This article originally appeared in the January 2023 issue of Security Business magazine. When sharing, don’t forget to mention Security Business magazine on LinkedIn and @SecBusinessMag on Twitter.
Inflation, supply chain, interest rate hikes, labor shortages, and more make these some turbulent times, especially for those running a business. How will you navigate through the chaos?
What is the status of your business? Meaning, have you seen a slowdown, or are you expecting one? In speaking to some of our 200 member companies, every integrator tells me they are busier than ever. They have large backlogs; order intake is good, and the supply chain is slowly improving. They would be crushing it if it wasn’t for a labor issue.
I ask specifically, what will your business look like in six months? Most say they do not anticipate a change. Oddly, when I speak to some manufacturers in the market, they tell me that order intake has slowed in the last two months. So, where is the disconnect? How can integrators be so busy and optimistic about the future when the manufacturers see a dip?
If you are paying attention to the financial markets, other industries are seeing something different. For example, Apple, the world’s largest company by market cap, announced a hiring freeze in early November. They have enough cash in the bank not to worry about a downturn or get the negative publicity of having employee layoffs, but other large companies are different. Facebook, Google, JP Morgan Chase, Goldman Sachs – the list of companies who have recently laid employees off goes on and on. What are they seeing that our industry is not?
3 Ways to Prepare for 2023 and Beyond
It has been said that the security industry is recession proof. I prefer “recession resistant.” Historically, the security sector only takes a 10% dip when the rest of the world endures an economic slump. There are various reasons, but in 30 years, this has been my experience. The best of the companies that I worked for during those times took the opportunity during that pinch to make changes so they could accelerate when the economic conditions improved.
Here are three ideas to be prepared for 2023 and position your integration company to come out better than ever in subsequent years:
1. Integrators must create a “fortress balance sheet” and institute conservative practices to weather a market downturn. Integrators can do this by having enough cash on hand, partnering with companies like PSA that provide financial support, not taking on too much debt, and maintaining solid margins. Raising prices may be necessary as well. Integrators should prepare for economic uncertainty by freeing up capital and effectively stockpiling cash to position themselves for rising interest rates and inflation (wages and product/services).
2. What an integrator will stop doing is just as important. Integrators should take this opportunity to fire bad customers – the ones who always want the best quality products and incredible service but at the lowest price and usually with a hard time collecting from them. Use your greatest assets, your people, on the most profitable work. Invest your company’s resources in something other than low margin or risky business that will only weaken your financial position.
3. Reevaluate your organization. Do you have the right people in the right seats? I have had many conversations with integrators who tell me about bad apples in the bunch. Because hiring has been challenging, they stick with someone filling a seat instead of helping the business succeed. How much time, energy and money do these employees zap from a company? In my experience, I have always wished I had made a change earlier that I did. Invest in your best people, make changes where you must, and keep an eye out for “A players” to have the best team on the field as the business environment improves.
Matt Barnette is CEO of PSA Security Network. Request more info about PSA at www.securityinfowatch.com/10214742.