How to Boost Profits and Grant Peace of Mind with Service Agreements

An ISC West education session discusses how ensuring rapid response and reliable problem solving will benefit integrators who sell themselves as an insurance policy.

Mickey McCarter Leave a Comment
How to Boost Profits and Grant Peace of Mind with Service Agreements

Alan Kruglak founded his first security company 37 years ago. In 1980, he started a small company that eventually grew to about 200 people, and he eventually sold it to a larger firm.

But in that first year of business, Kruglak’s office copier broke. He called the copier company for service, and then discussed the repair bill with the serviceman. The company would guarantee response in the same day, and the cost would have been half the price, if Kruglak had purchased a service agreement with the copier company, the serviceman said.

Kruglak then had a revelation: security integrators should be doing the same thing as the copier company.

“A light lit up in our heads, and we said this is what we’re going to do,” Kruglak says. “We started selling service agreements, and people bought them because they want an instantaneous response.”

In a session for SIA Educuation@ISC West on April 6, Kruglak will discuss his insights into service agreements and their benefits to systems integrators. Indeed, Kruglak’s session is so popular that he has been delivering it at the ISC West Expo in Las Vegas for at least 15 years.

In his session, Kruglak examines how service agreements can boost operating profits for integrators. He explains why organizations buy service agreements, their needs, how to package the right program, how to sell them to both existing and new clients, and how to price them in accordance with growing market demand.

“I’m going to talk about how to design and sell service agreements. And it’s important because recurring revenue is the key to financial success in our industry. And only about 25 percent of the companies aggressively sell service agreements,” he says. “Selling service agreements enables you to build up your cash flow and improve your financial stability.” 

And integrators are leaving a lot of money on the table when they don’t sell service agreements, Kruglak declares. “I bet we are probably the most profitable integration company in the country on a percentage basis,” he says of his current company, Genesis Security Systems LLC, based in Germantown, Md., where he is senior vice president.

His first company, which was sold in 1995, saw 25 percent of its revenue come from service agreements at the time of sale, according to Kruglak. He then wrote a book about his experiences and started delivering talks on service agreements. (Kruglak has authored or co-authored four books on successful business practices.)

Kruglak was inspired when he read another book about service agreements. The author challenged his competitors on price, claiming he was the cheapest option. But Kruglak saw that as a poor strategy, contending that people buy service based on performance, ultimately, and not price.

Service agreements provide clients with a guarantee of labor and materials at a fixed price, he says. In that way, it’s like an insurance policy. An integrator can provide financial protection against something bad happening in the future. As such, service agreements provide peace of mind to security managers, who must maintain their budget and who seek fast responses.

Kruglak’s experiences at Genesis Security Systems have reinforced his enthusiasm for service agreements. He founded it with his partners in 2002 with no revenue. Today, it’s a $30 million company, where a quarter of the business comes from service. And the executive travels to ISC West each year at the Sands Expo to inform others as to how to offer service agreements.

“Some guys think I’m the smartest thing since sliced bread, but I’m not,” Krugluk chuckles. “I just have experience, and the only way to really make money in this business is through offering service because you also increase client satisfaction a big jump forward as well. And you just follow the models. Everybody is in the recurring revenue stream business. If you’re not in that business, you’re not going to make any money.”