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Structuring Small Acquisition Of Accounts
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Ken 
    I have a question on multiples and purchasing accounts.  I have an opportunity to purchase about 250 accounts from a current competitor. He has no contracts, no auto payments and just a standard form from the first time the customer signed on.  More of a "hand shake" type customer. Anyway I'm trying to come up with a for multiple for these types of accounts. He does own the 800 number for all these accounts which is a positive.  I've spoken with the Seller and he is willing to take payments over 36 months based on revenue these account continue to generate.  He is also trying to make 15% of the net revenue from services and leads that turn to sales (that we will sell) which I don't think I am a fan of because of his already low margins on these.  Figured you may have some good I sight and was curious as to what your opinion was.  Thanks in advance for your time in this!
All the best,
KB
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Response
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    These small deals are rather common and often innovative in approach.  Your scenario enables you to acquire the accounts essentially risk free since your only payout to the seller will be based on collected revenue.  You omitted what percentage of the RMR the seller gets for the first 36 months, and that obviously matters.  Assuming these are monitoring accounts your only expense, theorectically, will be central station charges and clerical expense for invoicing and collecting receivables.  Even a 50/50 split will leave you some RMR profit.  The 36 month deal will only generate 18 times for the seller, a low multiple.  Even accounts with poor or no contracts might warrant that mulitple.  
    The participation fee on new installs and service of 15% will have to be something you figure into each job.  If the numbers don't work for the subscribers then I suppose it's "nothing ventured nothing gained".  Just pass on the job unless you're willing to gamble that the account will stick around for RMR monitoring or service after the 36 month deal runs out.  
    A seller of course has a different perspective.  Why do this deal when all a seller needs do is run out the 36 months and collect whatever comes in.  After that seller still owns the accounts and can sell then or just keep milking the cow until it runs dry.  Without marketing and sales the RMR is likely to fall from attrition over time, but the seller may be able to recover more over those years than the buy out scenario.  
    There are usually personal factors and motivations that drive a sale and each situation charts its own course.  Whatever direction you take get proper professional advice and back yourself up with proper contracts, the lifeblood of your business.
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Comment on reporting bad credit
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Ken, 
    regarding the article on 7/18/2014, "reporting bad credit for defaulting subscribers"    If you send a claim to a collection agency, one of the tools they can use is to post a bad credit report.  You may decide to ask them to do that early on; or you might decide to leave that decision entirely up to them.  I collected one claim out of the blue years after we had given up (and beyond the 4-year point) because a mortgage company required them to pay it as a condition to granting a mortgage.  I got every penny, and with great eagerness.  The client would not leave me alone until I gave them the current exact balance.
Lou Arellano
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Response
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    Collection agencies typically to report bad credit.  Not everyone has had good experience with collection agencies, from improper credit reporting, improper debt collection methods, poor results, unsatisfactory communication and reporting, disappearing with the collections.  That's  one reason I don't endorse any of the collection agencies.
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Comment on false alarm fines
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Ken:
    Seattle's collection methods are absolutely ludicrous.  The city bills the alarm company and the alarm company has to collect the fines?  That is like getting a picture from a red light camera for a violation and the CAR DEALER that submitted the registration gets the ticket.  This has been since 2004?
    What about DIY alarms?  Home Depot or Lowe's gets the bill?
    I can see sanctions for abuse of false alarms quotas but to bill the dealer is WRONG.
(Just my thoughts from under the bus.....)
Joel
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Response
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    I doubt the ordinance requires the alarm co to collect the fine from the subscriber, and I am sure not all fines are reimbursed.
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                                                   Speaking Engagements

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Alarm Association of Greater St. Louis.   September 16, 2014.  at Tech Electronics HQs office at 6437 Manchester  Ave, St. Louis, MO 63139.  Meeting is from 11:45 – 1:30  Video conference presentation starting at 12:15 CST.  For more information or to register contact Tony Drago adrago@tyco.com  www.alarmstl.org
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NYSESA - September 17, 2014 at Honor's Haven Resort, Ellenville, NY.  This is the NYS Electronic Security Assoc annual meeting.  Presentation on updated contracts and current legal issues will be at 10:30 AM.  For more information or reservations contact Dale R. Eller, Executive Director (814) 838-0301  dalereller@itzsolutions.com
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Alabama Alarm Association.  AAA's Fall Meeting and Trade Show - October 21, 2014 from 3 to 5 PM at DoubleTree Hotel 808 South 20th Street Birmingham, AL 35205  for more info contact AAA Executive Director: director@alabamaalarm.org  (205) 933-9000 

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Electronic Security Summit for 2014.  October 22-24, 2014  at the landmark Broadmoor Hotel. Colorado Springs, CO.  For more information contact Alexander J. Quirin, CEO & Managing Partner, Advisory Summit Providers, LLC.,  (786) 999-9738    alex.quirin@aspsummits.com    www.aspsummits.com

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