BIG FISH BIG POND
December 1, 2006
When Bob Bean purchased Alert Alarm Inc. in 1982, it was over a meal and a handshake – literally. Bean was working for another alarm company at the time and the owner of Alert Alarm kept trying to get Bean to work for him. “We met for lunch and I said, ‘No, I won’t come to work for you, but let’s put a deal together and I will buy the company.’ We turned over a placemat, wrote out the deal and both signed it. Later, we of course formalized it, but it was basically a handshake deal,” Bean recalls.
Bean acquired what is today Alert Alarm of Hawaii, based in Honolulu, and is president and CEO of the company. When Bean bought the company, he had about 10 employees and gross revenue of roughly $400,000 each year. “We’ve never had a year where we haven’t been profitable. We’ve had years of considerable growth and years of very slow growth,” Bean says. Today, the company employs about 90 people and estimates $11.8 million in revenue for 2006, a 5.3 percent increase over 2005.
In 1992, Alert Alarm acquired the Hawaii operations of a bankrupt alarm company, Alert Centre. “That built our company and doubled our size immediately,” recalls Milton Kakaio, executive vice president. Other than the acquisition, the company’s growth has been internal. Bean has surrounded himself with a dedicated team of executive staff – half of whom have been at the company as long as Bean himself. Together, executive management has 128 years of combined experience in the industry.
Alert Alarm’s experienced staff, focus on recurring revenue, commitment to profitability, proactive approach to business growth, and emphasis on the customer are a few of the reasons why the company is SDM’s 2006 Dealer of the Year.
SURROUNDED BY LEADERSOne of the elements contributing to Alert Alarm’s success is its management team. Bean recognizes the need to surround himself with good people, and he did just that. Of the six employees on the executive staff at Alert Alarm, four of them have been with Alert Alarm for 24 years. Bean invited Michael Ventura, executive vice president, to come along with him to Alert Alarm in 1982. Milton Kakaio, executive vice president, and Antoinette Boilard, vice president and CFO, also joined the company about the same time. Don Smith, group vice president, and Doug Schleif, group vice president, are not that far behind – having been with Alert Alarm 18 and 14 years, respectively.
Bean, who had been a sales manager at his previous job, began doing installations and everything in between in the early days after acquiring Alert Alarm. “Michael and I would go out in the day and sell, and install systems at night. We did that for years until we hired enough people to do installation work. Milton and Antoinette would stay behind and virtually run the company. It was a team effort. Everybody worked hard,” Bean recalls.
It was aggressive selling and a commitment to making Alert Alarm successful that, today, results in 16,000 accounts and a 40 percent market share of alarm systems in the state of Hawaii, according to police statistics. “We came out there and built a big book of sales. We focused hard on residential, and we made a good move,” Bean says. Alert Alarm does about half of its business in residential installations, and about half in commercial installations, including schools.
AHEAD OF THEIR TIMEIn addition to focusing on residential and commercial market recurring revenue, the company zeroed in on two markets more than two decades ago: schools and new home development.
Alert Alarm began targeting schools in the early 1980s, and this focus in the education market continues to pay off. “We developed in this government sector when Mike, myself and Bob first came to Alert Alarm. We went out personally to schools and demonstrated burglar alarms to a lot of the schools in Hawaii,” Kakaio recalls. Alert Alarm’s footprint in school installations has continued to grow in recent years. “Seven or eight years ago when the Department of Education developed a position for security at schools, they had one person in charge of it and the department came to us because Alert Alarm has most of the existing alarms in the schools in the state of Hawaii,” Kakaio adds. “This happened because we began the process working with the schools a long time ago – we built a good background with the state department of education.” Smith, group vice president, is focusing on a marketing program to schools that have existing installations with Alert Alarm, to add remote video and CCTV systems.
The firm places an emphasis on building relationships and recognizes the potential for more sales from existing customers. About 20 years ago, the company saw an untapped market in new home development. “We started working with Castle and Cooke Homes and made an arrangement to pre-wire every single home built,” Bean says. “We were the first on the island to do it. We pre-wire and then sell the systems through the developers’ sales offices, not ours. An alarm system is then added to the buyer’s mortgage. It is a profit sale for the developer, because we wholesale the system and then they sell it to the customer,” Bean adds.
Alert Alarm currently has contracts with four developers, including Castle and Cooke Homes, which represent a large portion of the new homes being built in Hawaii. The company pre-wires each home for a wireless alarm system at no charge. Various levels of protection are available and, as further incentive, the new buyer receives one year of free monitoring with the purchase of an alarm system. To further the company’s reach in the builder market, Alert Alarm is a member of the Building Industry Association of Hawaii, participates in the annual Parade of Homes trade show and recently was named Building Industry Association of Hawaii specialty vendor of the year.
The choice to install wireless burglar alarm systems long ago, says Schleif, also has contributed to Alert Alarm’s success. “One of the major turning points, whether it was a conscious decision or not, was that in the late ‘80s, we started moving toward wireless installations for intrusion using GE,” Schleif notes. “That decision to use wireless for small commercial and residential makes our pre-wires easy and inexpensive. We don’t charge our partners for pre-wire. The savings in labor as compared to a traditional hard-wired system is just tremendous,” Schleif adds.
FORWARD THINKINGOne of the reasons Alert Alarm has earned such a large market share in Hawaii, Bean says, is its focus on technology. “By staying up with technology, we’ve managed to stay well ahead of the competition,” he reveals. In addition to installing wireless intrusion systems for almost two decades, Alert Alarm has taken a proactive approach with changes in technology and foreseen problems with POTS lines.
When Alert Alarm became aware of Voice over Internet Protocol (VoIP) and its possible pitfalls, the company began talks with Oceanic Cable, the largest cable provider on the island, and began testing Alert Alarm’s systems at the cable facility. The cable company has also trained its personnel at Alert Alarm’s offices. The relationship has been beneficial to both companies. “We have a very close relationship with [Oceanic Cable] to test our systems. We see which ones work and which ones don’t,” Smith adds. Alert Alarm also has developed relationships with some of the other cable providers. The company installed both DSL and Roadrunner in its new training center to train technicians on VoIP.
Alert Alarm also offers AES Intellinet, a wireless mesh alarm communications product, already installed and in effect in Hawaii. The firm is currently upgrading the AES system to have it statewide and will eventually replace all digital/analog products with the units, Smith says. “We are in the process of setting up the program statewide. We are in the early stages of this replacement program now,” he adds. The network will help Alert Alarm combat potential communication problems, including VoIP and the FCC’s AMPS Sunset Clause, which will allow carriers to discontinue analog cellular alarm communications after February 2008. “The first quarter of 2007, we will be informing all of our customers that have [analog cellular panels] and attempt to replace those systems,” Schleif explains. “Part of our strategy is to come back with the AES product, so that we are in a position to service our clients anyway, no matter what happens,” Smith adds.
In addition to technology upgrades, the company makes an effort to inform its existing customer base of anything that might affect their alarm systems in hopes of removing a problem before it starts.
“Every month we send our customers a flier with their invoice for various things,” Schleif says. Alert Alarm has sent out fliers educating customers on the concerns of switching to VoIP several times in the past year. The company also uses the invoice mailing as a marketing opportunity to target customers for add-ons or upgrades, such as repair and maintenance agreements, and Web account access.
CUSTOMER CARECommunication and emphasis on the customer relationship has spurred the phrase, “Customers Are Really Everything” or the CARE program at Alert Alarm. Even though the customer service program officially got this name in the early 1990s, according to Boilard, vice president and CFO, the philosophy has been in place since the beginning.
“Our CARE program is not something you could say we implemented. The program is an attitude to me. You have to live it. We do that by how we feel about our customers and those in our company develop this by learning from us and developing the same attitude,” says Ventura, executive vice president.
Adds Boilard, “Our customers are put on a pedestal on a daily basis.” Employees at Alert Alarm are taught to face complaints head-on and resolve them as quickly as possible.
“I know it sounds trite,” says Bean, “but we don’t shy away from complaints. My instructions are that the customer is right and has the right to be angry and deserves to have it repaired. None of us dodge a complaint call or e-mail. We will go after it. Once in a while our customers grumble and we need that, because if they don’t grumble, we don’t know what to fix,” Bean says.
Ventura agrees. “We work as a team and we try to get away from ‘it’s not my job.’ It is all of our jobs. When there is a problem, we don’t point fingers. We get it done,” he says.
One of Alert Alarm’s primary customer satisfaction programs, which has the benefits of decreasing both false alarms and attrition, is the Quality Assurance (QA) program. “Our QA program has ensured that our customers are trained well and has added a consistency in that training. I think that is one of the important parts from an operations perspective, that keeps us on track as to where we are as a company,” Ventura says.
The QA department consists of a manager and five QA technicians, including one on the Big Island of Hawaii. “The way we do it is that whoever installed the system does not train the customer. His role is to install and test the system,” Schleif explains. The installed system remains offline until the customer meets with a QA technician. “We train the customer before we ever allow them to go online,” Bean says. “The process has helped eliminate false alarms from new users.”
The QA technician educates and trains the new customer on the alarm system, then checks the system and puts the system online. If there is a problem with the alarm system at that time, all QA department employees are trained and qualified to fix most problems. The QA program not only significantly reduces false alarms from new users, but also creates a personal relationship with each customer. “Our quality assurance puts us above our competition. It helps us develop a one-on-one relationship with our customers,” Bean says. One of the reasons Alert Alarm’s attrition is low (an estimated 6 percent for 2006), is attached to the QA program as well, he says.
The QA department is responsible for handling cancellations and re-signs. A QA employee was recently put in charge of handling incoming cancellation letters full time, Schleif says. “We were surprised at how effective that has been in reducing cancellations. It gives us a leg up because we will contact them right away – hopefully within 24 hours,” Schleif adds. Calling up a canceled customer who is moving, Schleif says, has even led to finding out the buyer’s name and has aided Alert Alarm in re-signing the new owner.
BEHIND THE SCENES“We work extremely hard on communicating with our employees and we respect them,” Bean maintains. The management team believes that by training employees and giving them the tools to succeed in their jobs, that they can retain qualified, dedicated individuals.
“Training is really strong at Alert Alarm and we feel that if [employees] know what they are doing, they will feel comfortable to stay,” Kakaio adds. Alert Alarm brings in suppliers to train everyone from sales to technical to administration on a regular basis. As a Five Diamond central station, a certification awarded by the Central Station Alarm Association, Alert Alarm certifies 100 percent of its operators via online training.
The company offers semi-annual training programs by an attorney about harassment, to continue offering a workplace where employees care about and respect each other. “Teaching them to respect each other is probably the strongest point,” Bean says.
Working with executives on a daily basis also helps employees feel a part of the Alert Alarm family. “Our employees feel a sense of belonging. If employees need anything, all the executives are here. It makes them comfortable to have everyone around. Employees can walk into anyone’s office and have a conversation or share a complaint,” Boilard notes.
In addition to training, management at Alert Alarm believes it provides one of the best benefits packages in the industry. Alert Alarm offers new and existing employees a unique, individualized look into each and every benefit that a specific employee will earn from day one through 10 years of service.
“A number of years ago, I noticed that HR spent a lot of time explaining handbooks and benefits. I asked them to put together a spreadsheet for each employee. In addition to being a great incentive, it’s a great piece of information,” Bean says. Employees can see all benefits incrementally including vacation days, 401K eligibility, and medical benefits. After two years of service with Alert Alarm, the employee earns 100 percent of medical, vision and dental services paid by the company. At 10 years of employment, Alert Alarm pays 100 percent of employees’ dependents’ medical, vision and dental plans.
Late last year, Alert Alarm finished an expansion project to its Honolulu-based headquarters, adding 2,800 square feet to the existing building. The addition includes office space, a new training center and warehouse area. The company is in the process of hiring an additional salesperson to bring the company’s sales staff to 13 people. But while there may be a dedicated sales staff, everybody sells, Bean emphasizes. “It’s our nature. We say we have 12, but we are all very active at it,” he admits. Alert Alarm’s aggressive ap-proach to sales is part of what puts the company ahead of its competition, Bean says.
While Alert Alarm designs its benefits package, training offerings and workplace atmosphere in an effort to keep its employees, getting and maintaining new, qualified, employees is still a major challenge and will continue to be an ongoing one, Schleif says. “It is difficult to find a qualified employee: administrative, accounting, even management,” Schleif complains. To counter the difficulties, Alert Alarm continues to upgrade its benefits package, and also has built relationships with local technical colleges in the area to help with recruitment.
“Once we find new people, we aim to do everything we can to keep them trained and happy,” Smith says.
INDUSTRY INVOLVEMENTDespite being an ocean away from the rest of the country, Alert Alarm stays highly involved in the alarm industry, which has helped the company grow and prosper each year. “We are active because it’s a great opportunity to network and learn. We find out what’s going on and where we are in the industry on the curve. Somebody is always doing something better than you, and we learn a ton of stuff that we can do better,” Bean says. The company has gotten many of its ideas, such as maintenance and repair contracts, from talking to others in the industry.
Each year, Alert Alarm also conducts a U.L. fire seminar across four counties in Hawaii, educating AHJs, fire department personnel, commercial and residential building managers, and hotel security and engineering personnel.
FUTURE GOALSIn 2007 and beyond Alert Alarm will focus on growing its RMR, which was an estimated $650,000 for 2006 (4.3 percent growth over 2005), and also building its integrated systems footprint.
And, if the opportunity arises, Alert Alarm would like to purchase another company. “There are not many companies here we can buy. We’ve tried, believe me. If an acquisition comes along, we certainly want to make it,” Bean declares. The company is debt-free, he adds, and in a great position to acquire.
The Alert Alarm staff share a common goal of making the company the best it can be with steady growth. “It’s our attitude. We think we are the best and we try to get that feeling off to our customers and our employees,” Kakaio says.
“To be honest – and it will sound a bit self-serving – but we simply try harder,” Bean says. “In Hawaii, we are a relatively small community. It’s hard to walk down the street and not see somebody you know. If we don’t do a good job or try harder than anybody else, it would be noticed. Are we perfect? No. Life would be boring if we were. But I think we do an excellent job and our employees are a big reason we are No. 1.”
Sidebar: Alert Alarm of Hawaii at a Glance:SDM’s 2006 Dealer of the Year
Headquarters: Honolulu, Hawaii
Number of Employees: 91
Total Revenue 2006: $11.8 million (estimated)
Customer Accounts: 16,000+
Listings: U.L. listings include central station, mercantile, national industrial, and signal and fire. Alert Alarm is the only monitoring company in Hawaii to be Department of Defense listed (CRZH-National Industrial Security Systems).
Sidebar: IntegrationWhile Alert Alarm continues to focus on its core business of recurring revenue in the residential and small commercial markets, the company has experienced a rise in business in the integrated systems market, and recently set up an integrated systems department to specifically handle such installations. “We don’t have a lot of large industry in Hawaii, so integration is on a smaller scale here. But we are doing access control and small commercial installations,” says Michael Ventura, executive vice president at Alert Alarm.
The integrated systems department does its own CAD work, and has learned to rely on its vendors for assistance if the installation is particularly large. But Bob Bean, president and CEO of Alert Alarm, emphasizes that Alert Alarm is interested in pursuing an integrated systems installation, only with recurring revenue in mind. The company pushes maintenance contracts and other add-ons relentlessly in order to keep RMR in the forefront. “If I am doing a $200,000 installation and my recurring revenue is $0, I am not particularly interested in the job. We have fairly successful repair and maintenance agreements with our integrated services customers and we will continue to move in that direction,” Bean says.
A typical integrated systems installation for access control is between eight and 12 doors, according to Doug Schleif, group vice president, but the company has done some larger systems in the 100-door range. Alert Alarm’s focus is on doing the job well, just like all its other operations. “This convergence of technologies, IP and IT, is creating a lot of opportunities and we are attempting to keep up with it,” Schleif notes. The company encourages its vendors to train company employees, and recently brought in David Engebretson, an independent industry trainer and SDM’s contributing technology writer, to provide two-day training on IP installations to 36 Alert Alarm employees. Alert Alarm recognizes its market of mid-range commercial and residential customers and ties its integrated systems focus directly in with its major accounts base.
In the company’s traditional markets, Don Smith, group vice president, adds that Alert Alarm has seen a large interest in CCTV for its residential customers, and the company plans to pursue that opportunity. Schleif agrees that Alert Alarm envisions a niche for IP video in the residential market. “That is going to become very interesting for us to tap into, especially when it comes to people with children, latchkey kids, or absentee owners. They can look at their homes from anywhere in the world with IP video. We are getting better at it and really marketing it better than ever before with our eye on recurring revenue,” Schleif adds.
One installation the firm recently completed was for the Honolulu Academy of Arts, which included an upgrade and expansion of the academy’s fire alarm systems earlier this year. “They had a lot of separate fire systems in the complex and they were required by code to bring the entire fire system under one panel,” Schleif explains.
Alert Alarm replaced four separate fire alarm systems with a single panel, covering more than 315 devices. The alarm company also installed the academy’s video system, which includes roughly 80 cameras. The overall project lasted about five years and included security, CCTV and fire systems.