Seek Profit Beyond Traditional RMR

Ron Davis, Davis Mergers & Acquisitions Group. October 2021

“Multiples are down, and more than likely will stay that way. People who think of RMR as only something that is derived from monitoring revenue are not seeing the big picture.”
— Joe Nuccio, President, Dealer Partnerships, ADT

ASKED MRS. BARNES, my English teacher, what she thought I should do — become an advertising copywriter or, more likely, a door-to-door salesman. The copywriter was my idea, the door-to-door salesman, my teacher’s. I’m sure she would never have guessed that for the past 15 years, more or less, I have written a monthly column about successful people in our industry, and how they got that way. I recently was asked if there was any kind of secret to my longevity in writing the same type of column over and over again, interviewing hundreds of the industry's busiest movers and shakers. And there is a secret: for the most part, I only interview nice people who I like and respect. It seems to be working, I haven’t been fired yet!

The subject of this month’s column is a senior executive with ADT. In fact, he is the president of one of the company’s most profitable businesses, dealer partnerships. It’s an important role for Joe Nuccio, who is also an SSI Industry Hall of Famer. For Nuccio, it comes naturally. Everybody likes him and of greater importance, he likes everybody he meets. His philosophy could be summed up exactly as the great American philosopher Will Rogers once said: “I never met a man I didn’t like,” And he meant it.

When asked to describe his business unit, he called it “awesome,” and spoke of the 190 dealers that he and his team look after. These are all ADT Authorized Dealers, and are independent, and if you think a kindergarten class of children would be hard to manage, try managing a group of almost 200 independent alarm dealers who all think they know the business. And because of what Nuccio has done in managing this business, he has drawn the respect and admiration of not just the financial community (who gives him a pretty good scorecard), but also pretty much the rest of the industry. In case you haven’t guessed, I really like Nuccio, and we have become good friends. During our hourlong interview, I got more pearls than I would’ve thought possible.

Nuccio says, “Multiples are down, and more than likely will stay that way. People who think of RMR as only something that is derived from monitoring revenue, are not seeing the big picture.” Fire systems integrators are learning that RMR from test and inspection contracts can be just as predictable, even more so, than monitoring revenue. Alarm dealers are adding other types of services — think keys and locksmithing, whole house warranties, structured wiring, sound systems, and the list goes on.

All these products lend themselves to ongoing contract relationships. Service contracts, as an example, are most often used in pricing for fire prevention, test and inspect programs, and almost any other element of the security system you can think about. Today’s alarm dealers/integrators are always thinking about changes that will make their business more predictable, duplicatable and profitable. And while multiples are down, slightly, for traditional RMR, they are seen as being more stable and more predictable than some of the other types of RMR.

I’m not talking about “greener pastures,” but rather real and enduring cash flow revenue from products and services that never were part and parcel of the traditional alarm business. I remember working with Michael Karch, formerly the president and CEO of Floyd Total Security, and also a good friend. We helped Karch sell his company in Minnesota’s Twin Cities area for substantial dollars, and now, a year later, he is enjoying the fruits of his labor. What he tells me is that the big “secret” of his company is that he built up a substantial lock and key business that became one of the largest in the area.

The real secret was not that it was successful but that the people who handle those customers also learned how to ask the question, “Mr. Customer, have you given any thought to adding a home security system? We can help you with that, also.” So, many of the customers, both commercial and residential, went on to become a significant part of the value of the business.

Today, Nuccio enjoys the success and quality reputation he has built up over the years. ADT is building an enviable track record of running successful businesses. I think you’ll be seeing a lot more of that in the next few years. And, more than likely, those divisions that are contributing to that success will be managed by people who think like Nuccio. They have never met a person they didn’t like. Well, maybe one or two, but that’s another column.