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Comment on Wondering how to sell a few accounts
July 3, 2023
Comment on Wondering how to sell a few accounts  
          In response to Alisa, who inquired about selling a few of her 900 accounts (June 14,2023 Newsletter), let’s not jump to the conclusion that selling is the best solution for her needs.  The first question is WHY are you interested in selling some accounts?  If the answer is strategic, like getting out of a certain geographic market or selling all the residential accounts to focus on commercial, then yes the best solution may be to sell a portion of the accounts.  However, if the reason is to raise capital, then selling those accounts may not be the best financial solution.  A loan could likely be a better way to go.  With a loan, Alisa won’t forfeit all the current and future revenue from those customers, all the referrals, the upgrades, add-ons, etc.  And with a loan, she won’t have to pay taxes on the gains from the sale.  And when she does decide to sell the entire company someday, she will likely receive a higher multiple because the account base will be larger.  It’s worth further discussion.
          Thanks, as always, for this valuable forum.
Jim Wooster, Jr.
Alarm Financial Services, Inc.
866-204-9350 ext 1200
415-509-4750 cell
          For most alarm companies acquiring accounts generating RMR is the name of the game.  Building the RMR is why you’re likely in the alarm business.  There’s really only two ways to grow your RMR with new accounts, creation cost or acquisition.  Either way, you want to build up the RMR and while Jim points out that there may be good reason to sell off some RMR accounts, there may be good reason to consider an alternative to raise capital.  Borrowing against the RMR is one option and it’s often overlooked.  There are not a lot of options to get financing in the alarm industry based on the alarm contracts and RMR.  Sure you can mortgage your home or find other collateral, but most banks are not keen on lending based on just the alarm contracts.  Probably for good reason; the continued performance by the customer is likely tied closely to the services being provided by the alarm company, and the bank is not in a position to provide those services.  Jim’s company, Alarm Financial Services (AFS), is listed on The Alarm Exchange in the Financial Category and it is a reliable source of funding.  You work hard building the RMR and selling it off should be a last resort unless you’re selling the business or have other good reason to stop servicing particular accounts.

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301