What is the ultimate measure of your business success? If you run a relatively small security company, you might say you had a good year if you were able to take off a couple of long weekends without your business “crashing” while you were gone. Maybe a good year means achieving a low attrition rate or fewer false alarms, or keeping your best technician so happy that he doesn’t go to work for your competitor.

While all of those are important, certainly you also measure overall revenue and recurring monthly revenue (RMR) growth. But at what level can RMR growth be considered “exceptional,” compared with just “average”?

Early indicators from the SDM 100, SDM Magazine’s ranking of the 100 largest electronic security firms, show that 2004 was an exceptional year for RMR growth. But it hasn’t been easy, because the security business is booming in systems that aren’t attached to monthly monitoring revenues.

Most of the country’s largest security dealers said the market was strong in all sectors in 2004 – with some firms citing video surveillance (CCTV), access control, and fire alarm systems as the greatest expansion areas. Some claimed that the residential burglar alarm market either grew more slowly or declined.

‘Is profitable pricing back in vogue?’

“The market for security systems in 2004 was stronger for commercial burglary, access control, and CCTV than in 2003 due to increased concerns about customer and employee safety and property protection,” reported SecureNet Alarm Systems Inc., Wichita, Kansas. “Residential markets were average in 2004 compared with 2003.”

JMG Security Systems, Fountain Valley, Calif., reported experiencing “strong, steady growth, primarily in the industrial/commercial markets.”

Competition was stiff, noted Sonitrol of Southwest Ohio, Cincinnati. Still, “we were able to get fair prices compared to 2003.” The firm gained 12 percent in RMR in 2004.

Kimberlite Corp., Fresno, Calif., which owns and operates 11 Sonitrol franchises in California, reported “strong sales, particularly in the government/educational sector with ever-increasing demand for monitored video systems and verifiable intrusion detection.”

These are two categories that can help security companies continue to gain RMR, especially as more traditional sources of monitoring – residential burglar alarms – may tend to slip in certain markets.

“Generally you have to be bullish [on this industry],” noted Mike Barnes, Barnes Associates, at the 10th annual Barnes Buchanan & Mallon Conference, held recently in Palm Beach, Fla. Alarm systems work, there are great technologies available, and the insurance industry is mandating them, Barnes said, noting that “there is a surge back to charging more for installations.”

Is profitable pricing back in vogue? Why not, when the demand for security systems and services is clearly delineated. Investors are looking keening at our industry again, and for good reason.

“All signs point to a continued level of mergers and acquisitions in the still highly fragmented security industry,” said Jack Mallon of Mallon Associates. “It is a hot industry and the security threat is still there, which means there are numerous investment opportunities.”


Scarsdale Security is part of a new television series from Discovery Channel, “It Takes a Thief.” The program’s stars are reformed burglars who demonstrate how vulnerable homeowners really are, and how they can protect themselves better.