January 13, 2011
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Comment:
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---- "Ken Kirschenbaum wrote:
Note: Those of you who have gone years without contracts or less then the
best contract [putting it gently] and who then get the Standard Monitoring
Contracts from me, have the task of getting current subscribers to sign new
contracts. It's certainly time consuming [and by the way only going to be
even more time consuming the more subscribers you sign up without proper
contracts as time goes on]. Mitch Reitman, industry consultant and deal
maker, shared a recent experience he had getting a company into "compliance"
to maximize its selling potential [the December 10, 2010 email article].
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Since I only have 47 years in the business I probably don't understand how to
get contracts signed because I haven't had one signed in a jillion years. When I first went into the business you always got a contract signed and you always collected half of the "installation charge" up-front.
I know a lot of folks reading this are wondering about now... what's an
"installation charge"? Once upon a time people actually PAID to have a
burglar alarm system installed. I know that doesn't happen anymore but once
upon a time it was a good business.
Now, when the customer discovers their contract has expired or learns they
have no contract... they are GONE! Just like that!
Why? It's simple; a hundred other companies will give them a new system for
free and tell them they would be paying a lot less per month if they change.
Plus they will get $100. savings bond or $75. gas card or a three day Bahamas
vacation package.
If I sent out new contracts to folks I wouldn't have any customers by the end
of the month. Sad, but true. Even if I agreed to install a new system all the other
guys offer rates half as low as mine - nobody is willing to keep paying me $30. when
others offer "the exact same thing" for $12.
Of course they don't really get "the exact same thing" but you can't get that
point through to them; all they see is the much lower price.
So far this month I have lost two 25 year customers to low-price
trunk-slammers and I expect to lose a bunch more come the first of the year.
This is the norm for the last few years - the price of everything else is
going UP!
What the heck has happen to the security business?
anon
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Response;
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What happened to the alarm business is that it became a business. Life and business has become more complicated, sophisticated, - use any term you like - but it's a heck of a lot different than it was 47 years ago. By my calculation you entered this business in 1962. You started in the alarm business and apparently you are still in the alarm business. Everyone else around you is in the recurring revenue business and you're still at the starting gate. That's what happened.
After 47 years in this business your recurring monthly revenue should be at least $150,000; maybe upwards of $500,000 RMR. That would put your company equity in the range of $4.5 million and $15 million or more. O, I forgot, you gave up on contracts. Let me adjust that company value. Let's see, RMR of less than $20,000 and company value of less than $200,000. I truly hope I am wrong. Even if I am, you're going to need another few years to get those subscribers to sign contracts so that you can sell your business, or pass it along to your family, so they can sell it. Let's hope you don't get sued in the mean time - you have no contract to protect you.
Sorry to be so harsh, but this isn't 1962. Then, most alarm companies didn't bother with contracts. When I started representing the alarm industry in 1976 some of the guys preferred bricks rather than contracts to enforce their subscriber relationships. Over the last 35 years I counseled the alarm industry to use contracts, and now it's almost unheard of for an alarm business not to use contracts - and most use my Standard Form Contracts. You're only working 47 years, and I hope you have another 40 to go, but even so, now would be a good time to jump on the band wagon and start using contracts - that wagon is on it's way to the bank - and I want you to be on it. Contact Eileen at my office (516-747-6700 x.312), she is the contract administrator, if you decide to hitch a ride.
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Comment:
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Ken
I was using your contracts for years. Unfortunately, time caught up with me and had to sell the business. First thing the buyer asked was if I had contracts. That pretty much clinched the deals. Thanks.
Ben Dreidel
UEC Protective Systems, Inc.