Estimating, Accountability and Discipline for Alarm Dealers

A Q&A with Larry Folsom, general manager and COO of Nevada' A-1 Security, on managing company operations, estimating and keeping a handle on profits and losses

To keep revenues up and to keep a hold on company policy, A-1 Security COO and General Manager Larry Folsom says he focuses on discipline in his company's operations. It's an important management style for company that brings in $8.3 million annually, with services split between the alarm division, the commercial locksmithing division, tract home work, apartment security, custom homes and commercial security systems.

That discipline pervades Folsom's approach to estimating. The company, especially because of its size, has to follow very strict estimating procedures so that profits and losses are easily tracked directly to a job and to the managers who signed off on a job. But good estimating doesn't stop with a contract signed by a customer, says Folsom. It continues as that job is followed-through upon, and is closely watched so that mutating jobs, whether caused by a customer who wants changes or by an estimation that didn't account for an important aspect, don't get out of hand without being corrected in the company's purchase order and margin sheets.

While this may sound like unnecessary paperwork to smaller dealer companies working in a tight-nit operation in just one market, these procedures are useful whether you're doing $50,000 in revenues per year, or $10 million. In this Q&A with, Folsom gives his thoughts on aligning sales and operations staff during estimates, working with tract home developments, and "knowing when to say when."

SIW: How important is real-time analysis to your management system?

Folsom: Companies I've worked for in the past were making decisions based on what they thought was happening, rather that what was happening, and that's a scary position.

Previously, P&L (profit and loss) statements were coming in too late; they were really just obituaries. We decided we had to make every margin sheet accurate. We have to live and die by these.

Every Thursday at 4:30 we have a divisional briefing. We talk revenue, budget, returns, labor. It's a benefit because if one of our divisions is having problems, we can look at it and solve it. Our divisions can only be as good as our estimates -- I really believe that is true.

SIW: What's the best attribute someone can have for the estimation and sales process?

Folsom: It's all about discipline. You have to have discipline to be able to pass on a job; I think you have to be brave enough to walk away. That never gets easy. If a job is wrong in terms of the estimate, we know we didn't do a god estimate; we know we missed something. A lot of the excellence in good estimating is having foresight. Estimating is still about leadership and excellence and discipline.

SIW: How does the estimating and job sign-off procedures work at A-1 Security?

FOLSOM: We created a margin sheet for every job. I have the materials, the labor costs, and I know the commission. That gives us our cost. Then that goes to the manager who has to sign off on the labor, equipment criteria, commission. Then they can go out and get the contract. We shoot for about a 35 percent margin. Once I have approved it, their credit has been pulled, and then the job will be pushed forward. The way our system works is that everybody's in it. You will have problems if sales does not meet with operations, and the result will be that the customer is not happy and the company won't get its margin.

SIW: What are the dangers of not following through on this kind of margin sheet?

FOLSOM: The biggest danger is a lack of control. Our margin sheet is the same margin sheet throughout all jobs, so we all speak the same language. If you have sales turning in sheets not approved by operations, then ops is fulfilling a project that ops can't do at a fair price.

As far as our P&L sheets, we're very open with our financials. Our managers have profit and loss responsibilities, and anyone in our company can see the margin sheet - everyone but the customer. The divisional manager must sign off on it.

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