In late 2006, Dave Sinclair had one of those
moments.
The president of Sparksbased
CEI Inc., Sinclair oversaw
a company that was going
gangbusters, installing security
systems as a subcontractor to
booming production homebuilders.
The problem? Margins
were thin in the best of times,
and some big homebuilders wanted price concessions
as their business slowed.
Sinclair decided to bail, refocusing his
company instead on selling, servicing and
monitoring security and fire alarm systems.
And in a matter of 15 days this spring, he
made two acquisitions to deepen CEI's presence
in the market.
The company bought Secure Systems, a
Reno company with about 80 accounts, in mid-
March. It followed up at the end of March with
the purchase of Mustang Alarm Services,
another Reno firm that had about 90 accounts.
Account numbers are key to the security
monitoring business, Sinclair explains, because
of the stream of monthly revenue they produce
from customer contracts.
CE Pro, a trade magazine for the security
systems industry, says companies in the field
are selling these days for about 30 times their
recurring monthly revenue "RMR," as it's
known in the business.
While Sinclair doesn't have any plans to sell
CEI, he wants to move quickly to increase its
monthly revenue stream.
"Everything we do is directed toward
building RMR," he says.
Acquisitions may be part of the growth,
although Sinclair says deals are hard to predict
in an industry that has two dozen small players
and a couple of big ones in northern Nevada.
"I'm always looking for an alarm company
to buy," he says.
Organic growth through effective sales
campaigns will be more important, Sinclair
says, at the same time that a focus on excellent
service keeps customers on board.
In recent months, he says, CEI has recorded
no customer turnover, compared with an
industry average of about 8 percent.
At the same time, new technology is dramatically
lowering the cost of installing new
security systems. A wireless system, Sinclair
says, often can be installed by one worker in
half a day. Older wired systems required two
workers for a full day.
But the biggest change, Sinclair says, has
come in his own approach to the business as
he's no longer willing to chase sales at the cost
of profitability. And as a result, he figures his
goal a comapny valued at $10 million in 10
years is closer to reality than it was when he
was far, far busier a year ago.
"I've had a revelation in the last couple of
months," he says.
Comments
Use the comment form below to begin a discussion about this content.
Sign in to comment