Growing a security business gets harder when the financial side of the company can’t keep up.
In this episode of Entry & Exit, Stephen Olmon and Collin Trimble break down why Alarm Masters hired a Director of Finance and the lessons they learned as the business grew. They share their journey from handling the books themselves, to outsourced bookkeeping, to building the financial leadership needed to support acquisitions, debt, budgeting, and long-term growth.
In this episode:
→ When a business needs financial leadership
→ The difference between accounting and finance
→ Moving from cash to accrual accounting
→ Financial mistakes they made while scaling
→ Why acquisitions require stronger financials
→ Budgeting, forecasting, and managing cash flow
→ Managing for growth vs. managing for earnings
→ What to look for when hiring a finance leader
Connect:
Stephen Olmon — https://x.com/stephenolmon
Collin Trimble — https://x.com/TXAlarmGuy
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I could cry. Yeah, me too. I'm getting emotional.
Because we hired an absolute killer director of finance. Most security businesses that I know don't have anybody doing finance.
We are advocating for financial leadership in the business outside of the owner.
In the very beginning, God created the heavens and the earth.
Yeah. Yes. There's some dinosaurs, potentially depends on your perspective on all that. 6,000 years, who knows? It's crazy out there. Sometimes you just can't learn something until you get punched in the face by it. You have to maybe relearn it as your business changes and grows. We had to shift from cash to accrual. We should talk specifically about that. In fact, like I feel like I am talking about that right now, Colin, if you were listening. So matter, matter of fact, wow. Welcome to Entry and Exit. My name is Steven, and I also have my very handsome co-host and business partner, Colin Trimble, with me. We are wearing the same hat today, and we look like we're a part of the Las Vegas Raiders. Um, if you're not looking at us, you should be. Uh, join us on YouTube. Like, subscribe, comment, share it with your mom. And uh today, we are telling you about a new hire that we made. Yep. Very key hire. Quite literally just made. Literally just made. Hot off the press. Yeah. And I could cry.
Yeah.
Me too. I might, I'm getting I'm getting emotional. He's getting emotional. Because we hired a absolute killer director of finance. Yeah. And this is one of those hires that we could have used day one. Yeah. We absolutely need for our future and where we're headed. And it's not necessarily the most comfortable thing in the world for multiple reasons. We'll talk about that. But um, we are advocating for financial leadership in the business outside of the owner. That is that is the summary, and we'll talk about why.
So and I think we should talk through our journey of like managing accounting and finance and like why and and also like at what stage as a business do you think give them a sense of like revenue stage and life cycle of accounting? So, all that I think is important.
In the very beginning, um we God created the heavens and the earth. Yeah, yes. Um, there's some dinosaurs potentially, depends on your perspective on all that. New or six thousand years ago. It's crazy out there. Um so uh we uh uh originally were like we're gonna do it ourselves, and then quickly you're like, oh, we need some help. Um we need to be able to do that.
Let's find the cheapest bookkeeper we can find. That was our first one.
A very affordable bookkeeper um that didn't even live in the continental United States. Um can be fine. In this case, it wasn't, had some challenges. And for where we were being, you know, two, three million dollars revenue, yeah. It it kind of made sense, it was kind of justifiable, but the problem was we were not really um didn't have strong finance backgrounds, and so what we thought was okay and what we thought was like covered, and all the bases were covered, and everything was done just perfectly, yeah wasn't. And so that created some future pain for ourselves by trying to solve this gap too affordably and a little too willy-nilly, and that was just some of our own like maturation that had to occur. And sometimes you just can't learn something until you get punched in the face by it.
Well, and and honestly, in terms of um impact, the only reason it hurt us was because we were growing and like trying to do complex financial structuring and like to get to be able to fund deals, to fund acquisitions. And so in order to like raise money or go get senior debt, your financials have to be mature. But if you're not doing those things, which again, we're gonna talk through some of that, just being on cash accounting and having a bookkeeper do some of your transaction classifications is not that like is not that complex. And so that's like the accounting side. The problem is, I would argue most security businesses that I know don't have anybody doing finance. So, finance is the art of taking your accounting and turning it into an actionable insight to help you figure out how to grow. And whatever that means for you, I'm gonna assume that most people listening to this podcast are like, I want to grow my business. And so that's great. You should have finance that's aligned with that goal and what that looks like. There's also people that are like, I just want to make the most amount of money I can take home every year. There's also a finance approach to that, but there's a difference between accounting and finance. And I think a lot of folks are like, well, I've got an outsource bookkeeper, they do my finance. It's like, no, no, no. They're doing your accounting and they're providing you some financial reporting in terms of how that can help you with goal setting and FPA, which is just a fancy word for saying planning and budgeting. Yep, that's a whole separate function. Yep. And and and again, so I think phase one of our journey, we did it ourselves. Phase two hired a very inexpensive bookkeeper, phase three.
Well, we had a phase 2.5. We replaced said bookkeeper with a team that was better, yeah, um, but still was imperfect. And um as our business grew and changed, and we had to we we raised money, uh, we had to um we had to shift from cash to accrual.
Well, and we just we yeah, and at some point we should we should talk specifically about that.
Yeah, we can. Um, and uh in fact, like I feel like I am talking about that right now, Colin, if you were listening. So matter matter of fact, wow, wowzers over there. I felt like the change we made was a good one. And yeah, we did not know what we didn't know again. It happened all over again, and that's a good thing to remember is like this isn't about security companies owning a business, even outside of you know, kind of service, B2B, commercial, like anything, like you might learn something at one point in your business. You have to maybe relearn it as your business changes and grows and um kind of becomes a different shape and size, and it's like so we had to kind of relearn all over again that the way we were doing things maybe wasn't perfect, and right there were some issues and some things that we couldn't even blame anyone else for that we didn't think enough about or didn't know to think about when it was happening, and so that's another thing is like just pause like when you're going through a full shift in your business of anything major, like go find somebody way ahead of you and be like, Hey, have you gone through this? What are some things I should look out for? Um, we're happy to be that for you. Like, if you want to reach out, um, but man, we um we just underappreciated how challenging like shift to accrual was and I don't think as we started to really grow in project and install size, like we didn't fully appreciate the complexities of project finance, and so we got to a place where um largely predicated on some of the complexities of accrual accounting that we we got into, you know, we we made some mistakes that we had to resolve, and ultimately we chose to have kind of a new reset again with a external accounting team that was far more well-versed in exactly where we are, and frankly, uh like multiple steps ahead typically with custom with their clients of where we are, and so that that has been really helpful. But as we're continuing to grow, we've realized we also need like internal talent outside of Colin and myself to uh be the liaison for all of that, and it's not just financials, it's and you can talk about this, it's also technology tied to finance. That's right.
Yeah. Well, and I think a lot of what we just painted was this journey of our our accounting journey. And again, I would argue that we had no finance, uh, we had no financial insights. And and I think a couple things that's really important. If you're listening to this call, I think there's a couple truths you need to hear. If you're listening to this call, if you're listening to this podcast, I guess it could be a call. If you're listening to this podcast, there's a couple truths you need to hear. If you're growing a business, particularly in the security or fire alarm space, it is extraordinarily difficult. I'm not gonna say impossible because people have done it, but maybe impossible if you start now to take a business from four million of top line revenue to we'll just say 50 to 75 million of top line revenue exclusively through organic, meaning just normal sales, day-to-day sales and marketing. Not impossible, but maybe impossible. And the people that have done it got a way earlier head start and were doing some things different back then. If you are going to try to grow and you have a goal to exit your business and you want to get to 10, 15, 20, 25 million dollars of top line revenue, you're going to have to do acquisitions. And if you're gonna do acquisitions, you are probably not gonna be able to do it exclusively off your balance sheet. You could definitely that will help, and that will help you delever the amount of amount of debt or equity you got to go raise, but you're gonna have to get comfortable with raising money or taking on some senior level debt from a bank. Or both. Or both. And if you're gonna do that, your finances have to, you're sorry, your accounting has to be really tight, and you have to have a really good understanding of what the goalposts are, right? And what I mean by that is both from an equity raise, even if it's a minority investment, a family office, a friend or family, there's gonna be some covenants or some things they specifically want the business to be within, whether that's an eBITA requirement, a nutrition requirement. And then both from the bank has a whole stack of requirements that they're gonna want you to have. Those requirements are very detailed and are very hard to find. And you basically have to reorient your whole business to make sure you are managing your team KPIs are managing to that statistic. Just one very cut and dry example is if you're raising senior debt, you have to watch your attrition for your recurring revenue. Well, the bank doesn't fundamentally care about how much RMR you're adding. What they care about is how much you're losing. So you can't grow, outgrow your attrition problem. That's not the way to do it. You have to actually minimize your attrition. So you have to have KPIs in place and a forecast in place to be able to, hey, know where you are today, but also how are you going to reduce it in the future. And that's another place that a director of finance really helps is tracking and keeping track of all these covenants, both for equity investors and financial investors. And you, it's not just tracking it, it also plays a part into how are you budgeting for the next year? Well, if we really, if we're at, you know, if we're at 7% attrition and we need to be at below 7% next year for our bank, I'm just using bad examples, then we need to invest some dollars and time into solving for our problem to stay below 5%. And so how are we gonna do that? Well, then we got to build that into our budget. And then we need to make sure that we're tracking against that budget. Are we over and under in some areas? And how do we smooth that out? And like all of that is is really important. So, from a tactical perspective, if you're if you want to grow, you're gonna have to acquire. If you want to acquire, you've got to either raise debt, you're gonna raise equity, or both. And then if you want to grow organically on top of that, which we talk about all the time, you have to know where the goalposts are. And so you gotta say, hey, I want to hire a salesperson. Okay, well, how much can you pay that salesperson? And then, and like what should the commission structure be? Well, that's all dictated by finance. And how much money can you invest in marketing for leads and AI and software and international employees? Like, we talk a lot about what purchases and investments you should make. We're not making these blindly. Like, we're taking our accounting, we're creating a budget for the year, and we're either over or under the budget and we're making investments based on that budget.
Yeah, which and and I think we're about to have a whole nother level of sophistication on um from a budgeting perspective and forecasting and um just like uh even from like a cash flow management perspective, like there's just levels to it, right? Yeah, and so um I think the lesson I've learned is you have to keep learning and growing and acknowledging maybe areas where you're weak or have failed, and um have to like take action on those because if you don't fix those things, you're it you're gonna kind of inhibit your own growth. And so for us, hiring like a really high quality director of finance um has has been something we've been trying to do for a few months now. And uh we're really excited about it because we feel like it's an important piece in that next big step of maturation.
Fundamentally, I want to hold all the owners that are listening to this call accountable to say you've either got to manage for growth or earnings, and you can't do both. And so if you're managing for earnings, uh even that that could mean I'm managing for dollars you want to put in your own pocket, right? Like you're like, well, I want to make a million dollars a year, and I only make you know a million dollars in EBITDA. It's gonna be really hard to grow if you do those two things. Like, yeah, you've got to make some decisions, and it doesn't have to be that way forever. Maybe you say, I'm gonna manage for growth for five years, and then after that, I'm gonna manage for earnings. Um, in order to make those decisions and be able to do them well, you need to invest in finance. You need to invest in a leader that can help you budget and figure out how to go where, how, where to how to get to where you want to go. And the other thing I'll just add, and I want to close out on this, is like that person should be additive to the strategic direction of your business. If you're hiring a financial person that is just that they can only think inside it's all they can think inside their box, I think you're probably making the wrong hire initially, and they're probably less expensive. You want to find somebody that's gonna help give you an outside perspective and hold you as an owner or an executive team accountable to, hey guys, I know what your goals are. I'm in every single leadership meeting, I'm in your board meetings, I'm in the departmental meetings, I know where you want to go. You are you're investing in the wrong places, or you're underspending in one area, or you're overspending in another area, and having that kind of accountability is really important. That's all I'm gonna say about that.
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