Take Over Considerations / Value of Longer contract Term  

 February 1, 2013

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Question take over considerations

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Ken

        I am looking for advice and possibly a form letter on monitoring takeovers. My company has been doing some of these and they are starting to increase? What should the customer letter to their old monitoring company say?  Are their any issues my company should be concerned about?

Jerry D

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Answer

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Taking over alarm accounts, presumably currently being serviced by another alarm company, is one way to grow, but one not likely to make you very popular with your local competition.  What consequence that can have depends on the resolve of the outgoing alarm company.  There may be good reason the alarm co doesn't mind losing this particular account; some accounts may have expired contracts; some accounts may not have any contract or a month to month obligation.  

As long as you don't have your competitor's customer list or other confidential information you are free to solicit for new business.  You should not solicit a subscriber you know to be under contract with another alarm company.  While lawsuits for tortious interference of contract is a difficult and costly endeavor, you do risk that lawsuit.  When you hear from a subscriber that you know is being serviced by another alarm company you can inquire if there is a contract.  Ask to see it.  You may want to point out that the existing alarm co may make claim under the contract.  The subscriber can then decide if it wants to risk that claim and change anyway.  The subscriber may ask that you indemnify the subscriber if a claim is made; then you have to make the decision of assuming that risk.

If there doesn't appear to be any contractual impediment to changing alarm service you can suggest or provide a short letter from subscriber to alarm co advising that services are to be terminated.  Some subscribers may not own their alarm equipment.  This will obviously have to be dealt with on the take over.

We know that some companies have had explosive growth by using the take over business model.  My best advice is to keep it honest and you'll stay out of trouble.

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Question Re: Value of Longer Contract term

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Hi Ken-

I have a quick question on selling Monitoring Contracts.  Is there a price difference in selling a 5 year Contract vs a 1 year contract?  Thank you!

Stephanie

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Answer

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Quick answer:  yes.  The longer contract term has more value, but there are many other factors to consider.  Find out what your company is worth and how we arrive at the valuation at www.WhatsMyAlarmComanyWorth.com

 



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