follow up on attrition
June 15, 2012
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Before circulating some of the responses on this topic I want to comment. I think the 10% numbers we are seeing in the responses are more accurate among the larger alarm companies. In particular, the attrition reported by ADT is well above what I think industry standard is, and I attribute that to ADT's focus on new installations. For those alarm companies with RMR of under $100,000 [and keep in mind that is a monthly figure] I think subscriber attrition should be less than 8% [although Jeff Cohen makes a good point that smaller alarm companies may not have sufficient way to track real attrition]. Certainly an alarm company with less than $10,000 RMR knows when an account is lost, and usually why. A smaller company that can provide very personalized service should have a lesser than average attrition rate.
Alarm companies that grow by acquisition can of course expect a higher than average attrition rate, at least for the short term.
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Ken
Higher attrition after the sale shouldn't be singled out as "warranty breach". You have no control of the new company. Customers may not like something about their operation, their reputation, or may feel "sold out" and lose loyalty.
Dusan
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Ken
I experience between 8-10% attrition per year, concentrated in the summer months. (Real Estate Closings)- Everyone want to be in before school starts for their kids.
Keep up the great work.
Dimitry Boss
Boss Security Systems Inc.
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Ken,
We handle collections for many of the industry's top account producers, and with the information that we have access to, the range of attrition varies from 5-13% with the big boys (top 75 SDM). Many factors go into play when talking to different dealers on account creation (such at door-to-door, telemarketing, print media, Internet sales, DIY model, traditional advertising, etc) as well as geographic location that could vary from one end to the other very quickly.
Thanks again, and really enjoy your newsletters!
Michael Harrison, Sales Director
Hillcrest Davidson & Associates
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Ken,
attrition in the range of 10% is where I would place the average. Less of course is better, some of the smaller companies do better. Bud Wulforst
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Ken
The most authoritative source for industry attrition would be as reported at the Barnes Buchanan annual conference where a whole host of industry metrics are shared.
As reported at this year’s conference, for the last 5 years gross attrition for our industry has varied between 11.8% and 12.5%.
As further corroboration, ADT has openly reported that their gross attrition for FY 09, 10, and 11, has been 14.3%, 13.3% and 13.0% respectively.
It has been our observation that a number of smaller companies believe that their attrition is much lower. However based on the due diligence that we have performed on those that were acquisition opportunities for us, we discovered that their true gross attrition was generally in the norms described by Barnes and Associates. Candidly many smaller companies simply do not have the systems in place to properly measure their attrition and accordingly are fooling themselves into believing otherwise.
Jeffrey S Cohen, CPA, Chief Financial Officer
Ackerman Security Systems
Atlanta, GA