Recurring Revenue Rescues the Business Blahs for Security Integrators
Security integrators are becoming more proactive about passive income. SSI’s 2023 Recurring Revenue Deep Dive shows the flow of RMR streams.
While a comedic movie or TV show might depict a businessperson trying to get to sleep counting money in their mind rather than sheep, who wouldn’t want to literally make money 24/7 regardless of what they may be doing at a given time?
Embracing and implementing a model in which customers subscribe to services — as opposed to a one-time or periodic sale — makes that dream of generating recurring monthly revenue (RMR) a reality.
Of course, this is an approach with which the alarm industry is intimately familiar, as for many decades monitoring centers and equipped dealers have charged monthly fees to track, respond to burglar and fire alarm signals, alerting responding agencies as deemed necessary.
It’s somewhat ironic then that a scheme largely pioneered by the security industry, which has become broadly applied to put many other types of businesses on the map and collectively generate billions of dollars, has seen relatively slow dealer/integrator adoption beyond alarm systems even as the market has exponentially expanded into access control, video surveillance and other offerings.
However, that inertia is finally shifting. Although not all the forces, dynamics and catalysts in play disrupting this situation are favorable or desired, it is fortunate how in combination they are allowing, even pushing, the security industry to turn the corn the corner and begin capitalizing on what is an enormous opportunity.
Those factors include but are not limited to advances in technology, economics, changes in customer desires and expectations, unpredictability (e.g. pandemic and supply chain), product commoditization, more forward-thinking company leaders, and progressive start-ups. It’s all adding up to a more rapidly evolving security industry that requires nimble stewards who are dialed into the latest market trends and variables.
More About the 2023 SSI Recurring Revenue Deep Dive
Now in its sixth year, Security Sales & Integration’s Recurring Revenue Deep Dive survey assesses the opportunities, challenges and identifies key benchmarks dealers and integrators are experiencing. Given the historic and turbulent incidents affecting Americans and the world the past few years, security and RMR has held up impressively. As mentioned in the past, when compared to many fields, the critical importance security and safety plays in everyone’s lives largely shields the industry against extreme or extended downturns.
According to the study findings, although 94% of the respondents continue to cite the supply chain as an obstacle, a higher percentage of total revenues are recurring in nature and gross margins on that business rose from 31.4% in 2022 to 38.5% this year. Responding dealers and integrators note nearly 40% of their total revenue is now recurring, where it was only a third in the prior study. Another positive finding is RMR-based account attrition down for both residential (almost 1 percentage point) and commercial (1.5 points).
Traction is evidenced across myriad vertical markets and technologies, with retail and health care along with access control and video surveillance making significant strides.
Among the metrics reflecting the harsh realities of today’s competitive landscape, competition specifically nearly doubled as the top challenge to implementing more RMR-based services. At the same time, the lackluster economy is reflected in slower RMR growth (17% vs. 29% in 2022), lower total RMR and less average RMR per both residential and commercial customer. Back on the plus side, survey participants project 2023 to yield a growth rate of 22% in total RMR.
By now, most security company owners and operators recognize and acknowledge the rationale and urgency to devote at least a portion of their book of business to recurring-billed services. However, the technical, marketing, sales and support challenges can make it seem like trying to turn the Titanic. As with that famously doomed vessel, failing to navigate that transition could sink your ship.
Don’t delay. Dive into all the trends, product features, support mechanisms most coveted by your peers and offerings from two top technology partners ready to act as lighthouses guiding your company into the port of RMR glory.
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About the Author
Scott Goldfine
Scott Goldfine is the marketing director for Elite Interactive Solutions. He is the former editor-in-chief and associate publisher of Security Sales & Integration. He can be reached at [email protected].
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