Integrator: Security is Our Exit Strategy

Burglar alarms have always seemed to be the necessary evil of any integrated home control system. CE pros often farm out the security portion of a job because of presumed liabilities or simply a lack of expertise.

But for many CE pros, security is becoming an increasingly important part of their business, providing an easy entrée into a customer’s home and a source of recurring monthly revenue (RMR) for years.

Bolstered by new self-contained, easy-to-install security systems; mass marketing by the likes of ADT, Comcast and others to come; and ever-increasing monthly fees commanded by remote home management; more traditional integrators are making security a key part of their business.

There’s an even more pressing reason for chasing security RMR: Traditional CE pros are aging, and they need an exit strategy. Without being able to show a history of customer loyalty, it’s tough for an integration firm to demonstrate any value to outsiders.

And there’s the issue of cash flow. The “going rate” for selling a security account is roughly 30 times RMR. For example, an account that pays your company $30 per month could be sold to a third party for roughly $900.

There are all sorts of factors that determine the resale value of a security RMR account - the longevity of the account, the number of accounts being sold (the more the merrier) and other assessments of the quality of the accounts - but if you can collect hundreds or thousands of security customers, the numbers begin to add up.

While most CE pros incorporate high-performance alarm systems into their projects, SimpTech Solutions has found security to be the Holy Grail for creating an exit strategy.

From Nothing to 120 Panels Per Year
SimpTech is like many CE pros - once a six-person business doing jobs in the $20,000 to $25,000 range, now a two-man shop using a lot of subcontractors and tackling projects mostly in the $8,000 to $10,000 range.

That shift to smaller, quicker jobs doesn’t bother owner Chad Nichols. In fact, he wants more of it.

“It’s nice doing more hang-and-bang,” he says. “It’s in-and-out. It’s very gratifying.”

But you can’t just decide to do smaller jobs without a plan, Nichols explains: “It has forced us to think about higher-volume business models.”

Typically about 70 percent of SimpTech’s business has revolved around audio/video, 20 percent around security and 10 percent automation. But Nichols wants to change that ratio, adding more security to the mix.

For years, the Florence, Ky.-based company has used Home Automation Inc. (HAI) for automation and security, spurning pricier solutions in favor of “more practical brands with a better value proposition,” says Nichols. Before that, however, Nichols wouldn’t touch security, echoing fears voiced by so many CE pros.

“I kind of shot myself in the foot five years ago,” he recalls. “I was worried about the liabilities of security. We always farmed it out. All we got was, like, a $35 one-time commission.”

$2,500 System, $60 per Month
Now Nichols is determined to own that security business. Even with HAI in his arsenal, Nichols sought a more mass-market solution that could be sold and installed in a day. Through Worthington Distribution, he discovered the Go!Control panel from 2Gig Technologies, a self-contained wireless system that incorporates GSM for communications to the central station, and Z-Wave for modest integration options.