The Smart Business Security Opportunity

Over the last several years, a major technology-driven shift in the residential security space has created new growth opportunities for security dealers. Cloud services, powering connected devices in the home and mobile apps have enabled a new category of smart home security solutions. This has expanded the market for home security and generated higher RMR accounts and stickier, more engaged customers for security dealers.

That same foundational technology is now poised to create similar opportunities in commercial and small business properties, giving security dealers another "ground-floor opportunity" for future growth.

While some industries are disrupted by new technology — think Uber and taxis or AirBnB and vacation rentals — the security industry tends to embrace the opportunity to generate growth through new and more-valued services. The experiences and strategies that have created success in the smart home space can draw a roadmap for security dealers to target the small to medium business space in the same way, while embracing the latest technology to help capture this ready opportunity.

SMBs: An Attractive Market

Whether you currently sell into the commercial space or not, it is an extremely diverse market; thus, the correct starting point is necessary to define a more precise target segment. A recent study indicates that 1 percent of businesses in North America are large, 20 percent are medium, and 79 percent are classified as small. This makes the small business — typically defined as less than 5,000 square feet — a highly attractive segment from a volume point of view.

A deeper analysis of the small business segment shows that it shares a number of similarities with the residential security space, making it a highly accessible adjacent market for most security dealers. Leveraging pre-existing expertise, resources and models from the residential side of their business, security dealers can expand their addressable market and drive incremental growth with small business accounts.

A striking similarity is that small business systems often look like residential ones — with the same panels and sensors — and they are also sold and monetized in a similar way as well. These similarities are also reflected in the sales and financing process and are distinct from traditional commercial integrators that focus on large installations with custom specifications.

This requires a technical sales process and revenue is generated from the complexity of the installation and cost of hardware; however, with streamlined packages, small business sales look a lot like residential ones. The hardware is subsidized and revenue is primarily generated through RMR, resulting in short sales cycles and high volume account creation.

These similarities enable a security dealer to apply their residential sales resources and financial models to the small business space. In fact, we have seen a number of Alarm.com's dealer partners succeed in this space by using their existing sales force to expand their addressable market and drive new growth opportunities — without adding installation complexities.

Upgrade Opportunities

Most small business systems are outdated and ready for reinvention, much like residential systems a decade ago. Smart home security solutions are transformational because they significantly expand the value proposition of the systems. This is the basis for higher ARPU and stickier, longer-term customers. The small business opportunity is projected to unfold along a similar line.

Historically, security systems have been thought of by small business owners as a necessary expense, or a "cost of doing business," similar to buying insurance. The systems were largely the same and performed one function, making this market extremely price-sensitive. However, new technology is changing that dynamic. With the right technology that deeply enhances the value of the system, dealers can change the narrative with a highly differentiated offering.

Expanding Technology Choices

As dealers know first-hand, running a business is stressful, and managing employees can be difficult — especially when you cannot be present all the time. The latest technology offers improved and more convenient property security and access control, but where technology is really driving differentiation in the market is through the operational insights generated by the systems.

Technologies enable owners and managers to get detailed insights into how their business operates, detect if a location opened late or closed early, and identify the responsible employees. The challenges of managing employees and simplifying employee access to the business grow in complexity and become more time consuming when they include multiple locations. Business owners value a single interface for all their business locations, as well as the capability to manage user codes and access control across each property.

Business Intelligence is another way that security dealers can deliver new value to small- and medium-sized business owners. Innovative analytics and data visualization tools provide actionable insights into customer patterns. The business owner can optimize staffing and hours of operation to capture more business during peak traffic flow times and more efficiently manage low traffic times.

Sales Tactics

With these enhanced offerings and the extended value they provide, the sales approach has increased in scope from one focused only on preventing negative outcomes to communicating positive, measurable business benefits. If you were to listen in to a typical sales pitch five years ago, you would have heard terms like: slip and fall, liability control and shrinkage — all negative, fear-based selling points.

Today, the right sales messages take advantage of the opportunity to talk to the customer on positive terms that highlight how the system can help them run their business more effectively day to day with capabilities like employee management, efficiency and productivity. While the primary driver of the sale remains security, the ability to tell a compelling return on investment story to small business owners is an exciting new way to differentiate and add new value.

The market opportunity is now for security dealers to extend into commercial services and engage with small businesses. The similarities with the residential business create a highly accessible opportunity. As new technology solutions promise to redefine the space, the time is right to make the move.

Brian Lohse is Director of Commercial Sales for Alarm.com. Request more info about the company at www.securityinfowatch.com/10216128.