CEOs Urge Business Basics 101 for 2011
Tightly monitoring every facet of operations remains priority No. 1 as installing security firms continue to claw their way out of the economic doldrums. Five veteran CEOs explain how they stopped the bleeding in 2010 and why – although they can’t let their guards down – they expect 2011 to be more fruitful.
In what has become an annual event within an event, SSI once again convened with a group of leading security company executives during the First Alert Professional Convention. The extensive roundtable discussion that took place at Florida’s Boca Raton Resort covered many pressing issues facing installing businesses today, but special attention was given to what took place in 2010 and what’s anticipated for 2011.
Together, Mike Ash, president of Garden State Fire & Security Alarm Co. in Aberdeen, N.J.; Larry and Mike Matson, principals of Matson Alarm in Fresno, Calif.; Mike Miller, vice president of Moon Security Services in Pasco, Wash.; and Bill Zeller, CEO of Mellon Security & Sound Systems in Lantana, Fla., provide a frank assessment of how they have withstood economic challenges and detail their plans to restore profitability. Adding to the scope is the fact that the participants’ firms are of varied size, market focus and location.
A couple of terms that recur throughout the conversation are reinvention and fundamentals. The former pertains to abandoning what no longer works and exploring new markets; the latter relates to emphasizing the basic principles of sound, frugal practices throughout your enterprise. For much more of this session — including the massive problem of transitioning customers from landline-based phone services, how difficult it is to recruit good employees and the necessity of supporting trade associations.
With 2010 in the rearview mirror, I’d like to get everyone’s take on how you would sum up the year.
Larry Matson: In these times, I think the companies that have the stronger management and the stronger presence are going to survive. It’s been a really hard year trying to keep our customer base, working with people that are having hard times. California has a pretty high unemployment rate, a lot of foreclosures. Part of our market, Central Valley, has one of the highest foreclosure rates in the nation. But, we pulled through. Our numbers are actually better than they were in previous years. We’re having more cancellations, but we’re working harder to keep our numbers up. We’re still growing.
Mike Matson: It’s been difficult. Doing business has been more expensive because you’re used to smaller amounts of cancellations, and now you’ve got a higher amount and so we have to add a lot more to keep our growth going. We’re also qualifying people we want to do business with. It used to be that they would qualify us. We’re helping a lot of people through some hard times, you know. Contractors and building owners have seen funding cuts to their bases. You have to watch how deep you get in with them, but you want them to succeed because when they succeed, we succeed.
Mike Miller: Business has been slower for us, and tough. I agree that you do have to watch out for the attrition; you do have to watch out for the collections side of it. But, because construction is down, then that’s affected us on our stuff that would be fire and CCTV and access control systems. So, we’ve had to offset it with other divisions that we have working within the company as a whole, but it’s been an interesting struggle. When I travel across the nation and I talk to other dealers, we’ve all had to get lean and mean. We had to reduce costs; we had to do that by people and by processes. It was a tough look in the mirror when you had to go to work and then deal with those decisions and opportunities. But we had to do it to protect the rest of the employees. It hasn’t been just this year. It was last year for us, too.
Bill Zeller: We had to completely and totally reinvent ourselves. We were residential. There were some years that we were doing 1,500 to 1,800 houses a year. One day I said to one of our employees, ‘We have a problem.’ And he said, ‘What’s that?’ I said, ‘Cement trucks.’ And he said, ‘What do you mean?’ And I said, ‘There are no cement trucks.’ And he said, ‘What?’ And I said, ‘If there are no cement trucks, then there are no slabs.’ So we started to reinvent our business.
We went into more cameras and we went to home shows, which I hadn’t done for years. I don’t accept recessions. I was determined to make money each year and keep our employees. I have never worked as hard as I have worked in the past year. And sometimes I thought to myself, ‘What am I doing?’ We decided we were not just an alarm company. I set up a division for home theater and all types of stereo. A lot of our success financially has been because people are buying that type of thing in this area, they spend the money. We’ve done a couple million dollars in stereo.
But you have to watch everything today. Right now, every PO comes across my desk. We’re not buying stuff we don’t need. We have trackers on all the vehicles to make sure we know exactly where they are and what’s going on. We’ve cut our costs tremendously. Our monitoring is growing by about a percent or a percent-and-a-half a month after attrition. Most of what we are getting monitored is not from home sales now; it’s purely from our reputation. If I hadn’t started this business in 1977, if I had started it a couple of years ago, there is no way I could make it.
Larry Matson: To jump in on what you said, we’ve also cut our costs and really put the money where I think it should be. We’ve kind of taken a little leap of faith. We’re improving our call centers; we’ve spent a lot of money on improving our software and our call center software. The economics are different right now, so we can get a little better deal than we could have four or five years ago. So we’re looking at areas we know we’re going to need to build our infrastructure and improve things. We’re putting our money into our future, even though it’s kind of hard to do even that.
Mike Ash: We’re a much smaller company. When we were moving and grooving, we had 18, 20, 26 employees, and now we’re down to 10. So for the smaller guy, it’s been a tough year. It wasn’t as bad in 2009 because 2008 was the best year we ever had. That filtered into the first quarter of 2009 and I was thinking, ‘What is everybody talking about?’ Then April came and I checked my phone to see if it still had a dial tone [laughs], since that’s about when it hit us.
A lot of what you guys talked about is that it comes down to fundamentals and watching your pennies. A lot of that has to do with putting systems in place. We use SedonaOffice, and we became a First Alert dealer in 2009, which is extremely helpful. I get to sit at roundtables with gentlemen like this and learn things. You don’t get that anywhere else. GPS units in company vehicles, they pay for themselves. You’ve got to have it because it keeps everybody honest.
We have the guys use their cell phones to log field service units to keep things paperless. We bill after the first half-hour’s labor and then every quarter-hour after that. It was amazing how every call was 30 minutes. There was never a call that was 35 minutes until we put the field services in there, which clocked when they got in there, when they were done; it was automatic. Also, I have guys who have been with me for 20 years, so when they go into a customer’s house and they replace the sign, they think it’s $20 so off the top of their he
ad they put down $20 when it’s really $35. But you keep on adding up from there to here. With field service units, you’re just doing math so no mistakes are made.
We have had to lose people. I hated to do that, but we have gotten ourselves, luckily, ahead of that. We focused in on what our core was, serviced our customers, went ahead with radio only for all installations other than commercial fire. From that, you can go to Total Connect in the add-on services and go into wireless. It’s easier to add on a wireless CO detector and not have to go back and run a wire. And it allows you not to have these amazing techs have to go out and troubleshoot because if a window over there is bad, it’s the transmitter. So that cuts down on specialized labor.
Looking at 2011, I don’t think we’re going to see much difference in the economy.
And I wanted to transition to 2011 from the year just past. Do you foresee many differences? What are your top strategies going to be in 2011?
Ash: Bill talked about it in doing home theaters in that it’s tough to get into doing something else. Small guys have got to watch that. If you’re not doing it right, you have to be very careful when you move into other fields because you have to take care of the customer, and make sure you’re not selling your name out. I’m sure that some small guys can do that.
In 2011 we’re just going to hold down where we are and add on those AlarmNet radios, add on Total Connect, managed access, which I think is going to be a big thing. We’re going to look to increasing our RMR. The nice thing is that with residential, two or three years ago, it used to be $24 a month for residential monitoring and now it is $34.95. I like Total Connect because you’re constantly allowing that customer to arm or disarm when the alarm goes off and interact through a cell phone. You’re touching that customer all the time, so I like those types of services.
Zeller: I think 2011 is looking better than 2010. As I mentioned, we have reinvented ourselves and we’re getting used to what we are doing in the new business. It’s been a challenge, and you know what? I enjoyed it. I think we were so busy doing so much, for a few years a dead person could have run my business [laughs all around]. It was simple. People were in place, and that was it. We were adding customers so rapidly that if a customer decided they didn’t agree with some of our policies it was like, ‘Go ahead. Take off!’ But now, I made more decisions the past year than I’ve made in probably the previous five years. If this one doesn’t want to pay the service call, we’ll do it anyway. It’s been challenging, and it’s been a lot of fun. I think we’re going to have a lot more of that in 2011.
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