Though the economy is slowly picking up and more dealers are reporting a favorable outlook for 2011 — 82 percent of SDM 100 companies expect improvements over the next year — 2010 still saw companies struggling to keep their bottom lines from dropping. Mountain Alarm, an Ogden, Utah-based dealer ranked within the top 50, kept its profits up despite weak sales in 2010 by putting its business on a diet and making smarter choices.
Rod Garner, president and chief executive officer of Mountain Alarm, comments that the company was able to maintain profits in a down economy by becoming leaner and smarter. That involved a lot of evaluation of the business, some creativity, and making tough decisions.
“We worked smarter by putting emphasis on the products that produced the biggest margin,” Garner explains. “We paid bonus to sales people that hit target margins and increased commissions for the type of business that built value and provided cash flow. We consolidated product lines to cutting edge and high-demand products. We worked on our existing customers in selling new services. We are selling a lot of radios to existing customers and eliminating phone lines.”
Among Mountain Alarm’s product lines are products and manufacturers such as Honeywell, Notifier, DMP, 2gig, AvantGuard, 3xLOGIC and Clinton Electronics. The company monitors about 18,000 retail accounts and has a 65/35 commercial/residential split.
Garner explains that due to decreasing sales, “We needed to shrink some of our installation and service departments. Volume as a company shrank by 5 percent or about a million dollars. We let some of this occur by employee attrition but where that wasn’t enough we insisted that the branch managers make the tough decisions to eliminate marginal staff. The support staff also needed to be reduced and again employee attrition can help with this but at the end of the day more can be done with less if your sales are decreasing. When a down economy hits, actual survival is at stake and you have to make the hard choices.”
Making those tough choices may be challenging, but Garner does note an upside, “We think it’s a great opportunity to pick what you think are the A players and grade them and say this person is one of the best people we have and this person could be replaced. This happens at the branch level. It’s a grading process and G.E. is famous for doing this every year. They grade all employees, get rid of C players and promote A players. B players are watched closely for the whole year and they either become A players or C players. You pick the best bodies through a grading process and end up with a better staff.”
However, Garner comments that flexibility when it comes to opportunities for future growth is important. While shrinking certain departments made sense for the company’s workflow demands, future growth is still very much on everyone’s minds. As a result, the company recently opened a new branch office in Phoenix. “We had a very unusual opportunity to hire a long-time industry superstar in a market that we were not in,” Garner says. “The decision is costing us some cash in the short term, but will break even shortly and build lots of future profitability.”
The company is also considering, “a second new branch once our newest addition becomes cash-positive,” Garner says. Mountain Alarm is also considering rolling out an e-commerce site that the company sees as being a significant part of its business in the future.
Mountain Alarm began in 1952 in the fire protection services business and entered the security space in 1977, when it acquired a small security company. The company was recognized as SDM’s Dealer of the Year in 1996. Garner notes the company’s straightforward mission “is to provide high-quality life and property protection systems and services. To offer value to our clients and employees and to grow and remain profitable.” He quotes Ted Turner on buying ranches in Montana and notes how those words apply to Mountain Alarm: “When asked if he wanted to buy all the ranches in Montana, [Ted Turner] said, ‘I don’t want to buy all the ranches, just the ones next to mine.’ We hope to continue to be a strong regional alarm company building density and strength in our markets.”
The business is built on familiarity and strong relationships with its markets in the Western states of Colorado, Utah, Idaho, Washington and Arizona through its seven branch offices, and what Garner calls, “seasoned management.” He adds, “I guess that means some of us are as old as dirt, but that helps us through some of the rough patches.”
Just like dieting, running a healthy business during a recession is no picnic. In the end, it’s making smart — even if difficult — choices that makes all the difference.