Navigating the Security Industry

When I began my law career 20 years ago, I defended alarm companies against lawsuits involving fire, burglary and other losses. I've watched the electronic security industry evolve dramatically in those two decades and in my long-term view, three important principles impacting integrator success stand out. First, harnessing ever-changing technology. Second, approaching security as a value-added service provider and not just as another security contractor. Third, recognizing the extraordinary importance of recurring monthly revenue. It's difficult to navigate new waters using dated charts. Consider these three coordinates as you continue to navigate through the current waters of the electronic security industry.

Stay open to the technology evolution

Technology continues to alter the electronic security landscape. Today, I provide a significant amount of legal work to numerous industry video providers (ranging from camera manufacturers and video software providers to hosted video providers and security integrators using more and more video in the overall security mix). Industry trade shows demonstrate that security technology is becoming increasingly affordable, diverse and important. The much anticipated convergence of IT and physical security continues at a rapid pace and IT departments will play an ever-increasing role in physical security, especially since we "hang" on their IT network. Finally, in today's environment, it's all about the cloud and how, when properly exploited, it can be very profitable for smart security providers.

Security as a service

Approaching security as a service may be the single most important immediate strategy to take in running your business. Many security integrators continue to focus on getting work through competitive bidding, i.e., the "bid and chase" approach. Be the lowest bidder, get the installation contract and grow the relationship. "Bid and chase" has a limited future because getting new clients is essentially premised on price and the belief that all security integrators are created equal. Instead, focus on service and expertise, not price to get more and better clients. I'd much rather provide value-added services to a client who wants responsive, quality service and not to someone who has sticker shock with my hourly rate. It's a tough lesson to learn for any service provider selling their expertise but if you want to succeed today, you must make the transition from being just one more security contractor to a first-class security service provider that clients seek out for first-class security services.

The magic of RMR

Plenty of security contractors just don't get the importance of recurring monthly revenue (RMR) until they go through the process of trying to sell their business. And then it's too late. I've been there and it's terrible to watch owners who worked their entire lives to build an electronic security business realize that their business has very little value to an acquirer simply because the company's most precious business assets—its accounts—are tied up in relationships between the company's principals and their customers and not reduced to predictable, assignable and enforceable service contracts. Any security integrator who wants to sell their business should start worshipping at the altar of RMR. While acquirers want to buy (and can get financing for) good recurring revenue service and monitoring contracts, they won't pay much for business relationships where the company's owners are the "special sauce." My advice to integrators is to move as much of the time-and-materials service work (for which acquirers won't pay much, if anything) to periodic recurring service work under RMR-based contracts. Priced right, they can produce profit and long-term value. Lease RMR can also be attractive to security end-users since they can avoid significant capital investments.

Writer bio:

Eric Pritchard, SD&I's new legal columnist, is a partner in Kleinbard Bell & Brecker LLP, Philadelphia, a commercial law firm with a national practice in the electronic security and life safety industries. He co-chairs the Electronic Security Group at Kleinbard and has 20+ years of experience representing U.S. electronic security and life safety providers. Follow his columns in SD&I and read his blogs at www.securityinfowatch.com

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