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


SIW: This sounds very regimented. Where can flexibility exist?

FOLSOM: There are places where we can work with the margin sheets. On our commercial side, we have some sales persons with a salary. We raise our effective labor rate to make up for their salary on top of their commissions.

SIW: You noted that A-1 has worked in a lot of tract home developments. Can you give our readers some insight into doing that kind of work?

FOLSOM: In tract home work, the builders force you to compete, but really the builder market is about relationships. I do compete, but our paradigm is that we will train their sales staff, and we will be able to sell more to the customer, and support the transaction. We meet with every homeowner, so I do charge more to the builders, but the builder makes more money because we will end up selling more to the customer. We have to be the builders advocate to the new homeowners.

SIW: Sometimes jobs goes bad, no matter how well you think you've done the estimate. How does A-1 deal with those types of situations?

FOLSOM: If we have a plan that says 30 hours, and 10 hours into it, we know it's going bad, that's when I go back to the customer. That's when we have to take our lemons and figure out how to make lemonade.

If it's not on the contract, we simply don't do the work - unless there is a purchase order. You have to have the courage to look the customer in the eye in these situations and tell them, "I have to have the purchase order so I know I'll get paid." Some guys will throw labor and material at a job until it's done. You can't operate that way.

SIW: How important to the estimation process is being up-to-date on technology?

FOLSOM: We have a technologist on staff that tells us what we need. Our technologist is well trained and really likes the technology. If we don't stay up on technology, we could eat it. On the technology side, the market is changing, and the customer has more technical knowledge than before.

SIW: What's the end result of adding procedures and discipline, no matter how burdensome, to your sales and estimation processes?

FOLSOM: Our system may have too many moving pieces, but it frees up our sales guys. If ops signs off on a job, then that means I'm paying that sales guy, even if the customer goes upside down and is unhappy.

The accuracy means we can bid and win on more projects and different types of projects.

Step-by-Step
As an added benefit, Folsom, provided a simple step-by-step description of how a job goes from lead to collection at A-1 Security. While it's probably not an earth-shattering approach, Folsom's point in showing this is that if operations isn't taking responsibility for what the sales department is initially suggesting, the job can't move forward -- and if it does, it's at risk of being a threat to company margins.

  1. Sales Lead
  2. Systems are designed and a Proposal is built.
  3. Proposal is submitted to the Divisional Ops Manager
    1. The assembly of equipment and labor estimates are verified
    2. The Ops Manager signs the proposal and is taking responsibility for the accuracy of the equipment list and labor estimate
  4. Customer Signs Contract ( The Proposal becomes a Job)
  5. The Job is turned in and processed
    1. The customer is put through a credit check (625 Beacon residential, D&B for commercial)
    2. Branch Manager approves job and is taking responsibility for the jobs profitability and the Branches ability to perform the work
    3. The Account is built in Admin
  6. The Job goes to the Install Department
    1. Equipment is purchased (The approved Proposal is the equipment list)
    2. Labor is scheduled
    3. The Proposal is used as the blueprint for the jobs installation
  7. Complete Job and bill the customer.
    1. When the job is complete the estimate is compared to the actual results.
  8. Collect the Receivable.