Re: More on alarm company valuation

[Jim <alarminex@xxxxxxx>]

On Nov 25, 12:58=EF=BF=BDam, Frank Olson
<use_the_email_li...@xxxxxxxxxxxxxxxxxxxxxx> wrote:
> Effenpig1 wrote:
> > On Nov 24, 8:03 pm, nick markowitz <nmarkow...@xxxxxxxxx> wrote:
> >> On Nov 24, 7:07 pm, Effenpig1 <dirtyspicev...@xxxxxxxxxxx> wrote:
>
> >>> On Nov 24, 3:32 pm, tourman <robercampb...@xxxxxxxxx> wrote:
> >>>> On Nov 24, 2:26 pm, Effenpig1 <dirtyspicev...@xxxxxxxxxxx> wrote:
> >>> =EF=BF=BDYes,
> >>>> longer term contracts will definately get you more generally speakin=
g
> >>> Agreed.
> >>> I doubt I'll ever purchase accounts, but I may someday be on the
> >>> selling end.
> >> I do not have my customers under locked contracts but they are loyal
> >> to me and me to them and they would be loyal to a company buying me
> >> out as long as they were treated fairly.
> >> its all about service provide good service and pricing and the money
> >> will always be there but too many companys have forgoten this. i never
> >> advertise either word of mouth is how i built my company and im always
> >> busy.
>
> > Your above statement sounds like something I could have written,
> > however I believe it is in my best future interests to start getting
> > my customers used to the idea of locked-in contracts. I was thinking
> > of giving them the option to "freeze" their current rates for the
> > length of the contract as an incentive.
>
> That's exactly what we do. =EF=BF=BDWe've been able to demonstrate that o=
ur
> rates haven't changed in over 12 years. =EF=BF=BDWe offer a 3 year agreem=
ent
> that's renewable at one year intervals on expiry of the original
> agreement. =EF=BF=BDI have customers actually calling me asking to "exten=
d" for
> another three years!! =EF=BF=BD:-)-

In the context of the subject of this thread and assuming that someday
you will want to sell the company; it would seem to me that any
potential buyer, seeing that you haven't raised your prices in 12
years, would not look at that favorably. They would have to think that
upon buying the company, if they raised prices, they would lose
customers. And I'm assuming that you are talking about monitoring
prices only.

With either short OR long term contracts in place, certainly, if for
no other reason, shouldn't your prices have been increased to at least
reflect the natural increase in doing business? I'm sure you're paying
your personel more now than you did 12 years ago and if you include
the increase in every thing else over 12 years...... You've got to be
getting income from somewhere to be in business that long but not
increasing prices just because of the minor objection you might get
from a few clients, doesn't seem to me to be a good policy. Increasing
the monthly monitoring fee by a relatively small amount over the
years, is not something that 99.9% of your clients would object to.
I'm sure that YOU expect things to go up, why would you not think that
your clients would not expect things to go up also?

I can understand that you might be increasing your installation prices
to compensate for the increase in cost of doing business, and the
relative decrease in monitoring income over the years, but that's
contrary to the customary ....................  monitoring income
supplementing the installation income. When someone looks to buy a
company, annual income in considered but it is usually offset somewhat
by the buyer as attributable to "good will" which is more of a
subjective value (that is, subject to devaluation) as compared to hard
income from contracted clients.

I know a few alarm companys who have not raised their prices for a
long time and when you dig right down to the basic reason why,  it
always turns out to be that they're afraid they're going to lose their
accounts. I raise my prices after 5 years and then more often for
other accounts for various reason.  In my experience, you may lose one
of two through the years but the overall increase in income far
offsets the loss.

Just curious.