The Big Idea with Ron Davis
Changing Landscape Emphasizes Need for Education
Idea of the Month
If you had just one really great idea you could share with the alarm industry, what would it be?
This month's great idea comes from Jerry Tester, owner of Security Alert Inc. in Winterville, N.C.
Tester's Great Idea:No matter how much or how little amount of money you're making, spend some of it to support your local and national associations.
Jerry Tester, proprietor of Winterville, N.C.-based Security Alert Inc., is a pretty savvy alarm dealer. We met up recently at a seminar for the North Carolina Electronic Security Association (NCESA) where I had a chance to recruit his expertise for this month’s column. In fact, I’ll be sharing more from our conversation in the March installment as well.
After Tester initially shared his great idea, I nearly asked him for an alternative since it is a topic I have discussed prior in this column. But then it occurred to me that I was among more than 60 North Carolina executives who had committed valuable time to attend the association’s event.
The fact that I was the main speaker or the topic had to do partially with acquisitions and mergers was of little consequence. The important thing is that people, some of whom I’ve known for 40 years, are still spending time and money in the pursuit of knowledge. This speaks volumes about the continuing need for education and the role associations play in providing resources and forums to learn.
Although education is a broad category, what I want to really focus on is “actionable knowledge” and that means just what it implies: obtaining knowledge about something that requires your immediate attention for action.
People have long been talking about how the industry is changing and how it isn’t going to last much longer. For some time I subscribed to a portion of that theory, but then realized that crime will never go away. And while technology may improve and change modestly, the underlying technology used in the installation of alarm systems was going to remain pretty much the same.
This last part, however, is indeed changing dramatically. It is one of the paradigm shifts that is occurring in our industry. It is a shift that requires independent alarm dealers to learn more about what’s going on in the industry. Although multiples for the sale of monitored accounts have not changed significantly in the past five years, we are also seeing a quantum change in how systems are sold. Direct mail, direct marketing, door-to-door, do-it-yourself, bottom-basement monitoring prices, and so forth.
What this all means is that while we are quietly going about our business and moving the shift forward, we’re starting to be surrounded by gatecrashers. Like those pesky ocean hijackers in little boats, one or two of them we can handle. An armada changes the game.
Consider how the financial community looks at our industry. Ultimately, they’re lending money based on cash flow or, as we like to call it, a multiple of recurring monthly revenue (RMR). If an alarm dealer has sold an account that is paying $20 a month for monitoring and he gets a 35x multiple, he’s receiving $700 for that account. Multiply that by thousands of accounts and you’re talking about quite a piece of change.
The question now becomes what do we do as an industry to protect our greatest asset — our RMR — while still remaining a good and viable competitor to these new entries into the industry?
What does all this have to do with Tester’s great idea? It was the main topic of conversation at this particular association meeting! I’ll have some more thoughts on his intriguing suggestion in next month’s column.
Ron Davis is Security Sales & Integration's "What's the Big Idea?" columnist and contributing market analyst. He is president of Davis Group, a full-service consulting firm serving the security industry, which also includes GraybeardsRus. He has 35 years of industry experience, including founding Security Associates International in the 1980s.