With one of the most tumultuous economic and political years thankfully in our rearview mirrors, we can turn our attentions to 2009. Ah yes, the New Year, always rife with renewed dreams and optimism. Well maybe not so much this time around, as lingering challenges, unresolved questions and unknown variables continue to test the mettle of Americans and their businesses.
Even the usually recession-resistant security industry has sustained some chinks to its armor. Fortunately, any wounds suffered by most in the profession have been more akin to minor abrasions than the deep gashes seen in so many other lines of work. So then, what should stalwart security practitioners be prepared to brave as they forge ahead in this business battlefield?
To find out, SSI hosted a roundtable with four of the most experienced and respected CEOs from some of the installation community’s most successful companies. The two-hour discourse during the recent First Alert Professional Conference in Orlando, Fla., included John Bourque of Cranston, R.I.-based HB Alarm; Joe Hassan of Certified Security Systems in Jacksonville, Fla.; John Jennings of Safeguard Security and Communications in Scottsdale, Ariz.; and Joe Nuccio of ASG Security in Beltsville, Md.
Unlike many so-called roundtables that are actually individual interviews often haphazardly cobbled together, the material you are about to read was generated organically directly from a lively, fully interactive session in which the state of the industry was hotly debated and assessed. Overall, the message is mostly positive — tempered by some caveats and harsh market realities.
What type of year was 2008 for your business?
Joe Hassan: In Florida, new construction fell off the cliff. It’s way off even beyond our expectations; it’s somewhat nonexistent. However, the silver lining is our video surveillance and access control business, which has more than made up for it. We’ve really focused on that and there seems to be a lot of demand. It’s almost a necessity or requirement for schools, hospitals, like that, where it’s almost as normal as a fire system these days.
Joe Nuccio: We had a pretty solid year. We’re in the middle of a couple of acquisitions and I think with those we’ll actually exceed expectations. On the internal growth side, residential is down a little bit — probably about 8 percent. But commercial has picked up and, as Joe said, it’s really offset and made a difference. From a margins standpoint, because commercial has been so good we’ve actually had our best year ever for what it costs to create a dollar.
John Jennings: I look like a pretty smart guy right now, but four years ago I made a conscious decision to get out of new residential construction. I just figured there was no margin there. I was very fortunate because Phoenix is as bad if not worse than Florida now. Our residential construction market has fallen off the face of the earth. Three of every five dollars generated in Phoenix is tied to residential construction. So if you look at that, I would think that we would have had a bad year. I’m kind of waiting for the other shoe to drop because like Joe and Joe, we’ve had one of our best years.
Our commercial business is up well over 14 percent because we’re tied mainly to health care and education, which is where the dollars are still being spent. I’ve been through a lot of recessions where typically, when things get bad, the unemployment rate goes up, crime goes up, people get more concerned about security and attrition tends to turn down. Sure enough, we saw our attrition trend down for the year.
John Bourque: It was not the best year we’ve ever had. I think we have to look at running our businesses like it’s 1929, which none of us have ever done. This is an economic tsunami, and I’m really concerned about the availability of credit and what that’s going to mean to large projects. Consumers are just not buying — they’re not buying anything. Unless that changes, it’s bound to have a major impact on where we go in 2009.
We have a mandated fire business that will generate $2 to $5 million for us in 2009, regardless of the economy, because it’s been mandated by the state. So in a way we’re better off than a lot of other companies, because I wouldn’t want to be relying strictly on the economy that we’re heading into to find my growth. I applaud you, gentlemen, but I think it’s going to be difficult.
OK, so let’s talk about 2009. What are your expectations?
Nuccio: I think 2009 is a little bit unknown. Things happening today around the world are so sporadic. Take a look at the stock market — up one day 500, down the next day 500. There are fundamentals that are not normal, and until you really see what is ‘normal’ it is going to be difficult to assess.
Now that the election’s over people are worried about capital gains, so I think you’re going to see a lot of activity on the acquisitions side start to come about in 2009. The credit markets are shut airtight, but if you’re in a position of good credit and have a good credit facility, as we do, I think you’re going to see a lot of opportunities in 2009. If you’re on the other side of that situation it could create problems, and so I think it’s going to be an interesting first six months.
On the positive side, our industry has always been pretty recession-proof, and as John kind of talked about, when crime goes up, security really kicks into gear. You get bigger and better projects because they have to have security, which kind of counterbalances everything.
The most prudent thing you can do as a business owner is to go back to the basics; you’ve got to really structure and taper your business so that you’re quite efficient. It’s like Rule No. 1: What happens when your competitor drops their price? You can go drop your price, too, but then you go bankrupt, right? So if you drop your price, you have to drop your cost structure. I think that’s what you’re going to see in 2009 — a lot of tightening of the belt within companies.
