Egan, Ryan, Bonifas, Lombardi tout fire revenue

'Forget T&M; get RMR or get out
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Thursday, June 17, 2010

PITTSBURGH—If you’re not getting RMR on your fire jobs, you’re missing a great way to increase cash flow and the value of your company, according to four security industry veterans who gathered June 16 to present “RMR on Fire!,” a panel discussion at the ESX show here.

Bob Ryan, SVP sales and marketing for ASG; Ed Bonifas, president Alarm Detection Services; John Lombardi, president, Commercial Instruments & Alarm Systems; and Pat Egan, president Select Security, agreed that businesses can do more to profit from fire.

“Fire is a not a sexy business,” said Ryan. “It’s boring and it’s hard and I did all I could to avoid it when I first got into this business 20 years ago.” But his fondness for fire grew as he learned that, done right, “it’s a very profitable business.”

For one, fire accounts have a very low creation cost compared to a traditional security accounts, which cost money to create. With fire, “you’re in the black as soon as you create the account.” And in most cases, fire is a much more serious and likely threat than burglary.

“Companies get caught up in creating accounts,” Ryan said. “When you’re making a call for security [on the resi or commercial side] make sure to talk fire.” Consider including a base smoke detector in your promotional kits and “set the expectation that customers need smoke and CO detection,” he said.

And, never, ever, include fire in the base monitoring charge. “Fire is a separate and distinct service,” he said. “There is value there and you can get it.”

Fire can also “build the enterprise value of your company in a way that time-and-materials work does not. You can collateralize fire RMR and you can’t do that with time-and-materials [service arrangements].”

Ryan said ASG has acquired a lot of companies that had T&M service arrangements with their fire customers. If they’d had long-term service contracts with those customers instead, RMR would have been higher, the company would have been worth more, and likely “they would have received a higher multiple for the sale and the owner would have exited with more wealth.”

Bonifas said ADS has $2 million in RMR and 30 percent of that is fire-related. He cautioned that any company that does fire should have an expert on staff: “Fire is highly regulated and if you do a poor job and something goes wrong, you’ll likely be in trouble.”

Sixty percent of Select Security’s work is in fire. Egan estimated that his fire service RMR grew 19 percent from January to May of 2010 compared to the same time last year. For the all of 2010, he’s projecting a 31 percent increase over last year.

“We will not sell a fire alarm system that doesn’t have RMR,” Egan said. “If there’s no monitoring, inspection and testing [contract], we will not sell; we will walk from the deal.”

Fire is required, but it’s also expensive. Lombardi helps his customers with creative financing. “We started renting fire alarm systems 15 years ago and it’s the most successful thing I’ve ever done,” he said.

Finally, Ryan advised converting existing T&M fire accounts to RMR-generating service accounts, and even if you didn’t win the installation, you can go after the service business. “If you can afford it, dedicate a sales rep to this function,” he said. Forget trying to convert these accounts via letter or bill stuffer, though. “You want a sales rep to have a belly-to-belly business discussion with those customers,” he said.

Establishing a long-term service contract with your fire customers, said Ryan, creates a “competitive barrier, so your competition can’t touch them.”