Recurring Revenue? Keep Dreaming?
By Ira Friedman
There is no "recurring revenue" in the custom business. Of course, that doesn't stop custom dealers from looking at their friends, the "security guys," with mild envy. Those monthly monitoring charges they collect sure look sweet. And there's no cost associated with them, either.
Ah, free money. "If only we could develop a form of recurring income like those security guys," muses the custom retailer, "then we could have some stability in our business."
When the custom retailer revisits his warranty policy, he tries to envision a day when his customers send in quarterly "maintenance" checks. Ah, that free money.
Well, that free money is just a dream, because to date there's no successful, industry-accepted performance guarantee program in this business. And given the nature of the business, there won't be one for a long time.
Let's review the obvious.
First, security dealers virtually give away their equipment and labor in order to score a monitoring contract. That's how the entire security industry is structured, and all facets of the industry support this methodology. Look at an average security firm: It typically supports one security system manufacturer (often an in-house brand). It sells the same components over and over again. It typically pays its installers a flat fee per project. Because its business is geared to sell equipment and installation as cheaply as possible, the best way to keep its costs low is to employ standardization to the point where the customer is offered a single solution, not a host of options.
Second, and most importantly, homeowners aren't buying glass-break detectors and cameras. They're buying the comfort of a monitoring service that's available 24 hours a day. The home-owner gets more utility from the monitoring than he or she does from the door contacts. So it seems natural security customers would pay monthly for services they use monthly.