KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and white list ken@kirschenbaumesq.com ******************************* comments on life expectation for subscribers / comment on when to start exit plan May 25, 2019 ********************* comments on life expectation for residential and commercial subscribers from May 10, 2019 article ********************** Ken I don't have any stats to back it up but for 20 + years, I have always understood the life expectancy of a residential burglar alarm account to be 7 years. I've seen that figure used in a lot of different models. Mark Matlock, VP Indirect Sales Pro-Vigil, Inc. ************** Ken The life expectancy of a customer is truly on how long they're going to live in that premise or if they pass away that's really the true Factor providing they are happy with your services I have customers that signed up in 1978 and they're still customers hope that helps Yours very truly, Paul Seidman ******************* Ken, Regarding Curious’ question on May 10, 2019 in which he asked about the average life of a monitoring customer, there is some science to the process. Publicly held companies (there aren’t many) are required to commission a “Lifing Study” to determine the average life of customer accounts. The results of these studies are generally public information as they are summarized on their annual reports to the SEC. Additionally, some of the larger privately held companies commission similar studies at the request of their financial auditors. My firm has performed a few and I have read several. Not surprisingly, initial contract term is not as big a factor as you would think. The primary factors affecting customer life appear to be: Relationship between the customer and the monitoring company. Companies with happier customers tend to have longer relationships with them. Complexity of the installation. Customers with complex commercial and fire alarm systems tend to be “stickier,” mostly because they depend on the system and are not as quick to cancel over price or minor service issues. Customers who have paid significant amounts for the system up front tend to last longer as they are less price inelastic over monitoring rates. Basic fire customers tend to last longer than others. They are required to have the system so cancelling is not an option. Commercial customers tend to last longer than residential customers. They use the system daily so it is not necessarily a convenience. The shortest lives appear to be systems that are not well monitored or serviced. One quick and dirty way to estimate customer life is to divide 100 by your attrition rate. If you have 10% attrition your average customer is lasting 10 years, 20% = 5 years, etc… I personally like a three year initial term with annual auto renewals (where permitted). This gives the alarm company some time to establish the relationship and recover any creation costs and gives the customer a palatable renewal period. I consider a customer who is more than three years into this type of an agreement as “seasoned”… they have had the ability to cancel but voluntarily renewed. Mitch Reitman Reitman Consulting Group Fort Worth, TX 817-698-9999 http://www.reitman.us ********************** Ken Not sure if anyone can beat this record. Our firm is approaching its 50 th year in business. Our monitoring agreements have always been 30 days. I have a number of clients in the 47 - 48 year area per this agreement. Annual services performed, upgrades in technology and expansions. No end in sight. Respectfully, John W. Yusza, Jr., President ************************* Response ************************ Holding on to customers for 48 years may be a record. I'm guessing you're still using the same contract from 50 years ago, so that may be a record too. I'm going to keep an eye out for you for foil and relays on a wood board that served as a panel for sale on The Alarm Exchange under Parts category. I'll let you know, by Western Union. Get those customers to sign All in One contracts so they have maximum value. After 50 years you might be thinking about exit strategy in the next 20 or 30 years. ********************** comment on when to start exit plan from article on April 15, 2019 ******************* Ken more pre-planning for multiples … “when to start exit plans” For both buyers and sellers, here is another pre-planning task that is not on most lists, not even Ken's. Separate the “defensive” systems from the “deterrent” systems. As part of the RMR multiple pricing formula, this is a recent addition due to the evolution of the alarm industry that has reduced or removed local police response to calls from monitoring firms. The trend is toward high priority response for defensive systems (remote witness technologies) and low or no priority response for deterrent systems (without remote witness). Buyers and sellers will be spending more time researching local legislation related to unnecessary police response aka false alarms. Defensive systems generate higher RMR with lower attrition, thus higher buy/sell multiples; the opposite applies to deterrent systems. Lee Jones ********************** CONCIERGE LAWYER SERVICE FOR THE ALARM INDUSTRY PROGRAM You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** NOTICE: You can always read our Articles on our website at ww.kirschenbaumesq.com/page/alarm-articles *********************** THE ALARM EXCHANGE
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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 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
