Making Money by Verifying Alarms in Salt Lake City

April 26, 2005
CBI Security found a profitable niche when Salt Lake City went to a verified policy in 2000

Legislation affecting alarms has been known to get our industry up in arms, and for reason. After all, a verified response policy can change the way alarm systems are sold and the way that alarm monitoring companies do business.

In Salt Lake City, the concept of verified response was implemented almost five years ago, and while there's still regular public outcry in our industry over the city's policy, our industry proved that it has a will to survive, and that new business models will pop up to respond to changing business climates.

Enter Greg Valdez, executive vice president of CBI Security in Salt Lake City, Utah.

After Salt Lake City moved to verified response in 2000, police would no longer respond to alarm calls without a verification of an actual break-in or trouble on the premises.

Valdez's company, which he co-owns with CBI Security President Adam Kerbs, was already in the guard business, with standing point officers and roving patrols hired by area businesses to do scheduled checks of their parking lots and facilities. The company also provides court security units to the city. Because the company already has the business model of roving patrols on the streets, it made sense for CBI Security to add alarm verification to their services.

Today, the company is a popular contract provider for alarm service and monitoring providers like ADT, Honeywell, Protection One, and Valdez says that all together, CBI is serving about 96 alarm companies, and that ADT is leading their business, providing them about half of the alarms that they must verify. The billing to the customer is typically handled by the alarm companies, unless there's the off chance that the verification client was a company that CBI was already doing patrols for.

With a verification cost of between $20 and $25 per alarm (a cost that's much cheaper than most of the fines set by municipal false alarm ordinances), it might seem like easy money -- after all, Valdez notes that most of the alarms his patrol officers are called to respond to are false (a 97 percent false rate according to his company's numbers).

But it's not easy money, says Valdez, and while a lot of companies have attempted to enter the market, most have had to back out and close shop.

"We were lucky because we had built a big base," explains Valdez. "It will not work for other companies unless they have a base built. We had competition but we don't anymore. It's not the kind of company you can get into easily. There are a lot of hidden costs. You don't realize how many tires you'll go through. You don't count on accidents where you lose vehicles. The fuel costs have changed things, where we have had to call clients and pass those costs along."

By having a big existing client base and many guards, CBI was able to divide up the metro area into zones to cut down on response times -- and keep those guards employed on standard tours when it wasn't time to check false alarms. Valdez also credits Salt Lake's well-designed freeway system with giving him a business edge. With GPS mapping systems in the cars, CBI's guards can be at a business to verify an alarm in as fast as 3 minutes, though Valdez notes that 12 to 15 minutes is more standard. When it's prime-time for false alarms, such as when a big windstorm hits the area, the amount of alarms sounding can drive those response times to a half an hour or more, and that's even with call-up of extra guards.

And when his guards are on the scene, these aren't just another guy in a uniform. CBI's guards are armed and trained in skills from hand-to-hand combat up to the use of deadly force. The guard crews undergo training with the Salt Lake PD, and are therefore positioned as a first "officer" on scene -- ready to deal with the slight chance that the alarm isn't false and that there could be a criminal on the premises.

But how does it work? After all, what is the effect on the customer who had been buying alarm service and expecting the Salt Lake PD to show up when their alarm sounded?

"At first you have the initial shock of "We want police", says Valdez, "but when we show that we can be there in 15 minutes, they warm up quickly."

Can the model expand as city police officers find their time more and more limited?

Yes, says Valdez, who notes that some metros have already discussed having out-sourced guards handle incidents like minor traffic wrecks. But it really comes down to finances.

"I think we can save the cities a lot of money," says Valdez.