CEOs Tell How to Lessen the Punch of the Credit Crunch

As mentioned elsewhere in this blog, I recently conducted a roundtable at the First Alert Professional Conference with four of the most experienced and respected CEOs from some of the installation community’s most successful companies. The two-hour discourse 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.

Although much of the discussion will be available in the January issue of SECURITY SALES & INTEGRATION, with bonus content in the online version, the sheer volume of fascinating and incisive comments expressed during this marathon session demand an additional outlet. That outlet is Under Surveillance, and this is the second of several exclusive postings stemming from this summit of industry leaders. The first covered industry marketing.

This installment focuses on how the economy and credit crunch is affecting security contractors’ business, customers and employees.

(l-r) John Bourque, Joe Hassan, Joe Nuccio and Scott Goldfine

You have mentioned that business has been surprisingly robust, but with the recession have collections become more of an issue?

John Jennings: That’s one of the biggest challenges right now, collections or getting paid. We’ve watched that very closely. I can tell you we meet every two weeks on our receivables with the sales managers of both divisions, with both the commercial and the residential, and also with our accounting staff that do the collections, as well as myself and the president of the company. And we do whatever it takes to move to get paid, because that’s the big challenge. We moved out of the subcontractor market where we were the subcontractor to the subcontractor a few years ago and we got closer to the money with the general contractor or the owner. That helps a lot because when you’re subbed to a sub, he might be paying the last three jobs off with the job he’s got right now. When his job flow stops, your flow stops also, and that’s really critical. And I imagine people are feeling that today. We’ve got two contracts right now that we’re having a heck of a time getting paid on, and they were both tied to residential condominiums that – like down here in South Florida, Central Florida – are just empty, because they overbuilt them.

How are you guys doing in collections?

Joe Hassan: We’re doing well. We obviously have the concern with the economy that we would feel with our collection efforts, but we ramped up as far as our processes and timetables on notifications, with an acceleration of letters and phone calls, even field visits, when necessary. We’ve really not noticed any significant percentage increase in bad debt or write-offs or attrition of accounts. We are a lot more cautious on the front end. We very rarely go into a job with a retail end-user consumer without a 50-percent deposit in-house. We are pretty on mark on balances and installations unless we’ve made other arrangements because that’s where the problems begin, when that wasn’t clearly defined in the contract. Then you walk away and you may not know the condition of the business or the condition of their finances at times.

It’s easy to get yourself in that situation. So we just put a lot more effort on the front side to not allow those kinds of things to happen. We’re not managing maybe as loosely as we did when the economy was robust and people weren’t really strapped, financially. And we run credit checks on just about anybody we would consider doing anything substantial with, even if it is a balance due contract at the end. We want to know if you’re starting to get in trouble. We do that with our ongoing relationships, too. We periodically go out and run checks on contractors or electricians or builders we are doing business with to see if they’re beginning to get in trouble or their Paydex Score is starting to suffer. We want to be prudent businesspeople and not have their problems become our problems.

What other challenges from an industry perspective, or even closer to your businesses, are foremost in your mind right now?

Joe Nuccio: I have a little bit different perspective on it because I think the world today is different from what it was eight months ago. The challenges are these credit markets are slammed shut and it’s very difficult for people to gain capital. And it makes everything just come to a halt. And until these capital markets start to free up and consumer credit … The credit card companies started imposing where you used to have a $2,000 limit, now you have $50 or $500. These are the things that concern me as I look at it going into 2009. The products and the services and how we go to business – I mean, that’s never really affected me. I never look at how competitors do things. I just don’t view the world that way. We just go out and block and tackle and do the same thing day in day out that we always do, and build our business customer by customer. I think that will still always hold true. What’ll be the determining factors are I think these credit markets, where they’re at today. You know I think a lot of it has been driven by fear. Fear is causing these markets to go up 500 points one day and down 1,000 the next day. People selling off the hedge funds are the ones who are really killing us right now. That’s what I see.

Jennings: Joe, I agree with you 100 percent. I think the biggest problem you have is, when you take 50 percent off the value of the stock market, and you take 50 or 60 percent off the value of a home off the market

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