This is part 2 of a two-part series on the Security Market Growth Curve. You can access part one here.
In our last post, we discussed the importance of understanding the changing conditions of the security guard market and the need to adopt smart strategies for growth to drive value in a shrinking landscape with its ever-increasing challenges. In this post we will illustrate the levels of business maturity that happens at each stage of a company’s growth, and what you can do to move up to the next level of growth and compete more effectively.
The Security Market Growth Curve: Understanding and Benchmarking your Growth
For any business looking to grow, there are challenges to be addressed and solutions needed to get to the next level in your company’s journey. But it all starts with a definition of the challenges, and the steps required to overcome those challenges. What is the profile of your current operation, and what do you need to do to get to the next level? The Security Growth Curve helps illustrate the four dynamic levels of the overall market, and looks something like this:
At the start of the curve, your business has fewer capabilities and breadth of offerings – and lower maturity in terms of company size, ability to serve larger markets. As your company successfully addresses these challenges, it moves up the curve with increasing capabilities – offering more services and value to your clients, gaining strength through a combination of people, process and technology.
Eventually, your company’s maturity grows in scope, business reputation and branding, services and revenues, along with its ability to compete in the larger market. But to recognize your company’s level of maturity and what’s required to get to the next level, we need to understand the characteristics of the industry benchmarks at each level.
The Maturity Matrix Helps to identify your position on the Curve (and how to move up to the next level)
The Maturity Matrix illustrated in the table below helps define the characteristics of each level and the profiles of companies that fit into these levels. It further helps to visualize the key benchmarks normally associated with a company’s movement from one level to the next to “Level Up” the business:
The benchmarks at each level can be defined by the unique industry characteristics or attributes in these five dimensions:
- SCOPE – Generally a measurement of organization infrastructure, geographic footprint, number of clients and employees
- IT SYSTEMS – Includes industry-specific as well as generic business IT systems to help visualize and successfully manage the key metrics at each of these levels (for example; metrics needed to move up to L2 include; direct labor (D/L) and gross profit ratios by client, billable and non-billable S/T and O/T hours, etc.)
- HR/STAFFING – Represents a broad range of manual and automated processes for attracting and retaining employees. (Includes applicant tracking, on-boarding, compensation and benefits, compliance and performance/talent management).
- SERVICES – Includes the full spectrum of security related services, products and technologies from basic uniformed guard services to a fully diversified offering of fully integrated security systems and client-based information services.
- VALUATION – Increases with the level of maturity, extent of development of each of these dimensions and their impact on the company’s ability to generate sustainable revenue and profit growth. Ultimately, the valuation will be determined in a sale transaction based on the seller’s ability to negotiate the value of these attributes and the buyer’s agreement to pay this value depending on its wants and needs. This ranges from a “tuck-in” purchase where the buyer basically only wants to acquire the customer accounts to a “platform” acquisition where the buyer needs and is willing to pay for the value of a fully established and matured security firm.
Based on this framework, now let’s look at what companies are typically doing to move up the curve to their next levels:
Some Questions You Might Ask Yourself…
From the perspective of these industry examples, here are some questions to ask yourself in order to benchmark your ability to compete and grow your business.
- Process: What am I doing to control operations more efficiently? As operations grow and become more complex, the management of people and processes requires greater visibility and controls. Technology that analyzes workforce availability and utilization for scheduling, integrates with the payroll and billing, and builds a seamless end-to-end process eliminates manual work, reduces errors, and provides you with efficiencies to operate smarter, reduce costs, maximize profitability to drive greater value and faster growth.
- Product Offering: How am I differentiating myself in the Market? To be competitive, it’s important for companies to analyze market needs and look at their current offerings to see what makes them unique compared to others. Whether this is focusing on a specific verticals or specialized niches (e.g. Stadiums, Events, Corporate, Executive protection) or portfolio of services (e.g. physical security combined with technology, Off-Duty officers only, etc.), this analysis will help determine strategies and plans for how you will grow and expand.
- Level of Service: What am I doing to build a better level of service for clients? Early stage companies typically offer a basic level of guard services. However, as you grow and your competitors increase their offerings, you will want to expand your service capabilities and benefits to provide a greater value proposition to the client. This might include more training, supervision and a combination or bundling of services including guarding and technology.
- People: How am I creating value for my guards? With current tight labor market conditions and potentially better employment opportunities with competitors or other employers, you need to recruit and retain talented guards by paying them at or above local market levels to keep your turnover at a minimum. Best employer practices for employee retention also includes employee recognition and communications – especially understanding the guard’s preferences of job assignments. The key is to determine what makes employment with your company different so that guards will WANT to stay with you?
- Financial: Am I investing in my growth? One of your company’s primary goals is to make money and grow wealth for yourself – along with any other owners in this enterprise. How you manage this process is essential for your Company’s survival and success. This starts with a clear understanding of your company’s financial condition and its ability to support your growth goals and objectives. At each stage or level of the growth curve, you need to ensure your Company’s financial and investment capabilities remain sufficient to meet these needs – whether from operating cash flows, borrowing or capital funding.
The Tools for the Journey: One Size Does Not Fit All
While the industry we are covering is Security, every company has its own path to successful growth. Beyond “Levels” there are many issues and factors which must be considered. Hopefully this article provides a basic foundation for approaching these issues. Professional advice and resources are available to assist you and your company in this important process.
Watch for future articles in this series, as we address additional related topics including, “Value Pricing for Strategic Growth” and “Thinking about Selling Your Security Guard Company: Are You Prepared?”
Principal Consultant at Whitehaven Advisors LLC
Jack Goldsborough has over 45+ years in the security services industry and is the principal consultant of Whitehaven Advisors, a specialized consulting, advisory and M&A firm serving security owner/operators where he brings extensive experience, thought leadership and industry-specific skills and capabilities for the benefit of its clients. Prior to founding Whitehaven Advisors, Jack was most recently CFO of a prominent NYC-based security and investigative firm, T&M Protection Resources, LLC. He began his career with Burns International Security Services (now part of Securitas), where he rose to the Office of the President. He also held various ownership and leadership positions with other regional and national security organizations. Jack’s corporate background spans a broad spectrum of disciplines including organizational, operational and financial management, with special focus on debt and equity financing, acquisitions, mergers and divestitures. He has been active in the investigative and security industry as a member of the American Society for Industrial Security (ASIS) and the Associated Licensed Detectives of New York State, Inc. (ALDONYS) where he served on the Board and was President from 1993-1994.