Question electronc contracts and valuation
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Ken,
I have a question for you. There seems to be a growing trend to go to electronic contracts, but all companies are doing it differently, some using DocuSign, some just an electronic contract that the customer signs on an iPad, and others. The question I have is, what does this do to our portfolio when it comes time to sell the accounts down the road? Do you think this will limit our scope of buyers? Your input would be appreciated before we make the switch to all paperless contracts.
Taylor
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Answer
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We've addressed this topic, but it's going to be a growing concern, so let's talk about it again. To get directly to the point, some buyers simply are not going to be satisfied with electronic contracts and that is going to limit your pool of interested buyers. Demand influences price, so your valuation is going to be affected negatively. The next question is, of course, why?
Once you accept that the RMR contract is the most important part of your assets you begin to understand why the physical written contract, in proper form, is important to a buyer. Your potential buyer needs to be concerned with his bank, if his deals are financed, and his eventual potential buyer who may have financial institutions to answer to, public companies that may be in the RMR market, or just prudent buyers.
I admit I didn't research electronic contracts and their execution and validity, so if anyone out there has, let us know. But my instinct tells me that laws simply have not kept pace with technology. For example, and an easy one, how do electronic contracts comply with consumer laws that require that a consumer get a copy, sometimes two, of a signed contract at time of execution? How does an electronic contract comply with font requirements, both in size, placement, conspicuousness and sometimes color? How do electronic contracts comply with a 3 day notice of cancellation where the consumer is entitled to a cancelation for in duplicate? I don't have answers. This is the kind of concern a buyer has to have because if a buyer is going to pay $800 for a $20 a month RMR contract he wants to know he can enforce it, or that his bank is going to advance funds against it.
Those of you looking for a quick evaluation of your company can check out WhatsMyAlarmCompanyWorth.com. Failure will have a written contract in proper form is going to cost you in multiples.