There’s Security in Security

Like a lone building that miraculously remains standing after a ferocious twister levels everything else around it, by and large electronic security contractors had been unscathed by the nation’s economic squalor. More recently, however, the recessionary tornado has circled back and begun to pull installing security companies into its downward spiral.

Truly though, the writing was on the wall, as the security industry’s suppliers — many of which are large, diversified conglomerates also affected by the market dynamics of other industries they serve — were the first to encounter diminishing returns. As a consequence, as reported in our February issue, publicly held security providers saw their collective share values plummet by more than a third in 2008.

On the dealer side, it was those focused on the residential and homebuilder markets — particularly ones lacking strong recurring revenue bases — that suffered the initial and most severe fiscal wrath. Then, as the economy continued to take a beating and the recession deepened, hardships of one kind or another befell the majority of security providers.

An analysis of SSI’s Sales Snapshot polls from 2008 tells the story. From April-November, installing security contractors reported residential sales were down an average of 49 percent, commercial 30.6 percent. Year-over-year results for that period show the residential figure rose 21 percentage points (to the 49 percent) from 2007 and 21.1 points from 2006. Those reporting commercial sales were down increased 18.9 percentage points from 2007 (to the 30.6 percent) and 19.3 points from 2006.

It is important to note these figures represent the percentage of respondents who reported business was down, not the actual percentage of declining revenues. However, the 2007-2008 drop-off was substantial compared to 2006-2007, when business was relatively flat. Making matters more troubling is this trend has not yet peaked, analysts like Mike Barnes project 2008 will be the industry’s worst since the 1980s and ISC organizers are braced for a 10-percent dip in attendance.

Despite this data and mainstream media’s “sky-is-falling” panic, I believe there is a silver lining to this dark economic cloud — particularly for our industry. Apparently, I am not alone because when asked late last year what their 2009 outlook was, 41 percent of responding security professionals selected “optimistic,” 11 percent chose “outstanding.”

Like most journalists I have a mile-wide cynic streak, yet even I share this optimism. Why? Because as long as society exists as we know it people will need security solutions, and technology will continue to advance and propel those solutions — indefinitely. How many businesses can say that? The just-signed economic stimulus package won’t hurt either. In case you have not figured it out yet, you have selected a pretty special field to be in.

Yet success and profitability are never guaranteed — particularly when tough times dictate lean and mean operations. There was a time when the margin for error as the owner/manager of a security company was fairly large and forgiving, when making money and incompetence were not always mutually exclusive. I believe it’s those companies — ones run too loosey goosey and lacking in business fundamentals, discipline and strategic focus — that are feeling the most pain.

That’s where Darwinism comes in … survival of the fittest. In this case, fit means: 1) monitoring costs like a hawk; 2) adjusting and tightening the belt where it makes sense; 3) minimizing debt; 4) pursuing new revenue-generating opportunities; and 5 & 6) making sure both employees and customers feel cherished.

These things should not be the result of the recession but rather standard operating procedure. The great news if your company has already embraced those practices not only is it more likely to survive but also positioned to capitalize during and after any crisis. Those still insistent on flying by the seat of their pants may be destined for busted britches.

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