This alarm company owner is finding it impossible to get a written contractwith a term for recurring revenue signed. So he has discovered the idea ofa month to month contract. That idea was actually circulated by me severalmonths ago when I suggested that subscribers be given the opportunity topay a realistic price for installation of the system in order to have theright to a month to month contract. Here is the comment and question:
Ken:
I am finding it impossible to get customers to sign contracts. Years agothis wasn't a problem but now nobody wants to sign because everyone haseither had a bad experience or has been told of some problems someone elseclaims to have had.You mentioned long term contracts of ten years when in fact a three yearcontract would be a blessing. Without a state law requiring you to have asigned contract - which by the way is something we should have - there's noway to get most people to sign. They can call 200 other companies in thisarea and they don't require a contract.In fact, it appears that only the national firms now require a contract andthey don't have any trouble getting peeps to sign page after page of stuffbut I don't know of anyone else that gets that same response.I started a 'no contract, no service, no kidding' policy and went out andvisited 100 mostly long-time customers in 100 days and I ended of pullingout those 100 systems and at that point I decided to call my new policyquits and rethink things.I came up with a 'no contract' agreement idea. The customers don't want toobligate themselves beyond next month no matter what the term of thecontract is so I came up with this. I need a month-to-month agreement that:only obligates them for one month,sets out my complete non-liability for anything aside from delivering andsetting up the system,states what will be installed,how much they will pay right now to have the installation done,what they will furnish... 24/7 electric power and a wireline telephone,if they don't provide a wireline telephone they must acknowledge that thesystem may fail to warn due to this,that additional protection is available at an additional cost,if they don't want it they must specifically decline it, a radio backupsystem is available if they want to pay for it, if they don't they must specifically decline it,if they desire their system to be monitored,if they don't they must specifically decline it,how much they will pay each and every month beyond the first month if theydesire to continue the monitoring service,the charge I will collect to make a service call if they shall be willingto pay or they can call whomever they desire to perform their service.That's it. Of course at the end of next month they may all cancel out butthey can do that anyway because the value of the contracts are so small youcan't collect anything anyway.So am I just nuts or is this a reasonable idea?
Many thanks.
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So is he nuts? Well, he would be nuts to do business without a contractthat covers all the services he is performing. But he has spent a lot oftime reinventing the wheel.He needs a Sales contract, and he needs to get a realistic price for theinstallation.He needs a Monitoring contract that is month to month.He needs a Service contract and needs to select the option for "per call"service.
The contracts he needs are available at www.alarmcontracts.com. Sales,Service and Monitoring. He also needs the Disclaimer Notice to cover allthat equipment and service the subscriber is not getting, and to warn thesubscriber that VOIP is not as reliable as telephone service
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Here are two comments regarding contracts, whether you should use them, howhard it is to get them signed and pricing for month to month or short termcontracts. Honestly - I didn't write these comments !!! except for thereprinted article at the bottom.
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WHO IS THIS JACK ASS AND WHAT STATE IS HE IN. GIVE HIM MY NUMBER AND I'LLEXPLAIN THE VALUE OF A CONTRACT AND HOW TO GET THEM SIGNED.
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DID YOU WRITE THIS STORY JUST TO TRY AND SELL CONTRACTS. IF THAT THE CASEMAY I SUGGEST A 4TH OF JULY SPECIAL, BUY A CONTRACT AND GET A PACKAGE OFFIRE CRACKERS.WAYNE
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One idea I use is a 3 or 5 year fixed rate contract with ongoing 30 dayauto-renews thereafter. The same contract has an Early Cancellation Rightprovision, which states a fixed fee (like $250) or a percentage (like 60%)of the balance of the unpaid term to be paid with the early right ofcancellation notice. Further, waiving the fee for sold residence's if wesign on the new owner prior to their move (or finders fee mailedthereafter) which motivates them to act as your salesman to the new ownerand get you the name with their own extended efforts. Its got to be justenough to be worth their efforts.People get cell phones these days and expect a 2 year agreement and expectto be told about the $200 early cancel fee - so the consumer world haseducated our customers.One concern I have is people feeling like hey have to make the contract abig deal. I say I need a signature here and we can start, please read thisand ask any questions you want. If you have not convinced them that you area great guy to buy from by that point in time, then you need to class upyour act - or go buy a cell phone and see how smooth they do it.I also find few people "argue" if you have handled them with confidence andgreat service. People need to believe you are just being reasonable.JR
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Here is reprint of article I sent out in November 2005A recent newspaper article was critical of an alarm company who commenced acollection action against home owners after they breached the contract foralarm monitoring service at their home. As it turned out the husband, whowas the only one to sign the contract, had died and the widow sold thehouse, without making provision for take over of the alarm monitoringcontract by the new home buyer.I explained to the news writer how the alarm industry works; how alarmsystems are installed for little or no money and the anticipated profit wasin the term payments for the life of the contract. I also explained thatdeath does not terminate a contract, unless the contract terms provide forsuch termination. A decedent's estate, if there is one, is liable for thecontract.I am beginning to wonder if the alarm industry should not be looking at anew approach. For those of you who may not be believers, the alarmindustry, nationwide, focuses on building recurring revenue; That's thenumber to watch. No matter that your balance sheet is in the red, thatevery installation is done at a loss, that you are working 18 hour days andthink you have little to show for it. Watch the recurring revenue. If it'sraising, so is your fortune, your pot of gold at the end of the rainbow.This is the traditional thinking.Well plenty of subscribers just can't understand why they should be lockedinto long term contracts. They are making enough noise so that politiciansare looking at the long term contract relationship. Already we havelegislation dealing with automatic renewal contracts in some jurisdictions.Though I am not aware of any laws limiting the length of a term of an alarmcontract, it's not going to surprise me if someone sends me information oncurrent laws.An idea has occurred to me and I through it out here for your considerationand comment. What if alarm companies offered subscribers a choice. No longterm contract; cancel on 30 days notice. They can have that option bypaying the real price for the service to be provided. So when you set upmonitoring for example, it's not going to be free or $50 for theinstallation, programing and setup. You know the account at $20 a month isworth a good $600.00 So offer the subscriber the right to a 30 daycancelable contract for the one time installation and set up charge of$600.00.How about a commercial lease, where the monthly is $60, and theinstallation charge is going to be $750 Well, that subscriber should beable to pay $4350.00 for the privilege of a 30 day cancelable contract.Now I know that you are thinking, sure this would be fine but not onesubscriber is going to opt for paying the full price. Why should they whenthey can have out of pocket only $750 and maybe the first $60 payment. Iagree, not many if any. But, when the issue is later raised, by thesubscriber, a judge or a politician, you will be able to tell them that thesubscriber had a real choice when entering into the contract. Be able toshow them that the offer by you was made and that the subscriber exercisedhis, her or its choice.So what's the worst that can happen if you do provide for this alternativepricing and contractual relationship? True, if many of your subscriberselect to pay the "retail" price up front you will not be building recurringrevenue of value. Contracts cancelable at will are not going to be asvaluable or have any value compared to a long term recurring revenuecontract. On the other hand, you will be getting much more money up front;don't squander it. It needs to be there when you go to sell since you won'tbe getting the same price for the contracts you do have. Offering thealternative may in fact make your remaining recurring revenue contractsmore valuable because they may be subject to less attack and criticism.Just an idea.
More comments on whether you need contracts
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Ken,
I admit that once in a while I let my overhead creep up too high, butmostly we just try to install the best job we can, and that takes time.I've looked at the mass marketing approach and maybe I'm not buying right,but I place the actual cost of even 3 doors and a motion sensor at $450 to$550, when you look at all the real behind the scenes cost of licensing,insurance, commissions, salaries, vehicle expense,etc., my figures are veryclose.I've never had a problem communicating the value to the client for aquality installation with a stable company to back it up with good service.The mass marketing whores have tried to turn this industry into a balancesheet with margins so close that one misstep by the entrepreneur who buysinto this scheme and he's lucky to get out, by selling his contracts, withhis ass intact.The manufacturer's love pushing panels, moving "units", but I think itwiser to go the other direction. I think we've seen too many hastilyinstalled alarms with not enough end-user training, and not enoughdetection components. If a company installs one smoke detector in the halloutside the bedroom, and there's a fire, who do you think will bring up thefact that nationally accepted code is at least one smoke detector in eachbedroom, on each level, and outside each sleeping area, with no more than21 feet to any point in the room?We try to make a little profit on each job, and admittedly don't get thereevery time. That's why we lean on the revenue for a few years from thecontracts.All of us need to educate our consumers. They're not all stupid, justmisled sometimes. If you present the value of comprehensive detection, mostconsumers will see the light.
Ray Yauchler
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In my opinion, and I'm sure attorneys would agree, that contracts are amust in any recurring type of business or for any company that installs,remodels or repairs in residential or commercial settings. And, by the wayguys and gals,,,,if you are installing security system in residentialapplications you are "remodeling". If you don't know a microlam from a 2 x4 or a header it's time you learn. How can you possibly quote or install asystem unless you know construction.I even use contracts for ongoing clients in my VA and PL practices. Mostinsurance companies won't write liability or E&O unless you have a contractwith your clients.And besides all of these reasons, if anything ever goes "bump" yourcontract is your CYA or you are SOL. (I learned both of these acronyms inmy paralegal classes. LOL)
Regards,
Marsha Kopan, PLwww.mkeparalegal.com (414)453-0030
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