Re: More on alarm company valuation

[tourman <robercampbell@xxxxxxxxx>]

On Nov 26, 12:49=A0am, Frank Olson
<use_the_email_li...@xxxxxxxxxxxxxxxxxxxxxx> wrote:
> Jim wrote:
> > On Nov 25, 12:58 am, 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:
> >>>>> Yes,
> >>>>>> longer term contracts will definately get you more generally speak=
ing
> >>>>> 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 nev=
er
> >>>> advertise either word of mouth is how i built my company and im alwa=
ys
> >>>> 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. We've been able to demonstrate that our
> >> rates haven't changed in over 12 years. We offer a 3 year agreement
> >> that's renewable at one year intervals on expiry of the original
> >> agreement. I have customers actually calling me asking to "extend" for
> >> another three years!! :-)-
>
> > 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 .................... =A0monitoring 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, =A0it
> > 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. =A0In my experience, you may lose on=
e
> > of two through the years but the overall increase in income far
> > offsets the loss.
>
> > Just curious.
>
> My monitoring costs have actually gone down. =A0I see no reason to
> increase the cost of monitoring. =A0Unfortunately, service costs have gon=
e
> up and consequently so have our hourly rates. =A0We don't do free
> installs, but we do deliver value for the dollar. =A0There *is* a market
> for used Binkey panels, after all. =A0;-)

RHC: Frank, I find myself in the same position. I have always looked
at monitoring income as a "profit centre" in itself, independant of
sales and installation profit. My actual costs for monitoring have
also gone down, adding another $500 a month to the income stream from
the monitoring allocated to service and warranty. However, since
service and warranty are bundled, that comes out of that same revenue
stream. Costs for equipment are the same or slightly less, with
service costs increasing with the increased volume of accounts.
However, I keep detailed service records to establish costs and they
more than balance out. Service levels have dropped over the last few
years for everything except batteries and door changes (which have
increased greatly due to the ravages of time). I suspect being
ruthless in what panels and clients I will take over has helped
service matters greatly.....

The only negatives I see are governmental taxes which are horrible at
my income level. I spend as much time at legal tax avoidance as I do
anything else in the business. However, I have had occasion to use the
Canadian health care system extensively lately, and it is absolutely
superb, so I guess that balances things out....:((

Glad your business is going well. Next time I'm in Vancouver, I'll try
to look you up so we can meet....