Looking for Good News
On Monday she wrote saying she wouldn’t need to interview me after all, because she had done some research and was sorry to learn that the security industry was not as recession-resistant as it once was!
This took me by surprise. At a time when other industries are posting MASSIVE losses, the largest 100 security installation firms managed to pull off a 5 percent gain in overall revenue and a 6 percent increase in recurring monthly revenue in 2008 â€” hence, the title of our SDM 100 feature this year, “Fortunate.”
We are now well into the fifth month of 2009 and â€” although public quarterly financial reports are lacking in this mostly private industry â€” what we’ve been hearing anecdotally from dealers and integrators is that many are holding their own. They are continuing to uncover the projects that are still being funded, and managing to avoid layoffs in large part.
A report issued by the U.S. Commerce Dept. in late April showed that the economy shrank at 6.1 percent in the first quarter, which was worse than expected. The jobless rate of 8.5 percent is at a 25-year high, and many pundits think it will reach 10 percent by the end of this year. Yet, the SDM 100 as a group actually increased their staff levels, employing more than 53,000 full-time in 2008 compared with 49,000 in 2007.
One warning sign among security’s largest installing and monitoring firms, however, is the ability for companies’ new sales and installations to outpace its attrition. In 2008, 1.28 million new customers were added through new installations; yet more than 716,000 customers were lost. On an individual basis, 23 percent of SDM 100 firms lost more subscribers than they signed new ones. This is practically unheard of. In prior years’ SDM 100 reports, it would have been very unusual to find a security dealer business that had lost more accounts than it had sold.
The security industry’s “golden egg” of RMR will be hugely relied upon when weathering this economic storm. RMR must be protected â€” and doing so may make 2009 a strong year for account acquisitions due to the challenge of signing new subscribers. In 2008, nearly one-fourth of SDM 100 firms reported they had acquired other security dealerships and/or subscriber accounts. In total they acquired nearly 43,000 new subscribers. This was partly to credit for dealers’ RMR growth, because individually many dealers’ attrition outpaced their new installation sales.
In looking ahead, SDM 100 ranked No. 47, Custom Security Systems of Lacey, Wash., believes “installations will be hit big time â€” both residential and commercial. Service, inspections and monitoring tend to be more recession-proof.”
Let’s hold on tightly to that piece of good news.