Re: Account worth

[tourman <robercampbell@xxxxxxxxx>]

On May 11, 4:21 pm, "A.J." <j_re_pair...@xxxxxxxxx> wrote:
> How many multiple  can one get per account with no contract usually ?
>
> Thanks !

RHC: This is a very good question and one with a host of variables.
Since I have no long term contracts on my account base, it is one I
have had to deal with. With or without a long term commitment,
competent buyers will always insist on doing what is called "due
diligence" on your account base to determine a variety of things that
have a large bearing on the eventual sale price.  It helps if the
buyer has knowledge of , or can find out, things like....
1-Your reputation in the industry for good installations,
2-Your actual attrition rate year over year,
3- How many different types of panels you install in your business
(the fewer the better), and how modern they are
4- Whether or not they are "on line"
5- The state of paper documentation you have on each of your accounts
that you can hand over to them,
6- How long the majority of your accounts have remained monitored,
7- The price of your monitoring vis a vis those of your competitors
(since if you are too high, there is nothing to hold them if less
expensive competitors come knocking)
8 - The terms of your warranty service agreement with your clients
(what's covered and what isn't)
9- How much work there is to swing over your accounts to the buyers
station (if you're already on their station, it's only paperwork)
10- Very important; whether or not you intend to remain part of the
company upfront for a period of time (most small businesses depend
heavily upon the goodwill generated by the original owner for their
continued good health ),  or whether you wish to totally bail out !!

Another big point is how you intend to "sell". With some large company
buyers you can sell the "equity" and still stay in business with them
as a partner, continuing to sell services which you then turn over to
the buyer for an upfront price. If everything is set up correctly, you
can get 30 months on a monthly contract BUT only if the buyer is
convinced these accounts won't migrate away. This is a very attractive
way to "sell" your account base and be able to continue to grow
revenue as you continue to sell services (if even on an ongoing casual
basis)

I have had the experience of knowing one local company that had 60
month terms on his contracts who only came away with 20 times monthly,
but his account base was a mess. The buyer told me that he got hosed
at that ! I know one other monthly term company who got 24 months but
his paperwork was not in good shape. And a third who got 30 months,
but his company was superbly run !!

Many buyers today are taking a much harder look at the long term
contract idea and will only give the normally accepted multiples if
everything else meets their business requirements. The long term
contract in and of itself provides a buyer only with a short term
guarantee (to the end of the contract). Wise buyers are looking for a
much longer term viability for their purchases. If the seller's
company has not been well run, most clients will leave after the term
is up, and buyers know this. But if their service has been well
handled in the past by the seller, and customers generally feel
satisfied, the attrition rates will stay normal after all long term
contracts have run their course. In either case, how the buyer handles
these new clients and the process of how they are migrated over also
has a bearing on long term attrition rates for the buyer (with or
without long term commitments by the seller).

Look at it this way; even if you were to get a little less for each
account, a sizeable percentage of those accounts you have, you got
simply because the shopper didn't want to sign a long term agreement,
and you have them as customers because they got turned off by some
company who quoted only with the long term contract option, or they
had a bad experience in the past. They like "being in the drivers
seat" and will stay with you as long as you treat them well. These
clients will also pay much more upfront for the system than normal in
order to maintain that long term freedom to choose (same as the cell
phone market).  However, it IS a unique market niche and one you will
have to service well to succeed !

Regardless of the term of your contracts, finding an appropriate buyer
with the funds needed to pay you properly can sometimes be difficult.
I understand there have been several books written on the subject
which you might want to research.

Sorry to be so oblique in my answer, but the only true "black and
white" answer is..."it depends". With so many poor quality security
companies out there, most  buyers will wisely handle each case on an
"individual case basis"