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Comments on positioning your company for sale
December 1, 2022
Comments on positioning your company for sale from article on November 18, 2022
          We agree with each of the items on your “Positioning your company for sale” list and would like to suggest a few more:
- stay on top of collections
- be able to show the other ways your company makes a profit in addition to RMR
- measure and monitor your attrition
- call customers regularly to ask how you’re doing and ask for referrals
- if you have partners, have a buy/sell agreement
          As for your comment to “avoid debt”, we suggest “use debt productively” - making acquisitions, buying out a partner, growing RMR, etc.
          At AFS, we work with alarm companies through our Pre-Sale Due Diligence Services to help them maximize the value of their company.  And even if a sale is not in the immediate future, these steps will improve day-to-day performance of the business.
  Thanks for this forum!
Jim Wooster
Alarm Financial Services, Inc.
866-204-9350 ext 1200
415-509-4750 cell
          Good advice, as always.
          While avoidance of debt was only one issue I should temper my aversion to debt when there is good reason to incur it.  I am fiscally conservative by nature and having served as a United States Bankruptcy Trustee for almost 50 years I’ve seen a lot of debt and a lot of people get in trouble because of debt.  Don’t bit off more than you can chew is too simplistic advice because some people have bigger mouths. 
          But measured debt is certainly a legitimate way to grow your alarm business and I believe, as most others do in the alarm industry, that RMR growth is essential to build equity in your alarm business. There’s really only two ways to build RMR; create it by finding your own customers or buying existing accounts.  Creation cost compared to acquisition cost is a comparison I’ll leave to others.  Some companies have had spectacular growth finding, installing and continuing a relationship with their customers by monitoring and other RMR services; other companies have grown by acquisition.  In either case OPM fuels the growth, typically.  [OPM for the uninitiated is Other People’s Money].
          Not all lenders understand the alarm business; in fact most don’t.  If you want to borrow money from your local bank you better have a house to mortgage or some other collateral other than your alarm contracts.  But lenders in the alarm industry, like AFS, understand the value of alarm contracts and are willing to accept alarm contracts as collateral for loans.  Since alarm contracts may actually be your most valuable asset, certainly business asset, you naturally want to borrow against that asset rather than your house.
          I am getting side tracked a bit.  Here is why AFS is so valuable as a lender to the alarm industry.  They understand the alarm industry; they understand the value of alarm accounts and they understand the value of a potential acquisition.  If AFS is willing to fund the deal then you should have a good comfort level that the deal looks “good”, as in safe, as in AFS believes you will be successful and be able to pay AFS back out of the alarm contract assets.  That’s no small level of comfort.  Your local banker doesn’t know if your alarm acquisition or your alarm marketing plan is a good idea or not, or whether you’ll be successful with your plan, and perhaps doesn’t care, because the banker is comfortable that your house has plenty of equity and the bank will be able to foreclose its security interest and recoup its money.  Not particularly comforting thought.
          So when you borrow from AFS you have the added confidence that at least Jim Wooster thinks you’re going to be able to pay the debt off.  Better that than meeting someone like me in bankruptcy court.  

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
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