Homely Doesn’t Have to Mean Ugly

Monitoring fees have decreased, credit is tight, new home construction has slowed, people are losing their homes, disposable income has disappeared, Tweeter has shuttered all its stores and Circuit City is expected to close 155 locations. It seems the only good news for residential installing security contractors these days is that gas prices have hit their lowest levels in recent years — but how long will that last?

In imminent news, with the arrival of 2009, single station carbon monoxide (CO) alarms are required in new dwelling units in many states, digital signals will replace analog signals this February, and the community networking phenomenon of Web sites such as Facebook, LinkedIn and MySpace is in full swing.

Other trends of note include Radio Shack selling lots of digital TV boxes; increased opportunities for real estate buys for those who have money; consumer electronics products have become utilitarian; video gaming is on the rise; people are forgoing vacations for home entertainment solutions. And according to SSI’s research, the average number of monthly residential security installations fell almost 51 percent in 2008, while the average price paid for residential intrusion systems ($1,345) decreased to the lowest level in five years.

What does all this economic commotion mean for your business? Some of you will thrive, others will barely survive and, unfortunately, a few businesses will die. Your success or failure depends not only on your ability to understand these economic trends and implications, but also how effectively you mange them. Let’s explore how to best meet that challenge.

Trends: Quality Up, Volume Down

If you ask 10 different companies what they’re seeing in the marketplace, you’ll get 10 different answers. One of the few items most people agree on is that during tough times, the crime rate goes up. Another common belief is that referrals are more qualified because if someone is interested in a product or service, they are more serious and can afford to buy it. Lastly, many people agree that the pool of eligible customers has dramatically decreased.

According to Keith Fisher of Keyth® Security Technology Solutions, a high-end installation company located in Highland Park, Ill., his firm is seeing increased demand for intrusion monitoring services because economic times have led to an elevated incidence of theft. For that reason, Fisher reports it has become easier to sell security systems since homeowners are more concerned about their personal safety as opposed to purchasing because the insurance company mandates it, etc.

In addition to safety concerns, Fisher says he is receiving a higher caliber of referrals.

“Existing clients are sending us good referrals because people either want a system or they don’t,” he says. “They don’t have money to burn and are not looking for the sake of it. The only downside we’re seeing is that fewer referrals are coming our way.”

On the other hand, Fisher cites an increase in monitoring cancellations due to customers cutting monthly expenses. Also, more customers are defaulting on invoices. Usually when bills were past 90 days Fisher could get the money. However, today people are walking away from their financial obligations.

From another perspective, Greg Simmons, vice president of Eagle Sentry, a Las Vegas-based security and A/V company, says his firm’s customer base has dramatically changed. In Vegas, production homes have come to a crawl. Instead of prewiring hundreds of unsold tract homes and then selling monthly monitoring services and optional A/V solutions to eventual buyers, Eagle Sentry now sells complete systems to homebuyers once the home is sold. The advantage is that the customer is already a buyer. The disadvantage is there are fewer customers.

According to John Knox, president of Life and Property Security Systems, a Knoxville, Tenn.-based residential and commercial security and A/V installation company, this is the worst selling season he’s seen in 20 years. Many builders have gone out of business. To safeguard revenue from steady builders, Knox works exceptionally hard to offer excellent customer service.

In addition, Knox’s homebuyer customer base has shown increased interest in home entertainment solutions. He attributes this factor to people staying home more often. Lastly, Knox has found an opportunity to increase sales by doing subcontract work for national companies that do not have local branches everywhere. Knox has effectively networked with these companies to get a piece of their pie.

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