Firewatch Feature

Firewatch March 2022
The Recurring Revenue Model of Fire Protection

by Drew Slocum

It has been an interesting last few years in the world of fire protection and security. Many other industries throughout the globe have been severely impacted by the pandemic and economic conditions. Fire and life safety did not see much of a downtick, however. Service providers have hit record numbers. Manufacturers, even with slow innovation, have seen nice growth. Authorities Having Jurisdiction are pushing better compliance in their municipalities to keep buildings and people safe.

Mergers and acquisitions have also hit an all-time high. According to Dave Pelton and John Mackey on The Mackey Group blog, "As the fire protection industry emerged from the recession, the FLS [fire protection and life safety] companies standing tall were the ones with a strong ITM [inspection, testing, and maintenance] service-focused book of business." Service providers, manufacturers, and technology providers are all being valued higher than ever. The stability of recurring revenue as a business model is attractive to investors, and software technology plays a big part in helping manage this end of the business.
 
Jurisdictional Compliance
The adoption and enforcement of NFPA, UL, and ICC codes and standards pushes forward a jurisdiction’s fire protection compliance standards. However, there is a lag between the three years NFPA codes update and the five or more years it takes for a jurisdiction to adopt the new code language into their own fire and building codes. AHJs are becoming more informed about the latest in codes and standards with the implementation of third party compliance platforms like The Compliance Engine. These software platforms have been around for more than ten years but in the last few years have been seeing increased integration into more and more towns and cities. Because of this information, the AHJ can now make sure building owners are compliant while fixing critical deficiencies and pushing more service revenue to fire protection service providers.

Fire protection service providers must understand the process and how to take advantage of the service opportunity in front of them. This opportunity does not come without some costs, however. Data management and uploading are the hidden costs to these third party systems. Currently, fire alarm, sprinkler, and suppression systems are managed through third party systems for some municipalities, but recently we have seen more third party systems reviewing fire extinguishers and hood inspections.

How does a fire protection company manage new workflows set forth by the AHJ? One issue that has cropped up with AHJ compliance is certain discrepancies on some jurisdictional forms. Municipalities can dictate what their fire protection inspections entail as well as their frequency. These don't always line up precisely with what NFPA or other standards require. This heavily complicates things for the fire protection service provider because the building owner often separately needs to meet certain NFPA, FM, or Joint Commission inspection standards for building insurance purposes.

​How does a fire protection company stay up-to-date on jurisdictional, national, or other AHJ codes?
 
Fire Protection Has a Niche Workflow
Creating an optimized workflow for your recurring fire protection revenue is a must these days. Inspections drive compliance, but they also drive deficiency sales. Deficiencies are reported to the AHJ and building owner via a report which can be turned into a proposal to resolve the deficiencies for the building. Once the work is booked, getting accurate material out to technicians on time is essential. Invoicing and payment processing must happen quickly to make sure accounts receivables stay in check. Days Sales Outstanding (DSO) for top fire protection performers are 45 or more days. How does a fire protection company optimize its internal workflows to generate the highest return on service repair?

Industry-specific software platforms handle many of the questions asked above. Handling the third party systems can be a burden, but deficiency and inspection management can help ease the pain. Jurisdictional compliance seems to be growing throughout the U.S. and Canada. A company cannot easily keep up with these different requirements without hiring specific resources to ensure this. Fire protection has a niche workflow because we are so tied to the fire codes, therefore your software and process should be niche as well.

All in all, the fire protection industry is a great spot to be these days. It has proved to be a decent investment for recurring revenue businesses. Because compliance never goes backward and AHJs are becoming savvier with technology, our businesses continue to drive forward. Yes, there are problems such as the labor shortage, the supply chain, and other economic issues, but some of this is cyclical or an aftereffect of the pandemic.  If we stick to our strengths, keep up with the codes, and manage our workflows, the future will be bright as we adapt.

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Drew Slocum is the Chief Strategy Officer/Co-Founder of Inspect Point in Troy, New York. Learn more about the recurring revenue model and fire protection workflows at his session at the NAFED 2022 conferences.

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This article is from the March 2022 issue of NAFED's quarterly magazine Firewatch.