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Question - valuation of alarm accounts
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Ken
I've noticed the trend has been to include cellular fees and smart phone services as part of RMR when calculating portfolio values during account sales. My question to the dealers and experts, is the trend also to treat revenue from verified video such as Videofied and CheckVideo equally as well?
Rick
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another Question - Valuation of RMR with non-traditional contracts
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Ken
I've run across a situation to purchase a portfolio that includes a block of accounts with a property manager. The manager had excluded the term of the agreement due to the nature of buildings turning over.
He also excluded the assignability paragraph as he was burned once during a sale to an unresponsive dealer. Due to my companies reputation the manager is agreeable to me purchasing and servicing his accounts, but I'm concerned with the resale value.
On the plus side, lots of profitable service and project work is also generated.
My question; Does anyone have experience with valuations on a block of similar monitoring agreements?
BTW we use Kens contracts and they are readily accepted by portfolio buyers from my experience. Thanks also for this excellent forum.
Rick
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Answer
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Typically payments to third parties are excluded from RMR, thus the term "net" RMR is used in acquisition contracts. Years ago central station charges were excluded from the RMR but the trend is that those charges are usually not deducted. However, those charges may be considered by the buyer when making the offer on the multiple. Payments to other third parties are typically excluded from the RMR "net". Of course you're free to make your own deal, but why would a buyer pay the going rates, say 38 times the RMR, and include payments to third parties that are significant, such as Alarm.Com. I wouldn't suggest it.
Regarding the difficult property manager subscriber who insisted that the alarm contract be "at will" - with no fixed term, and that the contract not be assignable by the alarm company, obviously that contract is going to have less value, if any value, to a buyer.
This is a good opportunity for the alarm brokers to chime in with their expert opinions. Every one of you on The Alarm Exchange in the Business Broker / Consultant category are invited to offer your opinion. BTY you can get a quick inexpensive valuation at WhatsMyAlarmCompanyWorth.com
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Questions to ask when buying accounts
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Ken
Would you have a list of questions that I should be presenting to a company that I am looking at purchasing at the beginning of the acquisition process?
Thank you,
Lyle
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Answer
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Yes I would. You should engage me to assist in your process.
See what happens when you don't frame your question in the way that would elicit the answer your were hoping for?
OK, here are a few questions, and the Business Brokers are invited to respond to this question as well.
There are lots of questions, but here are the important ones to ask, in order of priority.
- What is your RMR?
- Do you have written contracts?
- Who is your central station?
- What's your mix of customer base?
- What's your mix of systems?
- What equipment do you usually use?
- What multiple are you looking for?
There are many more questions, but you should have an idea if it's worth engaging me to assist after you get the answers to the above.
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Webinars
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December 4, 2013 12 noon EST Register here: https://attendee.gotowebinar.com/register/4919260455763006721
Title: 10 Things Residential Security Alarm Companies should consider BEFORE entering the world of Commercial Engineered System Fire Alarms
Presented by: Bob Williams, President of Briscoe Protective Systems and his Management Team.
Briscoe Protective Systems has been in the industry for 35 Years and has made the transition from a Residential Alarm Company in the late 70’s to a Engineered System Fire and Security Company that is an SDM Top 100 Company. Find us on the web at www.BriscoeProtective.com or on LinkedIn under Companies, Facebook and Twitter@BriscoeProSys
Description: There is a big difference between installing Residential Fire Systems and Commercial Engineered Fire Systems and there are “Key Factors” that Security Company’s should consider before attempting to go into this lucrative but challenging market.
Who should attend: Alarm company owners and fire techs.
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