Question:
Ken,
Having been in the business for about 20 years, I have a been conditioned ('cause we always did it that way') to want to go to the mat to initially get a long term contract from subscribers and then to vigorously enforce the term, and the renewal. In past years it was rare that subscribers were even aware of the term, much less take issue with it. Lately, I have noticed that they are more aware of it, and we spend a significant effort attempting to enforce the contract. At best, it's a confusing process, dealing with letters, moves, people die, sold the house/business, collection agencies, etc, etc
I have been giving a lot of thought recently, to whether or not it makes much economic sense to attempt to enforce renewals at all. And for that matter whether it makes sense to go to the mat on the initial term, if you have gotten a fair price for the install. Leases, or low down/no down systems are different. While I am not persuaded, we seem to devote a significant effort to enforcement, with questionable payback, get a lot of negative feedback and bad will, and while we may collect a fraction of the money, we rarely change the outcome. The prospect of tracking, then sending out registered notices of renewal in a narrow time frame surrounding the renewal date may push me over the edge. I think my major reservation would be how competitors would react.
Now I know an attorney might sooner eat their young than recommend not enforcing a contract term, I would be interested in hearing from others on this.
Tony D
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Answer:
Well, Tony, I am also curious how your competitors will respond to your Inquiry. The standard form contracts I sell to the trade typically have an initial term of 10 years for the commercial contracts and 5 years for residential contracts. The renewal term is typically month to month.
You need to remember that in this industry the hope that there will be a pot of gold at the end of the rainbow is going to depend on your contracts. The better your contracts and the more under recurring revenue, the more you will be able to get when you sell your subscriber contracts and you are ready to pack it in.
Unless you have found a way to make real profit on the installations, service and monitoring, you should be focusing on the retirement benefits this industry offers. Like other types of commercial and residential construction or improvement, the security industry is tough competition. Obviously the 'free installation' offerings have the long term recurring revenue expectation, or the transaction would make no economic sense at all.
Enforcement of the contracts is a team effort, and it starts with the alarm company conducting itself in a professional manner and providing the service promised and expected. For those subscriber who for any reason at all fail to honor the contracts, despite the alarm company's efforts, the alarm company attorneys get involved. You need to use attorneys familiar with the industry and committed to the industry. You may know (I'm not sure where you are located) that my law practice's largest department is devoted to alarm contract enforcement (collections), and I know that we are rather successful at it.
You should anticipate being successful in most of your collection efforts, especially if you use experienced counsel. The sooner you opt to seek enforcement the better your chances of recovery. Waiting until a business has closed or a subscriber moved is no good policy.
As far as your reputation, do good work. No one will fault you for going after subscribers who have breached their contract. In fact, if it is known that you aggressively enforce your contracts subscribers will be less likely to breach, and attorneys representing defaulting subscribers less likely to prolong defenses.
So, my recommendation is, long term recurring revenue contracts, and send them to me as soon as the sub breaches.