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.
When you talk about going into home audio/theater, in terms of the personnel installing and servicing those systems, are they the same people who are doing the security?
Zeller: Absolutely not. We had two people who were with us that were audio specialists because we always have been in the sound business. When we decided to get into this, we became CEDIA members. This stuff is so tremendously complex you need someone who not only can work a computer but also has gone to school to build a computer! They have to understand everything from one end to the other. We don’t send those people out on alarm work at all. The alarm people are the alarm people; the sound people are the sound people.
Did you standardize on one product, or did you find that you can’t do that?
Zeller: I would love to do that; however, with home theater and stereo I don’t think it’s possible. When people are spending $100,000, $150,000 or $200,000, they are going to want their own input, and they have to be wooed. It’s very different from a security sale.
I had one customer who gave me such a hard time with the alarm prices. He signed a $120,000 theater contract like it was nothing but was killing me over the alarm system. And then I overheard him say to my daughter-in-law, who is my vice president and runs the audio division, ‘You know these chairs that recline? I kind of hate to have people have to put their hand down and release it. How much to make these 10 chairs electric?’ And she said, ‘Sir, that would be almost $4,000 a chair.’ And he says, ‘I think we should do that.’ [Laughs and head shaking all around.] He spent about three times as much on that as he would on an alarm system. It’s an amazing business, it’s a different world.
What’s in store for your business in 2011, Mike Miller?
Miller: I’m evaluating the critical performance factors for our business in terms of sales, what’s in the pipeline, and daily, weekly and monthly reporting. You need to know as you’re building toward your goal and your budgets if you are going to make it or not. I know that if we can hit these numbers here, I get all of my bank covenants and P&L issues covered, and everybody is happy. When we see that on a daily/weekly basis then if we’re off a little bit we can look at how we might compensate for some of it the next week.
One of the things I’m most concerned about is our attrition, and I have customers who are older than dirt. We have new competition and more competition. I thought we had four or five competitors at most, but I did a recount and found it’s now 12 plus the national companies. We’ve pretty much have had it to ourselves and we’ve been spoiled; I admit that. An age-old problem we have is salespeople who don’t go back and see their clients. They don’t go back for referrals; they don’t go back for add-ons and all of that. It’s nothing new; it’s back to basic fundamentals. Our customers have forgotten who we are; we’ve forgotten who our customers are. That’s pretty tough talk in the mirror right there, and that’s stuff that I don’t like to admit.
Another area we’re looking at is RMR add-ons, there has to be internal growth there. We’re just now starting to get our act together in terms of making sure of the AlarmNet, Total Connect, radio backup is primary not secondary. Something new in our state has to do with a company called Tegris. They provide Web-based back-office, third-party administration for local fire marshals. There are fire systems out there that are not in compliance, and they’re not in compliance because a) the client doesn’t change it unless the fire marshal tells them they have to fix something, and b) with ever tightening budgets, the fire marshal’s going, ‘I don’t have time to follow-up on these.’ It’s a life-safety issue.
So this company comes in, meets with all of the service providers within the city and then has access to your accounts. They then notify them, ‘We’re going to be getting everybody in compliance. It cost $15 for inspection.’ And you’re going, ‘Great, I’m going to add that on to charge the customer, if it’s being forced by the fire marshal.’ And this compliance means less liability exposure and extra dollars. You’ll be seeing more of this type of thing I believe.
Last but not least, let’s hear what the Matsons have in store for 2011.
Mike Matson: It used to be that you bought an alarm because you had money and you wanted to protect your stuff. Now you have to buy a system because there ar
e more criminals out there because people aren’t working, and you have to protect yourself. So we’ve turned that kind of around to where it used to be a luxury to have it and now it’s something you have to have.
Larry Matson: We’re launching a major campaign to get all of our old systems updated to GSM mode. We’re trying to add more protection. We’re also, which may not be the best thing, going to market against some of our weaker competition. In fact, we’ve already seen a lot of people just coming to us for monitoring because they know we’re a First Alert dealer and we’ve been around. These people can’t get their company out to see them when they need them because maybe that company had to cut back on their workforce. So we’re staying strong in the market and we’re working smarter.
What would you say as we sit here today is your most daunting challenge? What is it and what are you doing about it?
Ash: It goes right along the lines of radios. We have customers calling us, disconnecting phone lines, changing services to VoIP, Cablevision, Comcast and FIOS, and not paying attention to the alarm system. In every mailing we send out we include a bright orange postcard talking about this.
A customer called me the other day and said, ‘I had that changed a year ago.’ It scares the hell out of me. We’re sending a letter out again to every customer requiring they tell us what type of VoIP or whatever phone lines they’re using and giving them instructions to call us to put their systems on test. We’re watching as they come back in, we’re signing them in and calling the customers to make sure it gets done. It’s very scary because somebody is going to get hurt. I think it’s a major, major problem in this industry.
It’s different dynamics for every company. To me, even if it’s costing more money to do it’s the right thing to do because of two things. One is phone lines being cut, and the second because we all know that the regular POTS lines are going away. It’s irresponsible to ignore it and continue to put systems on. Our avenue is AlarmNet radios only, and we’re going back to all the other customers and making sure everybody is on the same page and understands what is going on.
It’s just the right thing to do, and it is also a legal matter. If a customer calls me and, God forbid, something has happened and the signal didn’t go through, I can at least say, ‘Look, we notified you. We asked you to respond. We followed through on this,’ and legally try to reduce our liabilities at that point. It’s a very scary issue that has to be addressed by the whole industry very quickly.
Isn’t one of the positives in some of that though that it does give you another touch opportunity with the customer, which could afford upselling opportunities and/or decrease the likelihood of attrition?
Ash: It is a positive, but now you have to understand that now you’re shaking the tree. So you have to be willing to possibly reinvest in that customer and either reduce the price or give that radio to that customer. I’m not sure which way to go with that, but it is an issue. You’re going to get customers calling to say, ‘I haven’t had an alarm for six months or a year now. How come you didn’t know me?’ So then you have to explain the situation to them. A couple of years ago, we were always putting systems on test, but with the older ones nothing happened so we don’t know. I think that’s the No. 1 problem.
Mike and Larry, what’s your tough challenge keeping you up at night and what are you doing to address it?
Larry Matson: It’s along those same lines. With our competition, it’s hard to go in to a customer that’s recently gotten Comcast or some other type of VoIP service and try to convince them of why they should pay for this instead of us just giving it to them. It’s a big challenge, too, that some of our competitors have aligned with cable providers to where right off the bat they tell our customers, ‘We’re compatible. We don’t know if the company you have now is compatible or not.’ So it’s a little bit of a challenge and we need to get in to the cable providers and make them aware that when they are dealing with a customer that has an alarm system, maybe they should step up to the plate as well and let the customer know that they may need to contact their alarm company.
Mike Matson: I think there has really been a disservice that Comcast and these other guys do by disconnecting some security systems. And they’re not telling the customers, ‘Hey, your alarm system doesn’t work now.’ They’re always trying to say that it’s the alarm company’s issue. I think it’s a very serious problem that the phone companies and cable companies need to take responsibility for because they are the ones cutting off our service because they want to sell phone service. They’re opening themselves up for a lot of liability.
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About the Author
Scott Goldfine
Scott Goldfine is the marketing director for Elite Interactive Solutions. He is the former editor-in-chief and associate publisher of Security Sales & Integration. He can be reached at [email protected].
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