dealer with at least twice what would be received from some other programs. Most importantly, the dealer continues to own the contract and receive renewal revenues.

According to Smith, No. 1 is not finance focused; Nos. 2 and 3 are slightly different spins on the same program; and No. 4 offers cash flow and an ability to grow so dealers can build a significant asset to sell when it’s time to retire.

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