Long Term Titan
The 2013 SDM Dealer of the Year is Guardian Protection
After a motorcycle accident delayed Russell Cersosimo’s entry into college, he started assisting a local burglar alarm installer — and became fascinated by the technology and the industry. Two years later, a man recognized Cersosimo at a grocery store and asked if he put alarm systems in homes. But when Cersosimo asked his boss, who specialized in retail alarm systems, if he could make the residential sale, the answer was “No.”
“I quit that day and sold the alarm system with a $15 monthly maintenance contract,” Cersosimo says. “That man referred his neighbor and his neighbor referred to the neighbor in the house beside him, and suddenly from that first sale I had $45 a month in RMR, which only intensified my vision for RMR and its value — and the importance of changing with opportunity.”
Two years later in 1975, at the young age of 20, Cersosimo purchased Guardian Alarm Systems of Pittsburgh Inc. for $7,500. Still with an eye on long-term potential, he changed the name to Guardian Protection Services Inc. (Guardian) to avoid limiting his market in the future.
By 1991, the company had grown to 10,000 accounts, attracting the attention of the Armstrong Group of Companies (Armstrong), Butler, Pa., a privately held company founded in 1946. Armstrong acquired an 80 percent controlling interest, and chose to continue using the Guardian name.
“As a diversified holding company with a long-term history in the cable business, Armstrong had a clear understanding of, and appreciation for, the RMR business model. In 1991 we structured a deal that has positioned us both in a great partnership that has lasted 22 years,” Cersosimo recalls. “The relationship has been priceless. They are astute businessmen, but also simply good people who realize the value of employees and family,” he adds. It is one example of the countless respectful, long-term relationships Guardian maintains.
Forty years after Cersosimo’s first sale, Guardian has expanded into a secure powerhouse. Building from that first RMR-focused sale, the company has grown to more than 276,000 accounts, produced double-digit RMR growth in 2012 (11.9 percent), landed No. 10 on the 2013 SDM 100 as measured by RMR, and netted annual revenue of more than $150 million — while across the board displaying a steadfastness in its relationships and a responsive attitude toward changes in the industry. Collectively, these accomplishments propelled Guardian to a second SDM Dealer of the Year award. After earning the award for the first time in 1999, the company again deserves the honor in 2013.
Comfortable with Commitment
RMR generation — at its core — involves sacrificing the short-term gain for the higher-value, long-term return. It exponentially raises the value of a company, but takes focus, calculated sales and product offerings, and an acceptance of commitment. The fact that RMR has remained a driving influence for Guardian since day one reflects the deep industry understanding its executive team holds and the ease the company has with long-term commitments.
In addition to all the major industry associations (ASIS, CSAA, ESA, FARA, NFPA, SIAC, and more), Guardian has been a partner with the AiN Group since 2002 and is a founding member on its board of directors; a dealer of Interlogix since 2009, receiving its National Growth Hero Award (2010), Strategic Partner Award (2011) and President’s Award (2012); and a Honeywell First Alert Professional dealer since 1991, receiving numerous awards of excellence including sales, technical, marketing, customer service and life safety.
Cersosimo shares that RMR was his vision from early on, but its potential didn’t take off until the invention of the digital dialer.
“I got into the business as a contractor looking to build RMR via maintenance agreements, but I just couldn’t deliver it to everyone. The advent of the digital dialer, however, took care of that problem. My vision — my focus on RMR — is still the same today as it was then.”
Guardian targets RMR creation in a number of calculated ways, explains Joe Colosimo, president.
When establishing targets for generating RMR from new customers from its dealer business channel, Guardian uses historical and anticipated volume trends, as well as the anticipated acquisition of new dealer partners into the dealer program. Currently, Guardian’s authorized dealer program consists of approximately 30 active dealers from coast-to-coast.
When generating RMR via new customers from internal business divisions, the company works with its managers in the field to develop goals based on historical and anticipated business activity in the various markets it operates. The targets take into consideration the anticipated generation of higher RMR per-account through the sale of interactive services, a new offering Guardian rolled out in 2011 after two years of preparation. Increasing technological capabilities for more and more interactive services are allowing Guardian to gain RMR via multiple forms that stretch far beyond monitoring alarms.
For existing customers, Guardian generates RMR growth through the provision of new services, including upgrading customers to interactive services.
In 2013, Guardian added:
- cameras and video surveillance to its residential package;
- intrusion detector-driven snapshots delivered via email; and
- additional interactive security system services including Z-Wave control of lights, locks and thermostats; geo-services; garage door control and more;
In the next 12 months Guardian is also working to add:
- residential energy management systems;
- residential 24-hour video recording; and
- alarm video verification in its central station.
“We are proud of the aggressive way in which we’ve gone about the multi-faceted process of upgrading our existing account base from traditional security services to interactive security services,” Colosimo says. “The industry players as a whole realize that upgrading is necessary for the future, but I believe Guardian may be one of the few industry participants to elevate this initiative to a key strategic objective.
Today 90 percent of new, internally-generated residential customers are on an interactive platform, that is, they are: a) users of remote services, and/or b) users of home automation services, and approximately 75 percent of all new customers generated by all business divisions, are on an interactive platform, shares Joe Lininger, senior vice president, Marketing.
In addition to RMR opportunities, the new services have opened deeper connections with customers, according to Guardian.
“There is much more intimacy in offering interactive services. We have the ability to touch our customers virtually at any time, whether they are at home or away. There is also a self-service element about interactive services that gives them control, and allows them to stay connected to us like never before,” Cersosimo describes.
He adds that, prior to the existence of interactive services, customers were reminded they had a security system only when they received a bill or when the police appeared at their door due to an alarm.
While the company looks for new opportunities such as interactive services to grow RMR, it also maintains an unwavering focus on the preservation of RMR from its existing customer base.
“We achieve this by an intense and systematic training program for our customer service staff. For example, we have trained and deployed a staff whose sole purpose is dedicated to saving customers who express a desire to cancel. We also have established another dedicated customer service staff whose sole function is to assist customers who are moving to another location. Given that these moves represent the ‘lion’s share’ among reasons for cancellation, this is a critical element of Guardian’s overall efforts to maintain RMR growth,” Colosimo describes.
Dealers are encouraged to keep RMR in their companies as well, benefiting from working with a partner that is looking long-term — for itself and for them.
“For years, I watched industry dealer programs mature and become more ‘professional,’ but I saw everyone creating long-term wealth for themselves except the dealers,” Cersosimo shares. “That’s why we recently decided to offer a multi-year financing program that will allow qualified dealers to retain a portion of their accounts, at their option. This decision is reflective of our underlying philosophy to build long-term relationships with valued business partners,” Cersosimo details. The program will fully launch in 2014.
Guardian sees its dealer program, which rolled out in 1995, as a vehicle for growth and diversification.
“Over time, we’ve come to understand the challenges that confront our dealers and have developed processes and procedures to help address the same. Over the last three years, we’ve developed support functions, such as software applications, that allow for real-time paperless funding, electronic marketing portals, and have expanded the staff of full-time dedicated personnel,” Colosimo describes.
“Our philosophy, as it relates to selecting dealers, is to identify partners who share the same underlying high-quality, customer-centric focus to which Guardian subscribes,” he adds.
The financing program mentioned earlier by Cersosimo enables qualified dealers to borrow money from Guardian that otherwise would not be available to these dealers in the capital markets. These borrowings will be used to finance the cost of accounts that the dealers will generate and retain, thereby allowing the dealers to build long-term value in a portfolio of monitored accounts that they will continue to own. In essence, Guardian will function as a “bank” for its dealers.
“We believe this is a significant point of differentiation for Guardian in the dealer market and is a tangible manifestation of Guardian’s desire to truly assist its dealers in building long-term equity,” Colosimo says.
Finding New Business
Wider revenue streams help increase stability. Guardian wisely generates new business via five distinct business channels:
- Residential, which generates the installation of systems for customers in existing homes.
- Builder, which generates the installation of systems for customers in newly constructed homes via relationships with new home builders.
- Commercial, which generates the installation of systems for small and large business customers.
- National Accounts, which generates the installation of systems for multi-location (chain account) retailers throughout the nation.
- Dealer, which generates the installation of systems for predominantly residential customers via independently owned, authorized dealers.
Having a broad revenue portfolio especially helped Guardian during the building slowdown when the company’s builder division installed sales declined from 3,000 per month to less than 500 per month. Despite the strain, throughout the collapse of the residential housing market, Guardian continued to work to maintain its long-standing relationships with numerous strong builder partners.
“Guardian’s builder division has rebounded along with the housing market,” Cersosimo reports. By optimizing its existing builder-partner relationships, and by adding new partnerships, Guardian generated 20,000 “rooftops” in 2013 and retains its position as a premier low-voltage integrator.
“In some markets, we believe we are the only sizable builder service provider offering a comprehensive array of security, structured wiring and low-voltage lifestyle products that survived the building downturn,” Cersosimo shares.
One of the reasons Guardian weathered the downturn so well is its financial model. The company’s capital structure is conservatively leveraged, meaning that Guardian has a relatively low level of debt in comparison to its RMR and enterprise value. Moreover, Guardian has significant access to capital via a committed revolving credit facility. This financial strength positions Guardian with the necessary funding to consistently achieve its growth objectives without stressing the financial underpinnings of the company, describes Lawrence Wargo, executive vice president, who has spent 19 years with the company.
“Guardian’s ability to work through the challenges of the unprecedented decline in the housing market that began around 2007 and the resultant significant drop in business in our builder segment was partially because of our financial strength. This strength provided us the luxury of time necessary to adapt our infrastructure and business practices to changing market conditions. While many of our competitors were compelled to exit the builder space, our ability to ‘weather the storm’ has permitted us to benefit from the improved housing market,” Wargo explains.
Cersosimo’s vision for stability and quality is perfectly aligned with Armstrong’s philosophy to retain and grow the business “in perpetuity.”
“We assume a long-term perspective when it comes to making key decisions about the direction of the firm, including finances,” he says. That long-term perspective makes changing, which can be hard for some companies to do, easier for Guardian.
Guardian’s ability to stay relevant in a changing or even struggling market, above many admirable characteristics, is a trait that caught SDM’s attention. After 38 years, the company continues to adapt to new technologies, new markets, and new competitors, including telcos and cable companies, with an apparent sense of ease.
“We pay unwavering attention to industry trends and to the demands of our customers. This includes critically evaluating both short- and long-term trends in the industry, particularly in the areas of emerging technologies and the products and services resulting from those technologies,” Colosimo explains. Colosimo, with the company for 34 years, was Cersosimo’s first hire — a perfect example of the long-term relationships found everywhere in Guardian.
Honing a Smal Company Feel
The company describes itself as a “big company with a small company feel,” which it credits for its percentage of long-tenure employees. Of its 901 full-time employees, 252 employees —more than one-fourth — have been with Guardian 10 years or longer. Of that group, 26 percent have been with the company 20 years or longer.
“We subscribe to a decidedly strong philosophy of work/life balance. As a result, we believe that we have a remarkable percentage of long-tenure employees,” shares Colosimo.
Guardian offers competitive pay, thorough training and a family-friendly environment that fosters a healthy work-life balance for its employees. It offers benefits starting on the first day of employment, and fosters an internal family-friendly environment through such endeavors as company cook-outs, holiday events, and many opportunities to participate in charitable work. Its customer service department recently raised more than $1,200 for the American Heart Association through its Heart Walk.
Other community-focused efforts include the GuardianKIDS ID program, which features ID events the company hosts for children. Staffed by Guardian employee volunteers, this commitment to community-friendly crime prevention technology allows Guardian to setup a working child ID site at community safety days and other community events.
Guardian also protects businesses and neighborhoods by offering free “Crime Watch” street signs for placement in target areas, works with the Central Blood Bank to host employee blood drives approximately three times per year, and even purchases Christmas gifts each holiday season for between 100 and 135 residents of Allegheny Valley School (AVS), a school for the physical and mentally challenged in Coraopolis, Pa., and much, much more.
The strong community participation from Guardian reflects its company value that every person — whether employee, community member, or customer — is important and to be treated with dignity, respect and care.
“Although we have grown significantly since we began our business, we have never taken the focus away from our company values; these values center on a passionate and unwavering commitment to life safety provided through technology that is leading edge, yet reliable, and customer care that is world-class, yet highly personalized and authentic,” Cersosimo states.
Guardian’s growth is predictable. Its value is predictable. Its relationships are rock solid, and there is consistency in every action.
“The core values upon which our business has been built are etched in stone,” Cersosimo sagely summarizes.
At a Glance
Guardian Protection Services Inc., Warrendale, Pa.
Ownership: Guardian is a subsidiary of The Armstrong Group of Companies, the 18th largest multiple system operator in the country. Armstrong, a privately held company, holds an 80 percent controlling interest and the remaining 20 percent is held by Guardian’s CEO, Russell Cersosimo.
Employees: 901 full-time; 12 part-time
Revenue: $157 million in 2013 (estimated)
RMR: $10.2 million in 2012
Customers: 250,500 residential, 25,500 commercial (estimated)
Rank on the 2013 SDM 100: 10
Monitoring for Today & for the Future
Guardian’s 24-hour, CSAA Five-Diamond-certifed, UL Llisted central monitoring station was built in 2006 when the company moved into its current headquarters. It is configured to monitor up to one million customers. Auto-dialers maximize the efficiency of the dispatch process, also preventing the risk of misdialed phone numbers when time is of the essence. Interactive voice response (IVR) technology is also in place. The company reports dispatch times that average one minute or less.
One interesting feature? A 24-foot opaque double-glass wall, which routinely acts as a privacy wall, can be rendered transparent at the touch of a button, presenting visitors an on-demand view of the central station from an adjacent conference room without disruption to the operators.
Staying abreast of ongoing changes in alarm communications, Guardian is in the process of implementing the technology related to ASAP/PSAP (Automated Secure Alarm Protocol/Public Safety Answering Point) in its central station. While current, standard technology provides for the communication of alarm tickets by phone to first-responder agencies, ASAP-to-PSAP provides instead for a rapid, electronic format of communication. While ASAP-to-PSAP is currently in place in only six areas in the United States, Guardian intends to have the technology protocol in place in the next two to three months.
“Guardian’s philosophy has always been to embrace opportunities that advance the image of the industry. The CSAA approached Guardian with the concept of ASAP–to–PSAP several years ago. Recognizing the value of this process, Guardian enthusiastically supported this notion, which will ultimately benefit a number of industry constituents, including municipalities, central stations and customers,” says Mike Overby, vice president of subscriber services, who has been with the company 17 years.
“Guardian believes that investing in ASAP-to-PSAP today will enable our firm to be well-positioned as more and more municipalities adopt the platform,” he adds.
Guardian routinely looks to adopt new technologies in its central station operation. The company optimizes its utilization of MAS (Mastermind) functionality to improve alarm response accuracy and internal efficiency. When faced with responding to a signal, most central station operators potentially face having to navigate multiple sets of instructions located in various places within their system in order to respond. Guardian optimizes MAS functionality to such a great extent that all response instructions for each account are delivered immediately, and within the correct order, to the central station operator. Only 1 percent of Guardian accounts have special verbal instructions attached, versus the 45 percent to 50 percent which Guardian considers average at other security systems companies its size.
“This requires an investment in backend setup, but the efficiencies gained in signal response are worth it,” Overby describes.
New Member of the Executive Team is an Industry Veteran
Bob Haskins joined Guardian as a member of the executive staff in February 2013. Haskins’ responsibilities as Guardian’s vice president of strategic planning and business development include helping expand the company’s dealer program. He comes to the company with a rich history in the security industry, including roles as former president of Interlogix and also vice president and general manager of U.S. security at GE Security.
“Bob’s 30 years’ experience and broad industry background was a significant attraction to us. He brings a unique perspective in that his background is in the manufacturing sector as opposed to the service company sector. He offers a fresh approach for Guardian in many ways, especially in the areas of organizational design, corporate communication and branding,” Cersosimo shares.
Russ Cersosimo: Vision Meets Fearless Focus, Fun
When Guardian Protection Services won the SDM 1999 Dealer of the Year award, Russ Cersosimo was interviewed for the cover story by Laura Stepanek, then senior editor of SDM. A lot has changed since then. Cersosimo has guided Guardian from a company grossing $40.8 million in revenue with 91,000 customers, to a company grossing $150 million with 276, 000 customers. He has done it by seizing every opportunity that generated growth and maintained stability. He’s also taken advice, built relationships and had fun.
Cersosimo has always had the ability to notice the details and innately react based on strong business sense.
When he was still just installing individual alarms with direct lines at the police station (before the digital dialer), he needed to go to Guardian Alarms of Pittsburgh to pay them $200 to install the module. While there, he learned that the company was for sale for $7,500. While the company didn’t have recurring revenue, the owner did have 35 accounts — mostly jewelry stores.
Cersosimo remembers one key account that caught his attention: a jobsite trailer for U.S. Steel. “If I were able to go in and tell customers at 20 years old, when I desperately needed credibility, that some of my customers were jewelry stores and U.S. Steel, I knew it would give me the credibility at a young age that I needed,” he recalls.
He made the purchase with a loan from his brother and then eventually made his first hire, Joe Colosimo, who has been with the company for 34 years, and is pictured on the cover with Cersosimo. Colosimo has plenty of stories, but also an appreciation for the respect and understanding between the two men — and the way Cersosimo treats his entire staff.
“Although he has ’fired’ me twice in the past 34 years, Russ does let you make mistakes. If you really ’blow it’ — but you have done so unintentionally and with a good reason for what you were trying to achieve — Russ allows for that. I think this is unique about his leadership style and one of the reasons why the company does well. It probably also has something to do with why we enjoy long-tenure among our employees. With Russ, if you’re not making mistakes along the way, you’re not working hard to grow the business.”
Cersosimo shares that Colosimo was “the best hire I ever made. He was this talented electrician that at a young age was running HUD projects.”
Over the years Cersosimo has had several mentors, but one that stands out to him is W.P. Snyder III, a wealthy businessman in the Pittsburgh area.
When Cersosimo installed an alarm system throughout Snyder’s mansion it was an enormous project. The walls were three feet thick and although he estimated the job would take a month, it took three months and cost far more than the bid.
“He fully expected an up charge and was impressed I honored the bid,” Cersosimo recalls. “He was a big deal at the time, but he told me if there was ever anything he could do for me to just let him know; so when I put together a board of advisers, I asked him to participate and he did.”
The advisers came together for a meeting where Cersosimo presented his vision for the company. They had agreed to a one-hour meeting, but it lasted five hours.
“They gave me advice that continues to shape the decisions I make today. The major consensus from that meeting was that I had a great company, but I needed a good CFO. They showed me the importance of surrounding myself with a good team,” Cersosimo shares.
The CFO hired produced good financial models for the company and gave it predictability — allowing Cersosimo to guide the company at a very early age in the right direction.
“It was the best advice I ever got. From that point, we were building a culture where every person I brought in felt like they were an integral part of the business. It hasn’t diluted to this day. We establish a place where people want to come to work — they feel welcome to voice their opinion, whether we agree with them or not,” Cersosimo says. “I was fortunate that we found the right people early on. Longevity is our hallmark and one of the things I am most proud of. The first executive I ever replaced was simply because he retired.”
Humor is a key part of the longevity, Cersosimo adds. He, and the company, actively create an environment where people want to come to work.
“To this day I probably have more fun than I should. We’ve created an environment where everyone is comfortable, feels valued and works hard,” Cersosimo believes.
“Most people in the industry know that Russ likes to have a good time. He loves to have fun. But Russ is also a strong believer in ‘work hard, play hard,’” Colosimo says. “He is relentless when it comes to growing the business.”
Many Roads to Alarm Management
Guardian understands that false alarms not only negatively impact municipalities but also negatively affect the customer experience and as a result, key focus is placed on alarm management. The company is an active member of the False Alarm Reduction Association (FARA) and follows guidelines established by FARA to reduce instances of false alarms. Guardian was recognized by FARA in 2007 with an Industry False Alarm Reduction Award. The award is presented each year to a security systems company that works cooperatively with public safety and that has shown meaningful or significant reduction in the number of false alarms over a three to five year period.
In 2007, Guardian also implemented a mandatory 7-day Operational Test period (No Dispatch Period) for every new residential security system activated for 24-hour monitoring. This Test Period allows customers to become familiar with their new Guardian system, to test their system and to send signals for the initial seven days following installation, without concern of a false alarm or dispatch situation.
Guardian’s holistic approach to addressing and reducing false alarms includes all aspects that contribute to false alarms such as the alarm system user perspective and proper use of the system (customer education), the customer call lists and Enhanced Call Verification (ECV) information, the security industry best practices in false alarm avoidance and much more.