Editor's Note: Locksmith Ledger presents the first article in a three-part series about how locksmiths can tap into the lucrative recurring monthly revenue business sector.
The traditional locksmith business is changing. The lock shops and key cutting businesses of the past still exist, but their numbers have dwindled. Technology is advancing and some say the key is going away. Look at the automobile industry as a prime example.
But the reason many locksmith companies and their technicians have disappeared is not entirely due to technology – it’s because many haven’t changed their business model and have not prepared themselves and their firms for the future. Most people don’t like change. On the surface, change can look and be uncomfortable. However, in today’s fast-moving world, becoming too comfortable can be the kiss of death for any organization.
I have a quote that helps me when making decisions that take some of the anxiety out of changing something I’m currently comfortable with: ‘don’t focus on the start, visualize the end result.’ So visualize the possible predictable cash flow through new technology and prepare your company for future profitability.
Everything has a life expectancy, especially your business if you don’t continue to evolve. You need to keep your company profitable by moving from decreasing project-based hardware margins only to predictable cash flow.
The easiest way to transition into cash generating services is through flexible, scalable, cloud-based security management platforms now available. Customers want to experience the convenience of interactive services, with instant access to their homes and offices and the ability to control everything simply and intuitively. And you can provide those value-add services easily with the help of the cloud. Best of all, these services equate to recurring monthly revenue (RMR), the gold standard with which many profitable companies have built their reputations on, such as Netflix streaming video, cellular phone providers and the alarm industry.
One of the most important pieces of the puzzle is to provide services customers can’t do without – such as the ability to remotely unlock entrance doors, change schedules for those who come and go, on the fly, or provide professional monitoring of their entrance and intrusion devices. Those services are now readily available and accessible, and locksmiths are in the perfect spot to take advantage of the technology and earn RMR. Now, you may be thinking: ‘I know how to cut keys and install locking hardware but don’t know about programming or IT centric matters.’ With the cloud and no software to install, those fears are easily erased.
Today, it’s all about the customer experience. And let’s face it -- putting a key into a lock is not a great customer experience.
Here’s a prime example of a great customer experience. Think about the multi-tenant facilities manager to whom you provide locking services. You can give the management company an even more enhanced experience when they don’t have to drive to a building to unlock doors outside of normal business hours for a service technician or tenant who forgets their credentials. The cloud lets you provide a valuable convenience to those vertical market customers as well as many others.
Thanks to cloud-hosted security management platforms (a subject we will explore more in our next article), locksmiths can easily add new services. Now you can have access to turnkey, all in one recurring revenue generating solutions for control and management of intrusion, door access control, power supply monitoring, video alarm verification and live camera viewing along with HVAC and critical temperature monitoring for one to hundreds of locations. You can grow your business easily and generate a stronger and more profitable business model.
Locksmiths who embrace the future with cloud computing will find many new ways to generate the all-important RMR for their business, as well as move into new and exciting enhancements for the customer. And, for those who might not be comfortable with the security or video side of the equation, they can easily partner with security dealers, who will also benefit from having the expertise of a locksmith so they can provide a full-featured, turnkey solution to the customer.
Here’s the harsh reality of the locksmith business today. If you are installing mechanical locks, electronic locking hardware or access control for a large enterprise customer – such as a campus location, medical facility or multi-tenant vertical market – you’re probably installing the system and reaping a profit margin on the hardware that can range from around 12 percent or so if you’re lucky. Maybe you are selling a service and maintenance or repair agreement for an annual fee that will get this customer expedited service and lower prices for any replacement parts out of warranty.
But what else are you doing to keep this customer in your sights front and center and money flowing in? After you leave this customer are you moving on from them forever, except when they add doors or expand their business? And what’s to say they won’t contact a different service provider if you’ve been out of sight and mind for an extended period of time? It doesn’t have to be that way and you can continue to earn predictable monthly income from these same customers after the installation is complete.
Predictable Cashflow
The security dealer industry, and other service providers as well, live and breathe the concept of RMR and predictable cash flow. It’s the money you can count on to come in every month from the customers you had thought were ‘once and done’ after the installation was complete. Predictable cash flow does more than keep coffers full. It enhances and boosts the valuation of your business in the eyes of lenders or investors. The more predictable money is coming in, the more valuable your business becomes.
With RMR you can spend more of your energy growing your existing customer base rather than trying to generate new business, which is a more expensive endeavor. With RMR you have some solid numbers that indicate what you are going to earn on a monthly basis in addition to any new business and project installations. In addition, RMR grows exponentially as you add services to new and existing customers so your profitability continues to peak.
To understand recurring revenue better, look at the cellular phone model. You pay a certain amount each month depending on the plan you select and also agree to keep paying it for two years in most instances with a long-term agreement. A related example is the business model used by Salesforce.com, the online sales tracking platform. Customers don’t sign a long-term contract but pay a fee per user, per month. In the security industry, there are many different ways to start collecting RMR. But you have to do more than just install hardware and move on.
The cool part of the cloud and RMR is the ability to customize the solution for the client. Maybe they want reports on who entered the business at what time, or who engaged the system at the end of the day. These audit trail reports can mean RMR and locksmiths can charge accordingly for these reports. Or, maybe customers want to remotely lock down parts of the school or certain classrooms through the smartphone, computer or laptop in the event of a breach or even an active shooter. There’s RMR for the locksmith again.
What about third party monitoring? You can provide the monitoring for the customer through a local or national central station monitoring company (at dealer cost), mark up the pricing and have a customer that’s now more engaged with services and less likely to leave you if they value your work as a service provider.
Offering mobile credential access control is another service that can differentiate your company and get your customers excited about doing business with you, earning RMR in the process. People love their smartphones and they are never far from their side. The more they can use the phone to operate things, the happier they are.
We continue to see the writing on the wall. Many people are using their smartphones as their preferred entrance device and can’t go anywhere without it. They don’t want to fumble with keys, or even key fobs and proximity access control readers. They want the convenience of easily using their device of choice to get into their homes and businesses.
The cloud also helps you better service your customers, especially with a robust dealer portal. You won’t always have to visit the customer site if an issue arises, saving the high price of a truck roll. Many times system resets and other customer support features can be handled through your supplied dealer portal.
The pricing on RMR depends on a number of factors, including the location of the business, what the market will bear and of course the value the customer believes they are getting from the services. But the more the customers use your services, the more likely they are to continue to stay with you and add new ones as well.
As a former security dealer, on average I was generating $45 to $65 per month in RMR. That’s per customer! And isn’t that better than completing a job and simply moving on, hoping for a high profit margin on hardware alone?
If you aren’t looking at all the services available to generate RMR and make the customer ‘stickier,’ you may need to rethink your business plan. You don’t want to lose business to the locksmith down the road who is offering these services.
The locksmith business is still strong and viable. It’s an exacting contracting trade that others can’t execute properly, or don’t have the skillsets for the precision of the work. Being in such a good spot, why not expand your services so you can have predictable monthly recurring revenue?
Michael Simon is a former alarm dealer who owned and operated a leading Chicago area security firm for some 40 years. Today, he’s the managing partner of Connected Technologies, LLC where he works alongside his son Daniel. The company is driven to deliver on the needs of the installing market and provide contractors like locksmiths valuable services they can offer to customers that yield recurring monthly revenue. They have developed an “All in One” hardware package pre-engineered for quick and easy installation geared specifically for the locksmith to start generating recurring monthly revenue today.
