In mid-February, I joined alarm dealers, investors and other players in the security industry in Palm Beach, Fla., for the annual Barnes Buchanan Conference. As a consultant to the security industry focused on helping companies grow profitably, I feel the conference is critically important to understand the market landscape; the financial players focused on the industry; and the influences that might enhance a company’s competitiveness or create a roadblock.
I spoke to numerous lenders and investors, security company operators, and various other industry service providers to hear their perspectives on the trends and changes in the industry; and this year especially, I found the casual conversations in the hallways and at the cocktail parties beneficial.
There are a couple of observations about the industry that were echoed by various attendees. First, it seemed that there were more banks and lenders in attendance than in any recent year. “The number of lenders in attendance was massive — obviously, there continues to be a great deal of interest in this industry sector,” said Mark Sandler of SPP Advisors, a leading Investment Banker in the industry. “It is great to see continued interest from a wide variety of financial players.”
Typically when there is strong interest in a sector from lenders, it usually bodes well for borrowing companies — with one caveat: The processes and systems need to be documented and in place. From a sales perspective, when lenders are interested, potential borrowers should take advantage of the available credit and grow. But just like all aspects of the business, the sales engine needs to have KPIs, repeatable processes, and they must be efficient. There must be disciplines in place around profitability.
Salespeople must be rewarded for the desired behaviors, sales managers must hold them accountable and coach for performance, and companies must hire efficiently. Get any one of these items wrong and creation costs may creep up, profitability will fall and borrowing capacity may be restricted — putting additional burden on the company to improve processes and systems. I spoke with Ken Wiesenfeld of X-it Strategy Consulting LLC about this exact thing. He helps companies get their house in order, so to speak.
Additionally, it was mentioned in the formal presentations that there is an ongoing divide between the sophistication of investor information requests and the ability of operators to provide relevant data to those requesting. “I am excited to be a financial consultant to the industry at this time, given the need to move toward more meaningful financial and operational metrics, as well as systems and process that support that information delivery,” Wiesenfeld said. I agree. And, don’t forget that financial and operational metrics are directly influenced by sales efficiency. The sales engine needs metrics as well.
Many attendees also noticed increased competition from non-traditional security providers. This has been an ongoing trend of late, and evidence was presented of increased competition from MSOs like AT&T and Comcast; however, traditional security providers continue to grow. Perhaps that is why the number of lenders and investors seems to have increased — not just because of the non-traditional entrants, which certainly get the buzz, but also because the market landscape continues to support growth.
“We see this continued growth among our own clients — traditional security companies that focus on marketing strategy, hire the right salespeople, and have a metric-driven and sustainable sales engine can compete,” said Mark Melendes of The PrivateBank, a long-standing industry lender. “We especially see those who understand lead generation and have a disciplined approach to lead conversion competing effectively and growing.”
It is interesting to me that shoring up the sales function is so prevalent and a major focus of our industry. Certainly, the financial and operational processes must be in place and the processes and systems need to be efficient, effective and repeatable. Unfortunately many companies neglect the need for buttoned up sales processes and systems and a focus toward measuring sales KPIs. It was a great reinforcement of my beliefs and focus in this area to have so many experts talking about these items — they are all interwoven.
As Sandler mentioned, there is a lot of investor and lender interest in the industry. They will require tight processes and procedures, and will want to see repeatable processes and a metrics driven culture, as Wiesenfeld stated; and as Melendes reinforced, those companies that do pay attention to these elements see the results in continued growth, and I assume increased interest from lenders and investors.
Based on these reflections, my takeaways are that the industry is alive and kicking for the traditional security company, despite new entrants; however, the companies that will thrive and flourish will have repeatable processes, systems and measurements in place, and will have a keen focus on an effective, efficient profitable growth engine.
Gretchen Gordon is the President of Braveheart Sales Performance, a sales optimization firm that guarantees improvement in profitable sales for its clients. Braveheart has a particular expertise in the security and systems integration industry, as Gordon is a former lender to the industry. Contact her at 614-641-0604 or [email protected], or please visit www.braveheartsecurity.com.
