Insights from a successful industry entrepreneur

Security Networks’ founder Richard Perry discusses how he built and the grew the company into a $500M business

SIW: How did you manage to grow Security Networks through the economic downturn?

Perry: It was almost surreal because when we were going through what was such a dramatic recession a few years ago, our business was hiring and growing at a 38 percent pace every year. I will say that most of our affiliates, the folks that were out selling on our behalf, their direct sales model - they don’t wait for the phone to ring, they go out and get the customers, so I think that’s part of it. If they have to work a little bit harder to meet their quota they would just work harder, but they certainly don’t wait for the phone to ring. It’s another testament to the fact that our industry tends to be very resistant to downturns in the economy. I’ve been through maybe three or four them since I’ve been in the business and that’s always been the case.

SIW: How big of an impact has the move towards home automation and other functionality beyond security had on the market?

Perry: I think the impact has yet to be fully realized. I think we’re all on the leading edge or frontline of that wave right now. Certainly, the impact it should have and the Holy Grail is that it will transform the security systems that we’ve all been selling for years from a product that’s a passive product on the wall to a product that is being actively interacted with by customers every day; a product that they can’t live without and that will change the dynamic because it will change the attrition curve, the cancellation curves dramatically and of course that would have a huge financial impact on all of our businesses.

SIW: How would characterize the effect that recent market entrants such as telcos and cable companies have had on traditional alarm dealers?

Perry: So far, it’s a positive impact because those larger companies add a lot of credibility to the industry in general. They spend a lot of dollars on advertising and they really create awareness in the business. We’ve seen a lot of television (ads) and we’ve seen a lot of impact and what I think that’s done so far is helped the industry at large because it creates opportunities for everyone to get more business. Their impact in the long term, I think those large companies are a little bit like an elephant in a parking lot. They’re big and a little clumsy, but they can crush a lot of people before you can get them under control. I think they certainly have the potential to do a lot of damage (competitively), but we haven’t seen that yet. They operate on different metrics than most of us in the alarm industry in terms of what they can live with regards to customer acquisition costs and those types of things, so they have a different way of approaching the business and a different way of looking at and measuring success.

SIW: What do you think it is going to take to increase the penetration rate for residential alarm systems?

Perry: I think part of it will be adding products and services that appeal to a lot of people. Right now, we’re at the point where we’re trading customers. There’s a lot that going on out there where one carrier takes over the account from another carrier and it gets a little bit predatory, so I think the extent that we can really simplify and mass market these home automation-type services in a way that really creates a valuable service to the customer… that’s what will make a huge change and that’s what I think would increase the potential market out there.

SIW: Now that you’ve built and sold Security Networks, what are your plans for the future within the industry?

Perry: Security Networks was my second start-up, so I’ve done that and wouldn’t be opposed to doing a third. I feel like I still have the energy and interest in the business to do that, so my intention is to stay involved in the industry. There are so many changes going on right now that it remains a very interesting and exciting business to be involved in. I had a partner in Security Networks in Oak Hill Capital, a very well-respected private equity firm, and they had a great outcome in this transaction. We have a mutual interest in looking for another platform to possibly acquire and get involved with back in the industry. There are a number of ways that I could approach re-entering the business, but I’m certainly interested in doing that if the right opportunity presents itself.