SD&I Fast50 No. 5: Growth is No Mistake

It is not surprising to industry observers that Netronix Integration Inc. is one of the fastest growing value-added resellers in the security business — after all, this year’s No. 5 ranking in SD&I’s Fast50 follows a No. 7 showing last year and a No. 11 showing the year before that. What is surprising is that the company happened almost by fortuitous accident.

“No one plans on becoming a security VAR,” says Craig Jarrett, president of Netronix. “We needed a job…they needed people.” 

While that may be a bit tongue-in-cheek, there is truth to the statement. Previous to Netronix, Jarrett and Steve Piechota, vice president and CFO, worked together for 10 years, growing a security division within a voice and data company that was eventually sold to a capital venture firm.

“We both moved on to other companies for a short period of time but soon realized that together we could re-create what we had done for the voice and data company and have full control of our destiny,” Jarrett says. “It was not easy to decide to take that leap of faith, but now our only regret is that we didn’t do it much sooner.”

A Tradition of Growth

There is no question about the basis of Netronix’s success, with two California offices; two Texas locations; and even a branch in London, England. “Netronix partners with our clients to decide the best choices in security for the long run,” Jarrett says.

The company is 100-percent commercial with a focus on general business clients, the education sector, hospitals and healthcare, banking and financial, and aviation and transportation. Throughout most of Netronix’s short history, the company has achieved growth of between 30 percent and 50 percent annually, Piechota says.

“2014 was our largest growth year, but it came pretty evenly throughout our offices and among all of our customers,” Piechota says. “There was not one single job or customer that has solely contributed to our growth.”

Of course, with rapid growth often come out-of-control overhead expenses. The management team at Netronix was well aware of the potential danger and worked to manage overhead. “This is one area where we really excel,” Piechota says, noting that it was even more important in the early years than it is today. “This was a large part of our success. This takes constant evaluation and re-evaluation of people and processes throughout the organization,” he says. 

Vertical Reach

The company’s top three vertical markets are corporate, education and healthcare. “Our mainstay has always been Corporate 1000 customers, and I am sure will remain that way for at least the next five years,” Jarrett says.

Jarrett notes that corporate customers tend to provide the greatest amount of revenue per relationship, and that is certainly beneficial to any VAR. “We prefer having fewer customers so that we can focus on providing the best service to those we do business with,” Jarrett says.

Over the past several years, Netronix has seen a decline in revenues from the healthcare sector, at least in northern California; however, Jarrett says, “We now do more education work than ever before.”

This fits the company’s overall strategy. “We believe that education will continue to grow with the reduced cost of wireless systems that are quickly coming to market,” Jarrett says, adding that there are also several markets that, in the past, they would not have considered pursuing that are starting to present themselves as very fast growth markets. Most of that potential growth is due to the wireless products being ready to deploy.

No matter how bright the potential cash flow situation is with any vertical market, Jarrett finds they all have various challenges. “We take the challenges as they come and always find a way to overcome them,” he says. Wireless is one such hill to climb.

Working Wireless

Despite its challenges, wireless promises to be one of the more rewarding challenges Netronix will deal with in the coming years. Jarrett leaves no doubt that the company is embracing the rising popularity and utility of wireless in the security market. “I see wireless and no-wire access control solutions taking over the normal day-to-day access control industry in the near future,” Jarrett predicts.

He notes that all aspects of the technology are advancing quickly and gaining popularity even faster. “We see cybersecurity and wireless/offline lock hardware as growth areas for our business,” Jarrett says.

The Recruiting Challenge

Finding good talent and getting on the same page with uneducated customers are daily challenges. “I believe our best way to recruit new talent is to remain as an independent dealer and not part of a large national,” Jarrett says.

The company’s principals agree that their ability to hire good people will be the key to their continued success. They look for employees who can make independent decisions that follow the company’s core focus and philosophy. “I believe we have done a good job of hiring people who had many talents and could fill various positions within the company as we grew,” Piechota says.

“We often would hire someone to fill one position with our knowledge and their knowledge that within a few months their job would change to something that made more sense for the long term,” Jarrett says. “We always hire the best talent we can and then shift them when it makes sense.” But simply knowing about wireless or alarms is not enough.

“We hire people who are team players and treat their fellow employees and our customers with respect and understand what ultimately is the most important things our customers want,” Jarrett continues.

Nine years ago, Jarrett and Piechota started with just four people. From day one, they focused on pursuing large corporate customers which came along pretty quickly. Growth followed. “By the end of the first year, we were at seven employees,” Piechota recalls.

As time passed, it became more difficult to find quality techs and engineers. Jarrett says this is due to the overall security market’s growth. “Just as we did, most people fall into this field by accident,” he muses. “No one seems to go to career day in high school and decide to become a security systems technician.” 

Netronix tends to attract employees rather than via self-promotion to bring in techs from the competition, Jarrett says. “We have a reputation for treating our employees fairly and giving them the tools to be successful. It’s amazing how well that attraction has worked,” he adds. 

They also work closely with the union to bring in quality apprentices. “When we get a good one, we grow them organically; when we get a not so good one, we send them back to the hall,” he says.

No matter the situation, employee training can be a challenge. The main hurdle is the amount of time involved away from the office. “Finding well-trained people hasn’t been too terribly tough in a bad economy, but now that all of our competitors are getting busy, it is starting to get harder to find employees that have experience,” Jarrett says.

Their experience has been to hire someone who has a good attitude and is fairly mechanically minded. “When a new apprentice or installer starts, we partner the new employee with several different teams over the first year so we make sure they get a chance to learn from more than just a small group,” Jarrett says. Moving a new worker around to several teams also gives management broad feedback on the new employee’s ability, thus helping managers make the decision as to whether the newcomer has potential to be part of the long-term team.  

The final outcome is the company retains good people who treat Netronix as their own. “It gives me great pleasure knowing that we have built a company that our employees work so hard for,” Jarrett says. “In the end, it is our employees that help separate us from our competition.”

Referrals Work

Having fewer customers means Netronix’s total book of business is smaller; however, that enables the company to tailor each of its offerings to the individual customer’s expectations. “When your customers are happy they tell others, our customers become our best sales staff,” Piechota says.

Word of mouth is Netronix’s most effective marketing tool for attracting new customers. Jarrett says they rely on referrals from existing clients as well as industry partners. “The manufacturers and consultants whom we have worked for in the past become our best marketing tool,” he says.

While every company changes as it grows, Jarrett does not see radical change at Netronix over the next five years. “At the core I don’t think Netronix will be much different,” he says. However, he projects it will continue to have a solid place in the Fast 50. “I anticipate we will be double our current size. We may have another location or two. And we still are looking for the next technology opportunity to shift to so that we can be a step ahead of our competition.”

Both Jarrett and Piechota are always looking for expansion opportunities geographically as well. While those target firms remain a company secret, they do have several areas currently in planning. They will port their successful formula to the new operation. “Until we believe there is a need to change our philosophy we plan to stick to what has been working,” Jarrett says.

Curt Harler is a technology writer and regular contributor to SD&I magazine. Reach him at [email protected].

Data Point

Company name: Netronix Integration, Inc.

Website: www.netronixint.com

HQ location: San Jose, CA

Principals: Craig Jarrett, president; Steve Piechota, vice president and CFO

Year founded: 2007

Number of employees: 128

Residential/Commercial split: 100% commercial

Top technologies:  Netronix leads with access control, both standalone and integrated video, as well as integrated intercom systems.