Re: Brinks & Broadview Takeovers

[Jim <alarminex@xxxxxxx>]

On Oct 3, 6:43=EF=BF=BDpm, tourman <robercampb...@xxxxxxxxx> wrote:

Robert,..... coincidently, I just got this from Ken Kirshenbaums blog.
It was topical so I'm reposting it. If you don't know, Ken is one of
very few US. nationally known alarm trade attorneys.

            Valuing Your Business Oct 5 2009


    How do you go about valuing your business?  I get several calls a
month asking me that, and asking me to give a quick valuation over the
phone.  Just the other day I had a broker specializing in brokering
alarm company deals in my office.  We kicked around acquisition issues
and it was clear to me that there are very different ways to approach
the valuation of your business.  Of course what some buyer is willing
to pay is the ultimate value.  There are things you can do to enhance
that value, and there is no better time to start then right now.

    Recurring monthly revenue, RMR.  You know that alarm companies
sell subscriber contracts for a multiple of the RMR.  But why is some
company getting 12 times, others 45 times and more?  Why are some
companies surprised that there is no one interested in buying the
subscriber accounts?

    You should take some comfort knowing that you are in a business
that deals with subscriber contracts as negotiable instruments.  The
contracts have intrinsic value, are assignable, tradable, and have
real value.  That $30 a month subscriber account can be worth $360 to
$1500.  If you have 1000 or 5000 or more of those subscriber contracts
you have a valuable business to protect.

    What makes certain subscriber contracts worth less?  Here's a list
of what to avoid or not do at all:
Use equipment or installation techniques that are not customary.  You
decide to use some obscure panel or application that other companies
don't use.

provide services that other companies don't or won't, such as 24 hour
service, pick up cash, cash discounts, opening closing reports at no
charge, pay the false alarm and permit fees and fines, etc.

Don't use contracts

Use old out of date contracts

Let contracts go into renewal without new contracts and updates

dont bother carrying errors and omission insurance

Don't have your own line at the central station

If you are a central station, use obsolete technology to monitor the
accounts

If you're a central station, don't use three party contracts or have
contracts with your dealers
finance or sell of your RMR as you struggle along; you won't have
anything to sell.

    Well, that's enough of a list of what not to do.  So, what can you
do to enhance the
 value of your business:

diversify your accounts, with a mix of residential and commercial

diversify types of alarms; burglar, fire.

lease commercial accounts; sell small commercial and residential; use
service
and monitoring contracts

use updated contracts and have all subscribers execute them

all subscribers on your own line into the central station

all systems remote programmable

all systems compliant with code, UL, NFPA, trade custom standards

provide customary services; don't try and reinvent the wheel

get new contracts rather than rely on renewal terms

keep all subscribers geographically located
.
maintain good service records for subscribers

stay on top of your receivables; keep them current

keep your debt to a minimum; you'll end up with lots more at the
closing.

    The difference between 32 times and 38 times, where most small to
mid sized companies can expect to sell subscriber accounts, can amount
to a lot of money.  To command 40 times or more you have to have paid
attention and adhered to most if not all of the above
recommendations.

Or maybe you just get lucky.