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  • Any Help, Guidence, and/or Advice?

    Hello all

    My name is Chris, Im new to the boards. Getting ready to start a security guard business in the Dallas/Ft. Worth area with two business partners. We all have State Law Enforcement experience as well as Military service(Marines MP). I realize this does not automatically transfer over to the Security Industry, but we certainly hope some of our training and experiences will prove an asset to our company.

    With that said, can anyone lend some advice or point me in the right direction as to obtain as much info/guidence in starting this type of company in the area mentioned? Looked into a few books, but had no real luck. Thought about studying some of the more sucessful companies in the area, but naturally once they view you as potential competition, no one wants to give you the time of day (understandable).

    Would love to speak with someone experienced in starting, running and operating a sucessful guard company. Someone that might even be interested in a consultant/mentor type role that can bring experience to the table. We would have no problem paying for this type of service. Basically we all realize this is a business that is growing and projected to keep growing, as we also all come from security/Law Enforcement back-grounds. If anyone could lend some direction or guidence, it would be greatly appreciated. If anyone interested would like to exchange phone #'s, that would be great. One of our partners currently runs a very very sucessful Private Investigations company, so we have a very nice facility to use, complete with several offices and a big classroom for training.

    Again, look forward to any and all feedback. Thanks much, Happy Holidays
    Chris

  • #2
    Hello, Chris and welcome to the boards. There's centuries of experience here, probably, although everything we have to say might not be exactly what you want to hear.

    As one who has lived and managed in both the public and private domains, the first thing you should know is that they are less alike than they seem to be on the surface. This means that the "transferrability" of LE skills to the private domain is surprisingly limited and applies mainly to certain skills such as firearms, first aid, defensive driving, self-defense, etc.

    In short, I'd have been happier if you'd said that you guys have security experience, not LE experience (and perhaps you should go get some before you undertake this). The security mission, the laws regarding security operations, the lack of authority granted to security officers, the business requirements as opposed to government supporting the organization, the occasional hostility of police agencies toward your organization (rather than the fraternity you might have enjoyed with other agencies), and even the general public indifference, disrespect and/or lack of public support for security as opposed to law enforcement...all these and many other factors add up to huge differences between the two domains that make many LE people feel like they've jumped into the deep end of a very, very cold swimming pool when they transition to security.

    With that in mind, then, I would be inclined to ask not what LE experience you have, but what business experience you and your partners have. In an LE agency, once the annual budget fight is over no one has to worry about how they're going to meet payroll. In other words, it doesn't matter whether you're delivering security or pizzas, this is a business first and foremost, and success will require business skills at least as much as security skills.

    Second, I'd ask exactly why you're opening an agency in Dallas/Ft. Worth? In other words, have you done a marketing survey or otherwise determined that there's a need for additional services in that area? More specifically, exactly what is that unfulfilled need, where is it, and how do you plan to fill it in ways that other agencies are not doing? What will differentiate you from other services?

    Third, I'd ask whether you've developed a formal business plan that realistically addresses sources and uses of funds, marketing, etc.? Banks and other public sources of financing will require this, but sometimes people who plan to finance their businesses privately think they don't need to do the very same thing - which is bad thinking.

    Fourth, I'd caution you about one thing. Lots of guys in LE have had one or two potential clients who knew they were thinking about leaving the force and have said "You go into business, and we'll hire you". This is almost always the siren song of temptation, leading the ship onto the rocks. "Hey!", you think. "Look how easy this is!"...well, it's not. This is a dog-eat-dog industry, and one or two potential clients is NOT a reason to start a business, as tempting as it may seem.

    Fifth, be sure you understand the requirements in Texas for opening such a business and ALL of the legal ramifications of doing so as well. You'll need insurance, licensing, etc...and you'll need it next month, and the month after that, and the month after that...well, you get the idea. Start a business of any kind, and the first strange sensation you have is that all of the money you put into it starts flying out the window, while very little is coming in.

    Sixth, get a handle on cash flow and credit terms. You'll find that you're spending a ton of dough up front while the client will be paying the tab later - much later. (This is actually one of the reasons that companies hire contract security rather than paying for their own security - there's a big difference between paying employees every two weeks and paying you in 30 days...or even later. Add up the difference between paying your own 10 officers every two weeks and paying your contract for the exact same amount in 30 days, and doing that every month for years...it starts to look like a very, very big difference. Add in the other things you don't have to pay for up front like uniforms, gear, squads, hiring/HR expenses, or training, all of which they pay you for over many months because it's built into your contract rate, and the difference really adds up.)

    It's not at all uncommon even for companies that are considered perfectly solid and respectable (like Xerox or Bank of America) to allow their payables to run out well beyond the 30-day billing period. Under standard net-30 billing terms, they view such "slowness" in paying their bills as free "float" money. They get to use the money for "X" additional days for free, which to them is merely good business. When they've got a $million or so in monthly payables (or even if they have a lot less than that), what they can earn on that extra float really adds up...nor are they at all worried about getting a bad credit rating by jerking you around for awhile before they pay your bill. It's considered good business practice, as I said, and lots of companies do it even though they could sit down and write your check the day the bill comes in.

    The strategy to overcome this, by the way, is simply to refuse to make interest-free loans to your clients by using something called "discount billing". You offer terms of 2-10, net-30 (pay in 10 days, knock 2% off the bill; pay the full amount in 30 days, with a penalty beyond that). Many companies - usually the same ones who won't pay you on time otherwise - will have a rigid policy of paying so that they DO take all discounts. An old IBM comptroller taught me that trick years ago and it has never failed me.

    Why does a "mere" 2% change their behavior so radically? Well, to an accountant, if he pays 2% extra merely by holding up your payment for 20 extra days (beyond the 10-day discount period), he's paying 36% simple interest for "borrowing" those funds. Here's how this is calculated:
    There are eighteen 20-day periods in the accounting year of 360 days, and so 18 x 2% discount not taken = 36% simple interest per year - there's no compounding involved here). No way will a competent comptroller pay 36% extra for taking out these monthly 20-day "loans" of your money, so to speak, by delaying payment of your bill. In fact, most companies have a very strict rule - take all discounts...and discounted invoices get moved right up to the front of the pile, automatically.

    Summing it up...if a company wants to "borrow" your money without asking your permission, then you set the terms without asking for their permission by establishing the discount of 1%, 2% or whatever you think proper. You're forcing them to look at that 20-day float (or longer, if they're slow payers) in a very different way because now it's costing them money.

    But doesn't this mean you lose 2% when they take the discount? Funny enough, not really. On your side, you get the money back into your cash flow 20 days sooner than the net-30 would bring in so that YOU are using the money, not your client. This means, for instance, that you probably won't have to "factor" your receivables at an even larger discount because you're running out of money. (Factoring means you sell your receivables to some shylock money-lender for much less than they're worth because you need the cash now.) 2% off means getting cash back into circulation AND avoiding the necessity of paying much, much larger discounts to a factoring house in order to convert slow-pays to cash.

    Cash flow is the name of the game in business. So it's odd, but it works out better for everyone concerned - including you - if your client takes your 2% discount and pays you in 10 days...they win, and you do too. Clients who are credit-worthy, even though they like to play with your money for free if they can get away with it, will take the discount.

    Of course, clients who aren't credit worthy don't care about discounts. That's because they aren't using your money for "float", but just to stay open, or else they just don't pay their bills because they're flakes. Neither discounts nor collection agencies will do you any good with such clients, so set up very strict credit requirements and stick to them religiously. If you find you've accidentally taken on such a client, drop them like a hot brick.

    The point of all this certainly isn't to discourage you, but simply to present the realities to you so that you can think about them before your farm goes up for auction due to a bad business decision. By thinking about them, you have a chance to overcome them...first, by finding a partner who really knows something about running a business, preferably a service business. It doesn't have to be the security business as long as he was successful (for a good period of time, like 5 years or more). Then, he runs the business side and you guys run the operations side. And when fights erupt between business and operations, as they will, the business side should usually prevail or there will be no operations.

    Operationally, you'd better dive into the professional literature, because security operations will be like nothing you've ever done in LE in many ways as you'll discover the first time you tell a trespasser to leave the premises and he calls you a fruit and tells you to take a hike, the first time you try to hire a decent officer when all you can pay is Burger King wages, the first time some cop doesn't like the color of your squad, or the first time you absent-mindedly finger your mike key thinking you'll just run this tag....oops! LE this ain't, and not very much like it, either.
    Last edited by SecTrainer; 12-12-2006, 04:19 PM.
    "Every betrayal begins with trust." - Brian Jacques

    "I can't predict the future, but I know that it'll be very weird." - Anonymous

    "There is nothing new under the sun." - Ecclesiastes 1:9

    "History, with all its volumes vast, hath but one page." - Lord Byron

    Comment


    • #3
      Originally posted by Christian16365
      Hello all

      My name is Chris, Im new to the boards. Getting ready to start a security guard business in the Dallas/Ft. Worth area with two business partners. We all have State Law Enforcement experience as well as Military service(Marines MP). I realize this does not automatically transfer over to the Security Industry, but we certainly hope some of our training and experiences will prove an asset to our company.

      With that said, can anyone lend some advice or point me in the right direction as to obtain as much info/guidence in starting this type of company in the area mentioned? Looked into a few books, but had no real luck. Thought about studying some of the more sucessful companies in the area, but naturally once they view you as potential competition, no one wants to give you the time of day (understandable).

      Would love to speak with someone experienced in starting, running and operating a sucessful guard company. Someone that might even be interested in a consultant/mentor type role that can bring experience to the table. We would have no problem paying for this type of service. Basically we all realize this is a business that is growing and projected to keep growing, as we also all come from security/Law Enforcement back-grounds. If anyone could lend some direction or guidence, it would be greatly appreciated. If anyone interested would like to exchange phone #'s, that would be great. One of our partners currently runs a very very sucessful Private Investigations company, so we have a very nice facility to use, complete with several offices and a big classroom for training.

      Again, look forward to any and all feedback. Thanks much, Happy Holidays
      Chris
      Nathan Corbier, HRDickinson, and Bill Warnock are all well qualified to help in this area. Contact them via PM.
      Security: Freedom from fear; danger; safe; a feeling of well-being. (Webster's)

      Comment


      • #4
        Originally posted by SecTrainer
        There's centuries of experience here, probably, although everything we have to say might not be exactly what you want to hear.
        Are you trying to make us feel old??

        Comment


        • #5
          Originally posted by SecTrainer
          There's centuries of experience here, probably, although everything we have to say might not be exactly what you want to hear.
          ....oops! LE this ain't, and not very much like it, either.
          I am not usually one who enjoys longer responses on the boards, however this was certainly justified and sums up real life of a Security business.
          Thank you SecTrainer, don't ever change.
          Quote me as saying I was mis-quoted.
          Groucho Marx

          Comment


          • #6
            Thanks very very much SecTrainer. Excellent info! I hear ya on the pitfalls of starting/running a security business, but show me any business that this does not also apply? You talk to restaurant owners about opening a new restaurant, they will talk you to death about all the negatives and how you should not do it.


            Bottom line, if you never roll the dice you have no chance. We have probably done a bit more research than I initially indicated and more importantly, we have a few things that I think will make our services different and better than many companies in the area.

            Thank you for your info, your insight with regards to billing, is "Priceless" as I have spoken with many a frustrated business owner (PI Firms/Security) that complains about the process of trying to get paid by clients.

            Thanks again, I will keep you posted

            Chris

            Comment


            • #7
              Originally posted by Christian16365
              Thanks very very much SecTrainer. Excellent info! I hear ya on the pitfalls of starting/running a security business, but show me any business that this does not also apply? You talk to restaurant owners about opening a new restaurant, they will talk you to death about all the negatives and how you should not do it.


              Bottom line, if you never roll the dice you have no chance. We have probably done a bit more research than I initially indicated and more importantly, we have a few things that I think will make our services different and better than many companies in the area.

              Thank you for your info, your insight with regards to billing, is "Priceless" as I have spoken with many a frustrated business owner (PI Firms/Security) that complains about the process of trying to get paid by clients.

              Thanks again, I will keep you posted

              Chris
              Chris,

              As I said in my email, I would be glad to help you and your partners. I agree with much of the advice offered by SecTrainer, especially with regard to the importance of a realistic business plan. The plan should forecast monthly for at least the first year and contain a well thought out marketing plan.

              It is a big help to have the facilities in place. That's a big portion of your fixed overhead expense.

              While LE and contract security are very different, I believe that many of the skills and traits do tranfer well. ST is also correct in pointing out that contract security is indeed a business (and not typically a high margin one, at that). Setting it up correctly is important, i.e. sourcing your insurance, choosing your pay/bill cycles, implementing policies and procedures, choosing vendors, etc. Then you have to watch the numbers and learn to anticipate problems before they occur.

              Give me a call when you get a chance.

              Richard
              Richard Dickinson
              Dickinson Security Management Group, LLC
              DSMG Provides a Variety of Software Products and Consulting Services to the Contract Security Industry
              www.hrdickinson.com

              Comment


              • #8
                Chris, I hope the attachments to the email will benefit you in your efforts.
                Mr. Security, thanks for the pat on the back. It is appreciated. I sent Chris much of what I sent you, Nathan and others.
                Enjoy the day,
                Bill

                Comment


                • #9
                  Originally posted by Christian16365
                  Hello all

                  My name is Chris, Im new to the boards. Getting ready to start a security guard business in the Dallas/Ft. Worth area with two business partners. We all have State Law Enforcement experience as well as Military service(Marines MP). I realize this does not automatically transfer over to the Security Industry, but we certainly hope some of our training and experiences will prove an asset to our company.

                  With that said, can anyone lend some advice or point me in the right direction as to obtain as much info/guidence in starting this type of company in the area mentioned? Looked into a few books, but had no real luck. Thought about studying some of the more sucessful companies in the area, but naturally once they view you as potential competition, no one wants to give you the time of day (understandable).

                  Would love to speak with someone experienced in starting, running and operating a sucessful guard company. Someone that might even be interested in a consultant/mentor type role that can bring experience to the table. We would have no problem paying for this type of service. Basically we all realize this is a business that is growing and projected to keep growing, as we also all come from security/Law Enforcement back-grounds. If anyone could lend some direction or guidence, it would be greatly appreciated. If anyone interested would like to exchange phone #'s, that would be great. One of our partners currently runs a very very sucessful Private Investigations company, so we have a very nice facility to use, complete with several offices and a big classroom for training.

                  Again, look forward to any and all feedback. Thanks much, Happy Holidays
                  Chris
                  Hi Chris,

                  First welcome to the wide wide world of guarding! I think you will get many ideas here from your post, this is a good group of folks.

                  If you are serious about seeking a consultant/mentor then click on the link below - go to the "about" page so you can get a little more info on my background. There is a toll-free number on the site to contact me, but only if your serious.

                  Best of luck in your new venture!
                  RJ Martin

                  "A Guiding Force In The Pursuit Of Protection & Peace Of Mind"
                  www.martinprotective.com

                  Comment


                  • #10
                    Originally posted by Christian16365
                    Bottom line, if you never roll the dice you have no chance.
                    Absolutely right! As I said, the advice was not meant to discourage you, but so that you could anticipate the risks and rough spots intelligently and make good decisions to avoid or mitigate them.

                    Getting some mentoring is a good idea, too - but for sure you want check the "mentor" out thoroughly. Be sure they really are, in fact, running substantial and successful security operations, and have the credentials they speak of, before accepting offers of help, or their advice might prove to be worse than no advice at all.
                    Last edited by SecTrainer; 12-16-2006, 12:54 PM.
                    "Every betrayal begins with trust." - Brian Jacques

                    "I can't predict the future, but I know that it'll be very weird." - Anonymous

                    "There is nothing new under the sun." - Ecclesiastes 1:9

                    "History, with all its volumes vast, hath but one page." - Lord Byron

                    Comment

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