Aley Moyer

The Californian 2022 Q1 – USING SMART SCHEDULING IN YOUR JOB COSTING STRATEGY

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USING SMART SCHEDULING IN YOUR JOB COSTING STRATEGY

Gail Tutt, TEAM Software Business Consultant, Network Partner

Moving into the new year, it’s important to look at how you can strengthen your profit margins. Especially when other market factors (like ongoing labor and supply shortages) are carrying over into 2022. One tactic you can consider? Use scheduling, particularly smart scheduling, as a part of your job costing toolkit.

What’s smart scheduling?

In short, smart scheduling is a system that does the heavy lifting for you when it comes to your officer schedules. This means factoring in your contract needs against your available officers, so you can make data-backed decisions when posting officers to jobs based on criteria like qualifications or pay rate. 

One simple way to keep jobs profitable is to deploy smart scheduling early in the process. When scheduling, include a parameter search for available guards that fit within a job’s contract bill rate. That way, you know officers on shift are within the scope of what’s budgeted per job. (If you skip this step, wage creep could get ahead of you, and it can show in your expenses.) 

If this isn’t something you’re used to doing, start by using smart scheduling reports in your enterprise workforce management solution to examine your labor margin direct labor (DL) percentages. If you know a particular job should be performing at a DL of 60%, you can compare it against your actual percentages to see if a job’s material costs are performing higher or lower than budgeted. If it is higher, drill down into the report to identify the problem. Chances are, if there’s a problem with one job going over DL, it’s a problem across your business. Is a manager scheduling officers without factoring in pay scale? Are you scheduling officers for a shift when a different job is needing their certifications? Is wage creep pushing you over budget? 

If your job’s DL is lower than benchmarks, you can still dig into the data and see what processes you can repeat on other jobs. From there, it’s only a matter of adjusting and measuring outcomes. 

At TEAM, we recommend reviewing your DL percentages with regularity. Assuming schedules are updated daily, a good rule of thumb is to review at least weekly. That way, you can catch budget deviation before it comes a larger issue. 

Flexible scheduling to support smart scheduling. 

While software solutions can help automate your scheduling needs with smart scheduling, they improve scheduling in other ways, too.

Think of scheduling as a larger job costing strategy. Self-scheduling through a feature like a mobile job board can improve employee engagement. In turn, this can improve retention and even reduce high-cost activities like overtime.


Where smart scheduling helps identify officers who are the right fit for a given shift, self-scheduling helps empower officers to offer their shifts to others without needing to involve a scheduler or supervisor. Others can then pick up the open extra work, keeping shifts filled without needing to go back-and-forth with a manager.

Don’t forget to factor in compliance. If your scheduling solution allows it (and believe me, it should) configure criteria on your self-scheduling job board so only qualified employees can fill certain shifts. This helps support job costing by keeping direct labor expenses reasonable per job. 

Scheduling for profits — and retention.

Here’s a crazy idea: instead of filling gaps, consider creating them. I know — crazy — but hear me out.

Expand your current, labor-intensive scheduling processes to include self-scheduling. This reduces some of the manual work demands of your managerial staff and engages your officers to have a say in their own schedules.

I’ve heard of some security companies piloting scheduling programs that strategically leave a small percentage of the global work schedule unfilled. By hiring a portion of your workforce in a self-scheduling-only capacity, you can have a subset of officers set their own schedules by filling open shifts. This approaches the smart scheduling, and retention, strategy from a whole new angle.

For example, let’s examine an officer who’s decided to leave your company. They could be leaving to work a different job, but still be hoping to make some extra cash on the side. In the pilot program described above, that officer could choose to stay an active employee within the self-scheduling program, picking and choosing shifts that fit around their new work schedule.

Pros:

  • Your company doesn’t lose out on any investment you’ve put into their hiring.
  • The officer has a flexible avenue to earn extra money by choosing jobs from your available contracts.
  • If the officer ever chooses to return to working for you full-time, their employee records are still on file. This streamlines your rehire process and cuts out added hiring expenses.

 

Gail has spent over 35 years in the private sector as a senior level finance and operations manager across multiple industry. Most recently CFO of a regional security company in San Jose, CA, Gail now works providing invaluable insight and expertise as a business consultant with TEAM Software.  Her hobbies include breeding and showing standard wirehair dachshunds, hiking and spending time with her family.

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Aley Moyer

The Californian 2021 Q4 – 3 WAYS TO IMPROVE YOUR SECURITY SERVICES AND MAINTAIN YOUR COMPETITIVE EDGE

3 WAYS TO IMPROVE YOUR SECURITY SERVICES AND MAINTAIN YOUR COMPETITIVE EDGE

Tony Unfried, CSA360

Seeing as the majority of your competitors undoubtedly offer most, if not all of these services, the most pressing question you need to answer is: What are you doing to improve and make sure your security guard services are keeping pace in a competitive industry? 

Here are three can’t fail suggestions:

1. Maintain Top of Mind Security Offerings by Focusing on Delivery and Quality of Services Provided

A big mistake many security companies make is trying to be all things to all customers. Casting such a wide net not only makes it hard to stand out, but you may find that you’re not focusing attention on your core security strengths.   

It’s important to maintain top of mind security offerings to ensure longevity with your current and future clients. To do this, we recommend the following actions…

  • Ensure your security services meet the needs of your clients. 

Confirming there’s a perfect match between the services you offer and the needs of your clients sounds like an obvious exercise, but it’s worth a closer inspection. 

To ensure that you are offering the right services to meet client needs, ask yourself the following questions:

  • What industry are your current clients part of?
  • What physical security pain points are they trying to alleviate?
  • What level of security expertise does your current team have?
  • Do you have the capacity to expand your services?

The answers to these questions will help you discover your niche services and provide the specialized client support that will make you stand out.

  • Enhance services with improved processes and techniques. 

The combining of new technologies with traditional guard techniques is offering security companies the opportunity to offer enhanced security services. An example of this is remote guarding services, which combines tools like motion alarms and security cameras with random site patrols to provide a dual, and highly effective level of security. 

By continuing to implement enhanced practices, like remote guarding, security companies can improve their processes and techniques. This leads to a more impactful experience and successful partnership for clients. 

  • Provide incident management and proactive response.

Another area that is getting more attention is Incident Management & Responses. In the past, many security companies would run into the problem of being too reactive to incidents and risks instead taking a proactive approach. Utilizing an effective incident management program will keep you ahead of the game and in front of potentially dangerous situations.

2. Build a high-quality team of security guards

In an industry that experiences a high percentage of turnover – between 100% – 300% percent, according to the Service Employees International Union – building and retaining a high-quality team of security guards is imperative to success. To achieve this, we recommend the following…

  • Set high standards for your security team and ensure each guard you hire has the qualifications to meet those standards.
  • Invest in additional training to continue to develop your team’s security skills. This is key in building a strong security guard staff and utilizing client feedback is a great way to determine what type of training will benefit your guards and your firm.
  • Engage and motivate your security team to ensure that you retain them.  This can be achieved by providing competitive pay and implementing incentive programs. 
  • Perform surprise inspections. This gives you the opportunity to provide immediate feedback to resolve issues and/or recognize achievements.
3. Implement Security Operations Software to Take Your Services to the Next Level

While it may have taken the physical security service sector a bit longer, the digital transformation in this space is now in full swing. And the good news is the security operations software available today makes linking the physical and digital security realms easier than ever before. 

All this new security tech is strengthening overall security measures and also allowing the visitor experience to be better prioritized. But it’s important that you choose the software that is right for your firm. 

The security operations software that you choose should allow you to resolve any internal challenges while giving your team the ability to ensure sustained safety and mitigate risks. 

The most effective systems will have the modules and features needed to:

  • Manage risk associated with staffing gaps
  • Manage the staff you have more effectively and efficiently
  • Increase workforce accountability
  • Mitigate risk and liability
  • Implement proactive security procedures
  • Simplify guard tour management
  • Enhance guard communication and transparency
  • Provide comprehensive data analytics and reporting
  • Deploy targeted training to mitigate turnover
  • Increase security guard engagement and retention

At CSA360 Software, we take your security service needs seriously. Our all-in-one security operations management software gives you the tools you need to manage your security options in one place.

Tony Unfried, CEO of CSA360, holds a master’s degree in Public Affairs and Criminal Justice from Indiana University, where he graduated with honors. While enrolled in his master’s program, Tony worked for The TJX Companies, Inc., leading the region in loss prevention and moving the company toward technology use in Security. Tony went on to join the most significant security company in Indiana, managing more than 500 employees and 50 sites, including the Indiana Convention Center, Bankers Life Fieldhouse, and Ruoff Home Mortgage Music Center. Seeing a noticeable gap in technology use in the physical security sector, Tony created his first security software application, launched at the Super Bowl in 2012, and recognized twice for Excellence in Mobile Technology by Techpoint. Tony has also spoken on Tech in Physical Security on panels with ASIS and IAVM.

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Aley Moyer

The Californian 2021 Q4 – WORKERS’ COMPENSATION CLAIMS: HOW TO CHOOSE AN OCCUPATIONAL CLINIC

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WORKERS’ COMPENSATION CLAIMS: HOW TO CHOOSE AN OCCUPATIONAL CLINIC

Shaun Kelly, Tolman & Wiker, Preferred Broker

Hello to all and we hope everyone is doing well!

We have been assisting employers in managing Workers’ Compensation claims for many years. This includes First Aid claims, moderate injuries involving transitioning to light duty to get the employee back to work as soon as possible and assisting with very serious injuries. One part of the process in managing Workers’ Compensation claims that all employers should engage in, is choosing an occupational clinic that works best for you, the employee and the insurance carrier. A designated Occupational Clinic should be selected prior to any injuries. Including all team members handling Workers’ Compensation claims in this process is important. This should also include your insurance broker in order to assist you throughout the claim.

The clinic you choose is an important decision as it sets the tone for the rest of the claim. A well written discharge report will limit options while a poorly written report can leave the door open for further allegations and treatment. The clinic you choose should also help convey how your company cares about its employees.

Things to look for in a clinic:

  1. Look for a clinic who can see your employees during your work hours
  2. Look for a clinic who will keep copies of your job descriptions on file
  3. Look for a clinic who will use MRIs sparingly
  4. Look for a clinic who is responsive to employee needs and has a pleasant bedside manner

Before choosing a clinic you should schedule a time to visit. This will allow you to tour the clinic which will give you an idea of the average wait time, as well as meet some of the doctors. You may also ask the clinic to do an on-site visit of your facility. This will give the clinic a better idea as to what it is you do and what type of job duties your employees have as well as the physical demands of the job.

Things to ask during your visit to the clinic:

  1. What are their hours of operation? Are they open at night and on weekends?
  2. How many locations do they have?
  3. How do they handle return-to-work? Do they try to get injured employees back to modified duties as soon as possible? Do they send work status reports via email to employers as soon as possible? How descriptive do they get in writing work restrictions?
  4. How do they communicate with employers?
  5. Do they do pre-placement medical exams and physical abilities tests?
  6. Do they do drug screening?
  7. How do they handle red-flag cases?
  8. Do they have in-house specialists? Do they have in-house physical therapy, chiropractic services, or a pharmacy?
  9. How do they make sure the injured employee understands what is being told to them during the exam?
  10. Are their doctors bilingual? Do they have interpreters?

Please feel free to give us a call if you have any questions .

Shaun Kelly joined Tolman & Wiker Insurance Services in 2005.  He specializes in all lines of property and casualty insurance for industries including contract security firms, agriculture, construction, oil and gas. Shaun received a BS in Business Administration with a major in Finance from California State University in Fresno, California. He is an active member of several industry associations, including the Association CALSAGA, the Kern County Builders Exchange and the Independent Insurance Agents of Kern County. Shaun can be reached at 661-616-4700 or skelly@tolmanandwiker.com.

 

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Kate

The Californian 2021 Q3 – IMPROVING CONTRACT MANAGEMENT FOR BETTER BUSINESS STRATEGY

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IMPROVING CONTRACT MANAGEMENT FOR BETTER BUSINESS STRATEGY

Brandy Tomasek, TEAM Software, CALSAGA Network Partner

 

As a leader of a security company, managing your contract updates can become an incredibly daunting task, especially given today’s ever-changing environment. Not only are customers requesting more from your business in terms of the services you provide, but you’re also being required to monitor your service delivery to meet new and specific compliance standards. As contract management becomes more complicated, you’re simultaneously being asked to provide more visibility to your customers through business data and proof of service — a process multiplied by each dispersed job site spelled out in your contract agreements. 

As contract management evolves, one thing is clear. Your business strategy needs to evolve as well, namely in finding a way to leverage your technology so it’s working for you, not against you. Managing a contract across multiple platforms — or worse, through only paper-and-pencil processes — is tricky, messy and ultimately a drain on your resources. Even with regular communication to and from the field, you’re more likely to end up with answers that don’t line up across systems, discrepancies in how information is processed and assigned, and a loss of customer business. It’s important to use technology specifically designed for the needs of the security industry to counteract these dangers and better manage your contracts. 

Trainings, Licensures and Breaks

With your contracts, it’s important to make sure you have officers with the correct qualifications fulfilling the requirements of any given job, and that you’re providing fair and equitable hours whenever possible. Employees need to be onboarded thoroughly and appropriately with ongoing training and licensure requirements accurately tracked, so when a job does require specific certifications, you can fill those service-level agreement needs appropriately. When your officers are on duty, a holistic workforce management solution can monitor time worked against necessary compliance regulations, ensuring you accurately track time, including meal or rest breaks. This is especially important for instances when meal or rest breaks could theoretically be attributed to a different week due to how shift schedules fall, mistakenly resulting in more overtime expenses on your payroll. Without a software solution working to provide accurately, timely data to produce outputs, you’re relying on human subjectivity to manage minute details where error can result in headaches and liabilities for your company to handle down the road.  

Scheduling and Your Bottom Line

As a service contractor, labor costs are one of the biggest expenses narrowing your profit margins. Seemingly harmless scheduling gaffes, like an officer coming in early or staying late, can quickly add up in expenses your company is on the hook for but that you ultimately can’t bill to your customer. By eliminating manual processes from the scheduling equation, you can more accurately manage shift punches and rule out any de minimis time by setting up configurable default time and attendance settings. From a contract standpoint, this helps with cost attribution, while minimizing any back-office reconciliation work before payroll is due. Plus, a tool that monitors open posts, offers positions to employees and schedules based on compliance requirements (guard licensing, driver’s license, weapons permit, CPR training, etc.) ensures you’re still able to identify gaps in coverage, prevent pre-scheduled overtime and receive notifications if an officer doesn’t clock in for a shift. 

Communicating to Field-Based Officers

Manual back-and-forth communications can get the job done, but a software solution that provides communication to and from the field helps provide visibility to your security officers, supervisors and management. System notifications help identify things like gaps in coverage for contracts and better manage compliance requirements via messaging solutions. Plus, the ability to notify employees of open posts via push notification and SMS texting helps shorten the lead time of filling gaps in coverage and ensuring contract management. By tracking all communications within one system, executives have peace of mind — and a paper trail to refer to when reviewing contract fulfillment or queries from customers. 

The possibilities of software built specifically for the needs of the security industry are endless. Take advantage of tools that work for you to help manage your contracts. 

 

Brandy Tomasek joined TEAM Software in 2016. She’s a part of the Professional Services team, working as a Sr. Business Consultant. Prior to joining TEAM, Brandy earned a Bachelor’s degree in Management and Marketing, as well as her MBA in Organizational Leadership. Brandy’s professional experience spans a range of disciplines from management and leadership, to training and accounting. In her free time, Brandy enjoys spending time with her family, training their puppy and DIY everything.

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Aley Moyer

The Californian 2020 Q4 – WHAT YOU SHOULD KNOW ABOUT CALIFORNIA WORK BREAK LAWS

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WHAT YOU SHOULD KNOW ABOUT CALIFORNIA WORK BREAK LAWS 

Debbie Howlett, TrackTik, Network Partner

While many security companies recognize that hungry and tired security officers aren’t at their most productive, providing meal or rest breaks to employees isn’t universally required by law (though many employers do provide meal or rest breaks out of courtesy).  

It is well-known that the state of California has some of the strictest employment laws in the United States. And while a number of U.S. states do require employers to provide meal breaks or rest breaks, California is only one of a few states that require both. It also requires that security companies pay their officers for some of this time by offering both a meal break and paid rest breaks.  

Meal Breaks

California law requires that for every five hours a security officer has worked, security companies must provide a 30-minute meal break. However, companies do not have to pay for this time – meal breaks are unpaid. So if the officer only works six hours or less, they can waive the right to a meal break. Security officers who work ten hours are entitled to a second 30 meal break which is also unpaid. If the entire shift doesn’t exceed 12 hours, then an officer can waive the second break as long as the officer took the first break. Two breaks may not be waived in one day.  

Rest Breaks

California law also requires companies to provide rest breaks to their officers. For every four hours worked, security companies must provide a paid 10-minute rest break. Security officers who work less than three-and-a-half hours are generally not offered rest breaks. 

As with all legislation, compliance with California’s labor laws is critical for security organizations since a failure to comply can lead to costly labor claims, stiff penalties, and lawsuits. So staying compliant with meal and rest breaks requirements is critical.  

Recent Lawsuits

Here are two examples of the consequences of not complying with California Work Break Laws, although there are some exceptions to the laws like for private-sector emergency workers who need to be available during their entire shift. 

In 2019, a resort located in Rancho Palos Verdes settled a class-action lawsuit with its hotel workers for $2.1 million. The Terranea Resort failed to provide hotel employees with rest and meal breaks, as well as numerous other violations under California labor law. 

Also in 2019, McDonald’s agreed to pay $26 million to settle a 6-year old lawsuit that alleged it violated wage and hour laws by not granting meal and rest breaks for 38,000 workers at its California restaurants. While McDonald’s didn’t admit culpability in the lawsuit, it did agree to ensure employees get adequate breaks.  

Advanced Break Management

To address the complexity of California work break laws, security companies should look for a security workforce management solution that includes Advanced Break Management. This allows supervisors and managers to implement break rules and automate break management to ensure that employees take the right breaks at the right time. It also ensures that you remain in compliance with the strictest labor legislation in your jurisdiction.   

A good rule of thumb here is to choose a solution that enables multiple meal and rest break rules to be created instantaneously, and alerts so security officers are always aware of breaks for best performance. Other important features include an overview of guard break schedules, simplified scheduling according to positions rather than individuals, and break reminders and overriding features for changes and exceptions.  

Advanced break management gives security organizations peace of mind by making it easier to comply with California’s ever-changing break rules and legislation – and reduce legal and financial risk – while simultaneously increasing workforce flexibility and guard productivity.

Debbie is an experienced writer with a demonstrated history of working in the security industry. She is based in Montreal, Canada, with TrackTik—a dynamic and cutting-edge tech company that sells cloud-based security workforce management software.

Debbie Howlett 
Content Specialist 
TrackTik 

debbie.howlett@tracktik.com
Twitter: @TrackTik  

 

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Kate

The Californian 2019 Q2 – ESSENTIAL CONTRACT TERMS FOR YOUR SECURITY SERVICES AGREEMENTS

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ESSENTIAL CONTRACT TERMS FOR YOUR SECURITY SERVICES AGREEMENTS

Barry A. Bradley, Esq., Bradley & Gmelich, CALSAGA Network Partner

While recently teaching CALSAGA’s Security University course on contracts, it became clear that many of your service contracts with your clients are often missing some vital essential terms.  Without going into too much detail in this limited space, examine your contract template and see if they contain each of the following:

  • General Statement of Duties (Scope) Are your duties clear and defined both as to location, post responsibilities, hours, expectations, and especially limitations? Are your officers to use force? Are they just required to observe and report?
  • Term of Contract When does your service agreement expire? Will it automatically renew? Is termination addressed?
  • Price and Payment Terms Are all service hours defined and invoicing defined?
  • Attorney’s Fees If a dispute arises between you and your client (for example, for non-payment), does the prevailing party have a right to recover its reasonable attorney’s fees?
  • Disclaimers Are you making promises you shouldn’t?
  • Indemnification This is perhaps one of the most vital areas of your agreement. Is it in your favor, or are you giving up the farm?
  • Insurance Requirements Are you providing appropriate insurance coverage? Are you required to name your client as an Additional Insured? Are there exclusions that might apply for which you might not have coverage?
  • How Disputes are Resolved? In the event of a legal dispute with your client, where and how will it be addressed?

These are just a few of the necessary provisions that should be addressed in any of your service contracts.  There are additional areas that can protect your business, but at a minimum, you should make sure you have these basics.

LESSON LEARNED:  We all know it is better to use your own contract than one that is drafted by your client. Your basic template can and should fully protect your business.  However, when you must use your client’s contract, you can always negotiate before you enter into the agreement and try to ensure that some of these essential provisions are there that will protect your business.

Contact us to assist you in reviewing your contract template, or any agreements you might be asked to sign.  (Once you sign it, it’s too late to change things.)

Barry A. Bradley is the Managing Partner of Bradley & Gmelich LLP located in Glendale, California, where he heads up the firm’s Private Security Team and oversees the Employment and Business Teams at the firm.  A former Deputy District Attorney, Barry’s practice concentrates on representing business owners in employment, business and licensing issues, as well as defending litigated cases involving negligent security, employment and business related issues.  The firm acts as general counsel for many security companies in California.  Barry is the Legal Advisor to CALSAGA.

He has been conferred an AV-Preeminent Peer Rating by Martindale Hubbell, the highest rating attainable, and has been named a Southern California Super Lawyer for the past 14 consecutive years in the area of Business Litigation.  Barry is also the recipient of CALSAGA’s Security Professional Lifetime Achievement Award. bbradley@bglawyers.com  818-243-5200.

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Kate

The Californian 2019 Q1 – HOW TO CUT OPERATING COSTS FOR SECURITY BUSINESSES

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HOW TO CUT OPERATING COSTS FOR SECURITY BUSINESSES

Mark Folmer, CPP, Msyl, TrackTik

When you run your own security business, there are several important investments that help you provide quality service to your clients such as training for security guards, uniforms and equipment. However, with modern management options, you can streamline your business, cut costs, deliver quality service and keep your security business profitable. Here’s how you can cut operating costs by 35% and increase profits for your security business:

Improve Service with Tracking and Data Analysis

Security companies live and die based on their ability to provide quality service to their clients. Tracking key field processes and using data analysis to improve your security performance is vital for lasting success in the security industry. By using software to track the location of security agents in real time, you’ll be better prepared to contact the nearest available operatives when additional support is needed. As you improve your team’s incident response time, client satisfaction will increase, allowing you to retain clients and gain valuable testimonials for attracting new business. Digital reporting software can also make it easier to analyze patrol and incident-related data. By matching tracking data with guard-uploaded incident pictures, video, and written comments in a digital database, it becomes significantly easier to review information so you can make informed decisions for streamlining your field operations.

Track Business Intelligence Data

Leveraging data isn’t just important for improving your team’s fieldwork. And while different security companies may value different KPIs (key performance indicators), there’s no denying that one of your top priorities should be to optimize operations and maximize your return on investment with each client. Investing in good business intelligence technology is essential for your success. With business intelligence tools and smart analytics, it becomes easier to identify common profitability pitfalls, such as inefficient employees, a high guard turnover rate, or client sites with costly overtime expenses. When your software can quickly match your accounting and scheduling data against your KPIs, it becomes easier to identify areas where change is needed. With business intelligence data at your fingertips, you can gain a better understanding of your business’s direct costs, anticipate staffing and coverage needs, and identify trends that could be hurting your profitability. With better data, you can make smarter budgeting decisions for the future.

Save Time by Streamlining Back Office Administration

Serious security business entails a large amount of documentation in the handling of your security agent workforce. That means a lot of time spent on administration and office work, covering everything from scheduling to payroll. If you can streamline these necessary processes, your team can spend less time on mundane day-to-day tasks and concentrate their efforts on delivering quality security service. When computer programs calculate, you gain efficient, controlled data that is automatically tracked and reported. Alternatively, modern scheduling software allows you to input important data regarding client needs, guard availability and certifications, reduce unbillable overtime, avoid costly errors, and other factors to automatically generate future schedules that match the right guards to the right clients, at the right site. Automating these and other similar processes will save you time and money by helping you avoid human error in schedules, payroll reports, and other documents. In addition, these reports will give you greater understanding and control over your office operations, helping you identify ways to allocate funds towards optimizing security operations. And you’ll be closer to your goals of faster, better service.

Go Paperless!

Do you have stacks of paper piling up in your office? Incident reports, contracts, invoices, schedules, and other paper documents can add up quickly. Not only do the costs of paper and other printing supplies add up over time; you’ve likely experienced the workflow issues of misplaced or lost documentation at least once (per week…). Modern back office management software allows you to replace paper reporting by digitally distributing important information to your clients, suppliers, and employees. These streamlined reports will ensure that vital information is never lost in a stack of papers so you can keep your clients happy–which is ultimately your best way to stay profitable. With digital reporting software, important information can be sent to clients and guards alike via email, text message, or push notification, creating a digital dialogue that is easily tracked and managed. As you digitally track your field operations, automate select tasks, and use intelligent data, you’ll be better equipped than ever to improve your security business operations and increase your profitability.

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Kate

THE CALIFORNIAN 2018 Q3 – GOING TO WORK FOR THE BUYER OF YOUR SECURITY COMPANY

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GOING TO WORK FOR THE BUYER OF YOUR SECURITY COMPANY

Harold A. Laufer, Esq., Bradley & Gmelich, CALSAGA Network Partner

Congratulations! You have an offer to sell your security company to a much larger operation. Due to your success, they want you to come and work for them, maybe to even continue to run your business or to manage an even larger security entity. They are also talking about giving you equity in the big company with potential bonuses.

Hmmm.  What should you be thinking of when evaluating how good a deal this really is, and whether you should stay on with the new company, or just take your money and head to the golf course?

For purposes of this article, we’re not going to talk about how to structure the deal – whether it should be a stock sale or an asset transaction. And we’re not going to discuss your tax issues. These are all really important, but instead we are focusing on the potential issues involved when you not only sell your business but go to work for the buyer of your security company.  Ask yourself how you will answer all of the questions below.

Who’s The Boss?

Let’s start with your employment contract. You’re used to running the show. Now you have a boss. The first question is “are you OK with that”? – or even if you’re not sure – are you receiving enough money to make it alright? Who are you reporting to? What do you know about the man or woman you’ll be reporting to? Do they seem reasonable? Under what circumstances can you be terminated? Because if the job isn’t all that secure, and you’re counting on the paycheck to get the deal worth what you’d like to make, you may be better off negotiating the sale price harder now rather than hoping things will work out later.

How much control will you have? Can you run things as you see fit, or if you don’t have a completely free hand, is it clear what the limits to your authority will be? Are you OK with the answer to that question? If part of your deal involves performance bonuses or an earn-out, are the targets realistic and achievable? And even if they are, is it confirmed the buyer will provide you with a sufficient budget and with enough operating discretion to actually hit your targets, or are the bonuses really illusory? It may sound great but in the real world will it actually happen?

How Much Longer Can I Take This? 

The next question is how long do you want to work as an employee, even if you’re an officer of the company making a lot of money? Does the amount of time you are required to stay on match how long you actually want to remain? Is it too long or not long enough to be worthwhile? We’ll talk more about this in a little while, but if you’re being offered equity, does your employment term align with how long it takes for your stock to fully vest?   (Full vesting means you can’t forfeit or lose the stock…it’s yours.) There’s a major risk if your employment can be terminated before your stock is fully vested and earned.

Am I Getting What They Say I’m Getting?

Let’s look at the equity side. How much of the buyer’s stock is on the table? Is it enough to be meaningful? Is it fair? Is it stock in the overall company or are you getting equity in a small little segregated piece of the business? Is it being given to you as part of the sale? Or is it extra in exchange for your staying with the business? If you have to earn it, what does that mean? Is it dependent on hitting certain targets? Is it dependent on your remaining with the company for a certain period of time? If you exceed your targets, can you get more stock?  (This is important because if you miss the targets you may lose stock or at least not earn some of it.) Are you getting stock options, which mean you have to buy the stock, albeit at a discount to fair market value, at the time you purchase your shares? Is your deal part of what we call a “roll-up.” This means your buyer is purchasing other companies like yours and wants to get a lot bigger. If it’s a roll-up, you should find out that your deal is equivalent to what other sellers are getting and is everyone getting a similar amount of stock?  (You might be receiving 10,000 shares, but if other similar sized companies are receiving 90,000 shares, this is not equitable for you.)  Is everyone receiving a similar compensation package. When a roll-up is in process it gives you an opportunity to talk to other owners and to get a better feel for what a good deal looks like.

If you earn or otherwise obtain all of your stock, who can you sell it to? What are your options for monetizing it? Unless you figure an even bigger buyer is coming along in the foreseeable future, you should consider making the buyer obligated to buy you out when you leave the company or at least at some mutually agreeable time. If the goal is to cash the stock in, you have to come up with a method of determining what the stock is worth. You should do that when you negotiate your employment deal and not leave it for later. Without a way to sell the stock, your stock certificates are just pieces of paper.

What About My Company’s Assets?

Does your security company have real estate, vehicles and/or equipment? Are they part of the sale or will you retain some or all of it? Is the buyer willing to lease these assets from you? This can be another revenue source for you and goes into figuring the total value of your deal.

Putting It All Together

When you decide to stay with the buyer of your security company there are complicated and interwoven issues about your compensation, your equity, your potential upside and possible side deals for assets that aren’t part of the overall package. Because these affect each other, making a mistake in any one of them can substantially change what your deal is worth. And most importantly, you have to think about why you want to stay on? Is it worth it financially? Is it secure? What is the realistic upside?  Are you going to be happy working – and working for someone else after years of doing things your way and being you own boss? It’s different, to say the least.

Bring your attorneys into the picture at the conceptual stage, not just to look over a final contract before you sign.  As you know, Bradley & Gmelich LLP works with sellers (and buyers) of security companies every day. We can help you understand the pros and cons of working for the buyer of your security company.

 

Harold A. Laufer is a highly experienced corporate transactional lawyer, and has been Of Counsel with Bradley & Gmelich LLP for over two years. He spent much of his career practicing corporate law as an equity partner at a major Midwest law firm, where he headed the Mergers and Acquisitions Practice Group. He has represented companies of all sizes, from start-ups to Fortune 500 companies, along with their owners and managers, as a Trusted Advisor. Mr. Laufer has handled a wide variety of transactions for corporate clients, with experience in all aspects of a business’ life cycle, starting with deal structuring and entity formation, and continuing through Founder’s documentation, initial HR, IP, rights and licensing issues, financing, growth, corporate governance and eventually ending in liquidity events and exits.

Mr. Laufer has published and lectured on mergers and acquisitions, negotiation strategies and skills, and corporate governance. He has taught graduate level business courses on family offices, contract drafting and enforcement, and entrepreneurship. He is affiliated with UCLA’s Anderson’s MBA and entrepreneurial programs.  hlaufer@bglawyers.com 818-243-5200.

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