After leveraging a direct-to-home business model to become of one of the fastest growing residential security companies in the country, NorthStar Home recently announced it is launching an Authorized Affiliate Funding Program as a way to bring independent alarm dealers into the fold and continue to grow the company’s nationwide footprint.
Founded in 2000 by Jason Christensen, NorthStar has embraced the emergence of smart home technology that has seen the alarm industry transition from the installation and monitoring of simple burglar and fire systems to providing whole home automation solutions. A combination of record sales in recent years combined with low customer attrition rates resulted in NorthStar being the top-ranked company in the 2016 SD&I Fast50 which annually recognizes the fastest growing security integrators and dealers in North America.
So, why would a company that has already achieved record success with a proven business model choose to also go to market through the traditional dealer sales channel? The answer, says Nick Perry, NorthStar’s new vice president of business development, is to give the company more of a permanent physical presence in the markets they serve – which he expects will help increase the company’s sales in those areas.
“For the last 17 years, NorthStar has had a direct-to-home business model, which has brought the company into just about every major market in the U.S,” says Perry, who previously oversaw dealer sales and development at Security Networks. “The dealer program is designed to complement that business in a number of ways. NorthStar’s traditional model is more of a summer (door-to-door) program where we don’t have a permanent presence in our markets. The dealers are going to act as an anchor or permanent presence in those markets and allow us to generate sales year round and also help us with service needs and other efficiencies in those markets.”
Perry says the cash infusion that NorthStar has received in recent years from its investors – namely Goldman Sachs and The Beekman Group – has enabled them to expand in a number of ways. “The dealer program was a natural fit for us to take advantage of an underserved market and have a scalable, more predictable sales channel that we felt like there was a big need for,” he says.
Benefits for Dealers
Perry says the “economics” of the NorthStar Affiliate Funding Program will be competitive with similar dealer programs in the industry in terms of both upfront pay and recurring revenue. Additionally, according to Perry, NorthStar will have a residual program to share a portion of the recurring revenue with dealers on a monthly basis; and there will also be an equity component that will enable them to benefit from financial transactions that result in a change of control of the company.
“For example, when our current private equity group exits the business and most likely a new private equity group comes in, our affiliates are going to have a stake in the success of the revenue sharing. Half of the revenue sharing at that point is going to be purchased and they will get a nice check, so it is a way for us to all be aligned and share in the success of the overall business, which is unique to our program,” Perry explains.
Also, because NorthStar already has extensive experience selling and installing alarm systems through its direct-to-consumer business, Perry says the company has a better understanding of what its affiliates are doing on a day-to-day basis and they have developed tools to help them with the sales and installation process.
Balancing Business Models
While it may seem to counterproductive to have both a direct sales and dealer channel model working in tandem with one another, Perry says they will have affiliates in areas where they don’t have direct sales teams and vice versa. “We have very defined rules of engagement to avoid any conflicts and we feel like it is a benefit,” he says. “There is really something for everybody at NorthStar now – it is a good place to get in on the ground floor as a sales rep or manager; and there is room for growth and opportunities for full-service, independent alarm companies as well.”
Perry believes there has been a disconnect between alarm companies and their dealer programs in the past – in that the alarm company simply served as a bank to its dealers and truly did not understand the challenges they faced in the field – which is not the case with NorthStar.
“Traditionally, dealer programs are banking companies – they are an auditing company and aggregator, and they have a banking relationship (with dealers). In most cases, they have never turned a screwdriver on their own,” Perry says. “We bring a completely different perspective to that, and it is something I think independent companies can relate with.”
To learn more about NorthStar’s affiliate funding program, contact Mr. Perry at (888) 832-9332 or [email protected].
About the Author:
Joel Griffin is the Editor-in-Chief of SecurityInfoWatch.com and a veteran security journalist. You can reach him at [email protected].
