Re: More on alarm company valuation

[Effenpig1 <dirtyspicevent@xxxxxxxxxxx>]

On Nov 25, 1:25=A0pm, Jim <alarmi...@xxxxxxx> 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 one
> of two through the years but the overall increase in income far
> offsets the loss.
>
> Just curious.

For monthly monitoring fees, I decided on an increase of 16% every 5
years based on the original starting monthly fee. I have been through
1 increase so far, I did lose a few customers (very few)but I got the
feeling these were customers who really didn't give a crap about their
security systems and never used them anyway. They were mostly
customers that were also a pain when it came to paying their bill
(good riddance).

Another thing I decided from the beginning was I would keep my
equipment prices fairly low. I found a certain website, which I won't
name, and couldn't believe what the prices they were selling the
equipment for. People can find out pricing with a few keystrokes, so I
decided to make my money on the labor, with moderate equipment
markups. A company I had worked for really jacked up prices, yet had a
fairly low labor rate. I always felt it was better to keep equipment
markup reasonable and make profit on the labor.