A Look Into Dealers’s Future Growth Businesses

Residential and commercial monitored accounts often form the basis for a security company’s financial health, especially now as changes continue to sweep the industry for dealers. So with current market pressures, where will future growth come from without moving outside traditional security businesses?

Dealers’ ‘Bread and Butter’ to Fall Short of Video Security in 2007

Recently, a national panel of dealers rated 12 different businesses they believe will provide substantial future growth. Despite the panel’s current focus on alarm monitoring, these dealers believe their greatest future growth will come from the CCTV/video security business. This is followed by access control, integrated security, and remote and networked video businesses.

The pattern of the panel’s rankings is essentially what the rest of the industry sees. A surprise, however, is how dealers view their commercial monitoring business.

While systems integrators are still slow in offering monitoring services for commercial accounts, an industry assumption has been that these accounts would largely continue to be owned by security dealers. This is true, but the panel’s 3.5 rating for the potential growth in this business area is nevertheless below the rating levels of the Big 4.

Another surprise is that the dealer panel ranked the importance of video monitoring – a still spawning business – the same as commercial monitoring by 2007. But even that is not as strong as other businesses. So, this may prove what many are essentially saying: cameras will be everywhere, integrated systems are not far behind, and video monitoring may be the big recurring revenue contract five years from now.

The businesses that received a low ranking by the dealer panel (e.g., those not highly thought of) include fire alarm systems; asset tracking; two-way voice monitoring; video conferencing; risk management; and disaster recovery. Of these, the fire alarm business is perceived to be the strongest segment.

The Value of Monitored Accounts in 5 Years Is Unclear

The security industry has changed substantially during the past 10 years. Mass marketers continued to penetrate into the residential market; digital technology began to dominate system designs; integrators took an increasing share of business in commercial security; and consolidation and corporate responsibility problems began to arise. Lastly, monitored account multiples steadily declined.

The attractive margins those accounts can deliver have formed the basis for a well-run dealer business. But the question now is how fast those accounts are growing vs. how fast their natural attrition rate reduces the number of accounts – and what the net income projection looks like during the next five years.

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