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Archive for April, 2010

Simplifying Hourly Hiring: Questions to Ask Yourself

According to a recent SHRM Report March 2010 shows a net total of 21.3 percent of HR Managers who reported an increase in hourly hiring for the month. While the job market still has quite a way to go, an increase is always good news. As the economy prepares for more and more hourly positions, it is a good time for Recruiters and Hiring Managers to evaluate their hourly hiring process.

Hourly employment often sports a notoriously high turnover rate, and thus, it may seem difficult to ease the hiring process. Think again! Start by evaluating how well you find quality candidates. Finding top talent is important not only for worker productivity, but for worker retention. Sourcing workers willing to dedicate themselves to the job will bring you one step closer to an optimal hiring process and a lower turnover rate. As obvious as the following may be, here are three questions to ask yourself:

1. Are you utilizing the data taken from your Workforce Planning Analysis?

Regardless of if your business has pressing seasonal hiring demands, planning is quite important. Analyze your past hiring trends either through a computer program or more advanced talent management systems, as past data may be the key to preparing for future hiring surges. Highlighting  which months see a rise in turnover and which months see a lull in candidate engagement. By doing so, you will be more prepared to proactively source top talent. You will be one step ahead of the rest and your company will be able to hire top talent before your competitor does.

2.  Where are you posting your open positions?

Post positions where your target candidates will see them. Hourly candidates usually apply to jobs that are located within a five mile radius of their home. Therefore, post appropriately. Utilize local print publications, post on local web-boards, use social media sites and of course, have plenty of applications available for walk-ins.

3.  How easy-to-complete is your application process?

Simple is better. By having a straight-forward, concise application process, candidate engagement is likely to improve. Higher candidate engagement=Larger talent pool=Easier to source top talent. Go one step further and make your application an automated paperless process. Nowadays, many hourly hiring businesses are utilizing applicant tracking systems to create an entirely web-based application process, while also installing online application kiosks in-house for walk-in applicants. This comes with two major benefits. Firstly, candidates are more likely to fill out an easy-to-complete application. Secondly, less administrative work for the HR professional: candidate information is stored on a web-based location so you no longer need physical space for employee data storage. Efficient and effective hourly hiring processes means fewer headaches for the recruiter and hiring manager.

Your company could be next in the SHRM hiring analyses; therefore, start evaluating your hiring process today. Be proactive and begin building your quality workforce!

What are some other good ways to ease hourly-hiring processes? Does anyone else have any suggestions?

By iCIMS Blogger Karen Bucks


Selling a Security Guard Company after 2010 Could Get a Lot More Expensive

Many of the tax cuts implemented by former President Bush stand to expire at the end of December 2010, unless there’s a move to extend them, and all indications are that most will not be extended; especially the present 15% tax rate on capital gains. Which means, best case, the rate will go back to 20%; or as many analysts are predicting, it may go much higher. If it goes back to just 20%, it will still mean a 33% increase over the 2010 rate.

Most owners have a certain net figure that they need from the sale of their business in order to justify selling. Unfortunately, increases in taxes do not equate to an increase in the multiples paid for security guard companies. Therefore, in order for a seller to get more for a business in a period of rising taxes, the business simply has to be worth more. Which means the business has to become more profitable on the same revenue, the revenue has to increase dramatically, or there has to be a dramatic shift in the company being an attractive target for an aggressive buyer – and none of these factors seem to be in the future for the sale of security guard companies.

To put this tax increase into perspective: consider an example of a $12 million revenue company that sells for $5.5 million ($4.5 million for the customers plus $1.0 million of net working capital). Further assume that the company operates as an “S” corporation. The $4.5 million is taxed at a 20% capital gains rate (15% Federal and 5% state) and the $1.0 million goes back to the owner tax free, leaving the owner with $4.6 million after paying taxes; assuming the owner sells in 2010.

Here’s the alarming part: If the capital gains rate goes to just 20%, a sale of the above $12 million company in 2011 would net the owner $4.375 million. If the rate goes to 28%, as some doomsayers are predicting, the sale of this $12 million company would net the owner $4.015 million – almost $500,000 less than what the owner would have received if he had sold the company for the same multiple in 2010.

Advice: Owners that are seriously thinking about selling in the next couple of years should immediately examine their likely potential for growth against the almost certain tax increases to determine if it might be advisable to accelerate the sale process.


Recent Security Letter Excerpts

WARNING: WARRANT ACCESS TO NETWORK COULD BE EXPLOITED BY OTHERS.

Tom Cross, X-Force, an IBM security unit, has determined that cooperation with law enforcement in serving a warrant of the computer system can lead to an opportunity that lets hackers perform illegal wiretaps. Cross found this weakness in access equip. made by Cisco. (He focused on Cisco because it was the only system to make intercept access details public. Cross believes similar vulnerabilities exist with other computer platforms.)

Networking and Internet companies have backdoors in their systems to support law enforcement with legitimate Internet wiretap requests. But these avenues also inadvertently make it easier for hackers who game the system to steal information. This was a factor in Google’s decision last month to consider withdrawing from China. The ease to infiltrate Google’s system is too easy. Summing up: organizations should monitor law enforcement carefully in installing wiretaps. Their systems could be compromised.

SEATTLE SECURITY GUARDS FAIL TO INTERVENE IN NEARBY YOUTH ATTACK.   Perhaps millions have already seen the video which has appeared globally in the news. In Seattle, Olympic Security Services personnel, contracted by King County, were in the Westlake station of the Metro Tunnel. Private security supported local law enforcement. A 15-yr.-old girl, and four other s at one point, attacked a girl. They robbed her of an iPod, cell phone, purse, and other items. That wasn’t enough. The 15-yr.-old attacker kicked the still, prone victim. All of this was picked up by surveillance video which was shared globally.

This news event has created a storm of discussion. While the beating was taking place, Olympic Security personnel were just a few feet away. Perhaps the attacker knew that security guards aren’t paid to get involved and felt free to act brazenly as she did. The reaction of Olympic Security’s client, King County Metro Transit, and the Seattle public was not warm toward the guards. Couldn’t they have intervened? They seemed like spectators at a fight, though one was seen on a radio seeking assistance.
What are security guards supposed to do?  The stated tasks of  security officers are to: deter, delay, detect, respond, and report. That doesn’t say anything about trying to arrest a wild 15-yr.-old female robber who is kicking her victim on the sidewalk directly in front of them. The security officers told a reporter that they were intimidated by the girl’s aggressive behavior. They provided aid to the victim after the attackers left and helped police in identifications in the subsequent arrests.

Is this enough? Doesn’t common sense require people to help others? Technically, the Olympic Security guards did what they were trained to do…and nothing more. That’s a pity. Society expects more from trained security personnel than this incident revealed.

SURGE IN TEMPORARY WORKERS REQUIRES ADEQUATE VETTING. RISKS IGNORED. From a trough last July, to the latest data, the use of workplace temps has risen 12%. Could this be one of those soft signs that the Great Recession is over? We don’t know. Perhaps. But it is reasonable to consider the security implications these new workers create.

According to preliminary data from the US Bureau of Labor Statistics, temporary employees grew 200K from 1.7M in July to over 1.9M. At the height of the flush times in late 2007, over 2.6M temps were working. That’s more than a one-quarter shrink from the top. Principle: vetting across the board.


The Importance of Momentum When Buying and Selling a Security Guard Company

Maintaining momentum with dialogue and the flow of information is very important to the buyer and seller during negotiations. And the intensity of the momentum indicates the commitment each side has in completing the transaction. A buyer who keeps the momentum throughout the entire process – investing time, money and personnel resources to getting the transaction completed timely is sending the seller a message that the seller’s company is important. Keeping the momentum on the seller’s part is a way the seller tells the buyer that there’s a genuine interest in selling the company, and that the seller’s motivated enough for the buyer to make these necessary investments. However, most buyers and sellers are somewhat cautious in how they communicate this eagerness to complete a transaction, because of their concern that in doing so they may lose leverage in the negotiations.

In order to start and maintain the momentum, both the buyer and the seller have to be committed to the transaction; it cannot be a one-sided effort. As previously stated, each side maintains the momentum in order to show the other side that there’s interest, but both parties also maintain the momentum for its own benefit. Usually, there’s some time-line necessary to getting the deal closed in order for either side to enjoy the benefits of the transaction. Momentum Is Important to Both Sides

From the buyer’s perspective, momentum ensures that the transaction closes, which is very important to the buyer, especially if the seller’s company is a vital part of some strategic plan. For example, the buyer may need the company in order to enter a certain vertical account or geographic market, or it may provide an attractive return on investment. In either case, the longer the transaction takes to close, the longer it takes the buyer to start benefiting from the acquisition.

From the seller’s prospective, the momentum is vital to keeping the buyer interested in the deal, especially true for buyers who are pro-active in the acquisition market. If the buyer’s due diligence team must wait for information from the seller, or the seller’s attorney does not respond promptly to the buyer’s attorney on important purchase agreement issues, the buyer’s personnel will be assigned to other projects. Then the buyer’s team might not be available when the seller is ready to resume the process. If this scenario goes on long enough, frustration starts to set in; the momentum is slowed down, and the negotiations may even stop completely.

Organizing the Process to Maintain Momentum

Some of the steps in the negotiations require the buyer and/or seller to be pro-active and even sometimes aggressive in dealing with getting information or decisions on important issues from the other side. The buyer and seller are usually concerned that any eagerness they display could cause them to lose negotiating leverage in the transaction – and rightly so. Whatever the decision as to who is best to handle the steps, the following are some important steps in organizing the process and making sure the momentum is maintained:

  • Assign a “point persons” to manage the activities for their respective side.
  • Exchange detailed contact information for personnel assigned to the transaction.
  • Meet with its respective attorneys, tax advisors, point person, and transaction manager to reinforce the reasons for doing the transaction.
  • Engage in frequent communications between all the team members with decision makers and updating status to the entire team.
  • Start accumulating the due diligence information BEFORE any buyer prospects are contacted.
  • Seller should review the buyer’s standard purchase contract.

Regardless of the seller’s or buyer’s need or desire for a quick deal, momentum in the acquisition process should be about moving through each stage of the negotiations in an orderly fashion balancing the needs of both parties. And not so fast as to cause mistakes that may later prove costly to either side.


Selling Part of the Company: A Way to Weather Today’s Financial Storm

The economic downturn has cause companies from all sectors to make difficult decisions necessary to weather the impact making the advantages of the partial divestiture even more compelling. Large and small companies are considering selling part of the company as a way to raise cash in case the banks decide to limit or not renew the credit lines and the customers slow down on paying their invoices.

Companies are selling divisions or subsidiaries that no longer fit their core operations. The benefits to the seller can be dramatic: making cash available to pay down debt, getting rid of an unprofitable business unit, or in the case of a small closely-held company, offering the opportunity for the owner to slow down, but not get out of business entirely.

For the owners of the smaller company, the decision to sell, or not to sell, part of the company is often driven by emotion, rather than economic prudence. Smaller companies are owned by entrepreneurs who make all the decisions for their company and tend to measure their success in terms of gross volume. The entrepreneur is infatuated with bigness. Making the company smaller is usually not an option. Instead of selling unprofitable divisions, the owner keeps trying to fix them by infusing borrowed funds. This is expensive and has to be paid back. Such a rigid fixation on size often leads to financial problems for the entire company. But there have been some owners of closely-held companies that realized the importance of selling off part of the company when the timing was right. They proved that the advantages found in the partial divestiture were not a secret lost in the large conglomerates. They were able to recognize the value in selling off part of the company — whether it was a need to come up with quick cash, divest an unprofitable division, or just sell a majority of the company and keep the less stressful part to supplement income during retirement.

In preparing for this article, we reviewed the 150 plus security guard industry transactions our firm has managed. We have represented sellers of companies with annual sales as small as $1 million, as well as multi-billion dollar public conglomerates in selling off security guard divisions. Many of our seller/clients had multiple offices or divisions, which allowed for selling off part of the company without taking value away from the business that remained.

We were reminded from our review that over 100 of these 150 plus transactions had something to do with a partial divestiture; even though some of our seller/clients were small.  There is no company too large and few companies are too small to take advantage of a partial divestiture. The only requirement is that the company has “divisible units.” The partial divestiture provides needed capital in the form of equity, as opposed to loans that are expensive and have to be paid back…and helps the company reach their financial goals — first by downsizing through getting rid of unwanted separate units — then taking the proceeds and redirecting them into more profitable areas.

With today’s economic challenges, having sufficient cash on hand certainly helps the company weather the economic storm. After downsizing through selling off part of the company, the resulting company is usually built back to one larger than its original size — more focused and more profitable.


Leadership: Company and Competition Analysis

During any persuasive executive presentation on security programming or initiatives, you can count on being asked how your idea or proposal compares to others in the industry and how the cost compares to your peers. For decades this has been a problematic because of a total lack of industry common benchmarks and information sharing. There is no area where this lack of common or shared definition is more evident than in determining cost of security. To complicate matters even more there has never been more intense interest on managements part for understanding and comparing these costs. This is due in part to the significant increases in total security budgets (often due to consolidating functions/services into security) in many companies over the last 10 years. To make matters even more complex no two companies are even organized alike. Security departments are organized in a wide variety of manners and their costs accounting methods are even more complex. Many times costs associated with security are decentralized to the business unit, the product line or the country in which the services are provided. Even when they are centralized and all costs are in the Corporate Security Headquarters budget, companies are not organized the same. In some companies physical security hardware costs are in the real estate or facilities budget. Pre-employment screening is often in the human resources budget. Computer and information security might be in the information technologies budget. So how can we get data to compare the cost of security in multiple companies. There is now an opportunity to participate an initiative underway to define and establish benchmarks for the “Total Cost of Security”. It will be the first to account for costs associated with individual programs and services by facility, location, country, business unit, differing cost centers, and other organizational variances. To receive the results of this ground breaking research you must participate. To do so you must contact the Security Executive Council at Contact@secleader.com and request the link to take the Roles and Responsibility Survey. It takes about an hour and results will be sent out when enough surveys are received to validate the research. I hope you take part. You can also visit our website at https://www.securityexecutivecouncil.com

Bob Hayes
Managing Director
Security Executive Council
202-730-9981
404-502-1600
bhayes@secleader.com


Why Are Buyers Paying Such High Multiples for Security Guard Companies That are Only Marginally Profitable, or Losing Money?

For many years, owners of privately held security guard companies were relying on the “street formulas” to get an idea of what their company might be worth to one of the generous industry buyers should they decide to put the company on the market.  These formulas were based on gross units such as multiples of gross revenue or percentage of annual billing. These calculations were believed to be about 25% of annual revenue or three times gross monthly billings.  However, over the past few years, these multiples have become very unreliable. Security guard companies may sell for much more than these traditional formulas, or to the surprise of many owners looking to sell, their company may not be saleable at all.

Buyers today first decide whether or not they are interested in the company based on several factors – such as geographic location, types of accounts, margins, etc.  If the seller passes this initial test, the buyers then do a return on investment computation.  This will tell the buyer what they can make off the acquisition and is the basis for their offer.  And to prove how unreliable the old “street formulas” are, we’ve seen the prices, stated in terms of gross units, as low as 2.5 times gross monthly revenue (20% of annual gross) to as much as six times gross monthly revenue (50% of annual gross) – plus the book value of the company.  These offering prices, when converted to multiples of the SELLER’S earnings, are often in the mid double digits, or off the charts in the case of sellers actually losing money.

How can these buyers pay so much for these marginally profitable companies?  They make the company more profitable than it was in the hands of the seller.  They do this by eliminating redundant costs and by reducing operating costs through volume buying. And, contrary to what a lot of nervous owners believe, many of the expense savings do not come from changing the seller’s company.  Many result from the buyer’s ability to be more efficient now that it has a much larger volume of business in its operating area.  For instance, the buyer may move its operations to the seller’s office, thereby eliminating the rent the buyer was paying on its space; or the buyer may move the accounting to the buyer’s home office, eliminating a few clerks.  The buyer also will probably have insurance rates much lower than the seller’s; and the cost of borrowing money will be much lower.  When all these savings are figured in, the buyer will usually wind up paying around five to seven times the BUYER’S proforma profit from the acquisition – albeit a much larger multiple on the SELLER’S reported profits.


  
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