INTEGRATOR CO-OP TAKES ACTION TO MATCH INDUSTRY GROWTH RATE
PSA Security Network, an organization that specializes in supporting security systems integrators, recently announced the formation of a new limited liability company (LLC) that will enable PSA to make some of its benefits available to non-PSA members. The new LLC, called Virtual Distribution & Management, will operate as a wholly owned subsidiary of PSA. Gary Venable, who is PSA chairman of the board as well as owner of All Systems Designed Solutions of Kansas City, discussed the LLC with SDM.
SDM: Tell me more about why PSA has created the LLC and what the benefits will be.
VENABLE: As part of our strategic plan, we identified three groups of stakeholders â€“ our partner vendors, our employees and our owner/customers â€“ and we want to make sure that whatever we do brings benefits to all three stakeholders. For most businesses, owners and customers are separate entities, but the PSA is a member-owned cooperative.
In the marketplace, some of our vendors are seeing growth curves of 15 percent to 20 percent or more, yet the integrator community is seeing more like 5 percent to 10 percent growth, on average. Thatâ€™s not just within the PSA but with other groups in the industry, as well. To maintain our influence with vendors, we have to grow at a rate comparable to theirs.
Operating a virtual distribution network allows us to buy and distribute products that other groups could use. We also have software packages for training members that could be offered to others. Weâ€™re evaluating enterprise requirements planning systems to provide systems and procedures to improve integrator operations. We want to obtain benefits like these for members and make them available to other partners.
SDM: What kinds of groups would these partners be?
VENABLE: These would be other groups of security integrators. Some are formalized into joint marketing associations. These are people who use the products that PSA buys and sells to its members. By selling to them, we can increase the volume of our purchases to our vendors. Groups that couldnâ€™t make critical mass could gain or if they have relationships with vendors that they canâ€™t maintain based on their volume, they could maintain those relationships by joining with us.
SDM: By creating an LLC, PSA also will be able to receive outside capital. How will that capital be used?
VENABLE: With PSA the cooperative, the capital is owned by shareholder owners. As a cooperative, PSA is not an investment vehicle. Members pay a certain amount to join and receive equity dividends, but they donâ€™t get a return on their investment.
At some point, you have to get more capital into the co-op and you canâ€™t do that all with debt. As we build our virtual distribution and management LLC, it will raise capital from outside investors and will be an investment vehicle to get critical mass to be successful beyond PSA membership. You canâ€™t have equity partners in a cooperative.
Weâ€™re talking to professional business planners to help build our business plans.
SDM: Who will be your equity partners?
VENABLE: We will allow employees and members the opportunity to join. Then weâ€™ll go to outside investor types â€“ either venture capital groups or individuals that are in the industry who do venture capital. We havenâ€™t approached them yet because we are still doing our business planning and development.
SDM: PSA has said it anticipates creating additional LLCs in the future. What can you tell me about that?
VENABLE: There are segments we canâ€™t access because weâ€™re independent. We want to create channels to go get those segments. For example, we have members that have national accounts who can partner with other PSA members to service areas they canâ€™t get to. But some large national entities only want to talk to a single entity.
SDM: So one possibility might be to create an LLC that could be that single entity that some national accounts prefer to deal with?
VENABLE: There may be an opportunity to do that. Our whole strategy is designed to create new channels to get business into PSA so we can meet vendor expectations and assist members.