Re: Value of monitoring Contracts?

["R.H.Campbell" <rh.campbell@xxxxxxxxxxxxx>]

Well, since that sounds like an invitation to post, I will....))

Long term contracts are one part of the process of determining a companies
net worth for the purpose of selling or buying. RMR locked into a long term
contract does build equity in an alarmco's business, and depending upon the
buyer, can be one of the most important things relating to the companie's
value for resale. However, with buyers and banks becoming more prudent in
lending money to buyers based on the worth of the company, it is far from
that cut and dry anymore !!

Any buyer doing "due diligence" to assess the worth of the business will
look at far more than that. I'll summarize some of the more salient points
below:

1- The companies track record as far as losing customers (called "attrition
rate") is important. All companies lose clients through people moving, but
bad companies lose far more than their share. Companies who specialize in
the "free systems" also seem to lose far more than their share, perhaps
because of the "el cheapo" nature of many clients who shop this way.

2- Buyers look for companies with the minimum number of types of panels in
service. A proliferation of different alarm panel types will increase
service costs for the buying company.

3- Buyers like all panels to be "uploadable" which saves service costs over
time.

4- The monthly rate you charge will have an affect on the ultimate purchase
price, since higher rates bring in more revenue.

5- The companies reputation in the marketplace is very important. Happy
clients stay with a company with or without long term contracts and this
loyalty can be transferable to the new buyer. However, much of that
"loyalty" can disappear depending upon how the buyer handles the first year
of ownership. If the buyer gets too greedy and trys to change things too
much, customers will leave (contract or not), and this loss will usually
reflect on a lower final payment price for the company. Most buyers try to
lever in a "holdback" clause, to ensure that any losses through their
stupidity comes out of your pocket.

6-


"Jim" <alarminex@xxxxxxx> wrote in message
news:1125374120.646605.13240@xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
>
> James wrote:
>> If I am thinking correctly your saying it will take me 2.5 years to break
>> even?    Wouldnt you need a 5 year contract to make it worth your time?
>> He
>> only does 3 or 4 installs a year so it wouldnt break the bank.   But at
>> the
>> same time we wont gain much either...
>>
>> James
>>
>
> You can contact Bob Campbell in this group. He can tell you all about
> long term contracts and how it affects the worth of the accounts you
> are buying.
>