January 19, 2012
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Question about batteries
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Ken
Do you recommend selling batteries over the counter to a customer to install themselves or should we require them to let us install? Do we have a real liability in that situation? thanks for your emails! really enjoy them.
Justin
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Answer
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There is no reason you can't sell batteries. I suspect that many alarm companies don't do it because they aren't in the retail sale of accessories, batteries or other equipment. They sell that they install or lease. The issue isn't really about batteries, but about the contractual duty the alarm companies owes the subscriber. If you're supposed to be servicing the alarm system and responsible for its continued operation [after notice to repair of course], then you can't stop by the house, or worse call the subscriber and tell them to stop by your office, and dispense batteries and tell them to install them. Especially since you're not likely to give instructions.
Funny, as I write this, I recall that recently my home lost electric, and back up battery died, and I told the alarm company [how'd you like me as your subscriber] to just give me a battery [which they would not do for anyone else] and I'd place it in the panel myself, which I did. But I have a policy not to sue alarm companies.
I would not recommend providing any equipment, including batteries, unless you have a signed Service Contract.
I guess another issue is selling batteries and any other alarm equipment retail. Again, most alarm companies don't do it, but from a liability perspective you would stand in the same shoes as any other retailer selling similar products. You're in the chain of distribution for product liability. I'd suggest a bill of sale that contains protective provisions similar to those found in properly drafted alarm contracts.
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Question on business address
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Ken
Our business is located at our house, and we will most likely move in the next year or so (plus don't really need our customers to know where we live), so we prefer the mailing address. Is there a legal issue or is street address just your preference?
Thanks,
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Answer
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Whether to use a business address or PO Box may be a personal preference, but might also be mandated by state statute. That statute may be in the alarm license law, some consumer law or agency regulation. The point is, I am confident that no statute prohibits the use of the actual business street address, but if you want to use a PO Box you need to first check with the law in your jurisdiction before displaying the address on your contracts and stationary. My office generally checks to make sure which address is appropriate when we customize the Standard Form Contracts for you.
This inquiry came from a company in California. CA has a statute, Business and Professional Code, section 17538.5 entitled Disclosure of business address and legal name, and that statute makes it a crime not to disclose your legal name under which you conduct business and your address of actual business. There is an exception if you conduct business from your residence. Then you can use a PO Box but you have to file with United States Postal Service a form 1583, which discloses your residence, and an acknowlegement form which authorizes the postal service to accept service of process as your agent. [this issue was researched by our Alarm Licensing Department - for info call Max Padden, Esq., 516 747 6700 ext 305]
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Exculpatory clause case issue January 14, 2012
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Ken
Your last sentence " better to deal with a false alarm fine....." is so true.
In an earnest effort to eliminate false dispatches the SIA CP01 standard for alarms tried to IDIOT PROOF alarms by sending CANCEL signals after brief alarms or EXIT ERROR alarms within 2 minutes of arming. The interpretation of these CANCEL signals or LACK OF STANDARS in interpretation is the cause of the communication difficulty. You are the expert to determine the level of culpability that each party assumes, however the installer/Dealer should explain IN WIRTING to the central station HOW TO TREAT CANCEL/EXIT ERROR alarms. Where a CANCEL ALARM signal is sent merely indicates "the alarm has been disarmed by an authorized code" We have no idea if a hostage/ambush situation exists. If the Central Station never got through to the residence any CANCEL DISPATCH should not have been made. Only after a thorough verification sequence of the identity of the person on premises and keeping in mind the potential for a DURESS SITUATION you might let the police know that persons are on premises, they may be authorized.......
Once dispatched we NEVER ALLOW CANCELLATION OF DISPATCH By an operator based on electronic data only. We would call back and advise of the potential of persons on premises not known.
Joel Kent
FBN Windsor Ct.
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More on RMR multiples
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Ken
My compliments to you for the quality of newsletter, as well is my admiration for your ability to keep producing interesting and thought out items for discussion.
I read David Myers letter to you on January 17, 2012, Where he referred to three speakers at the ISC show all predicting that multiples for RMR would "continue" to fall. Since you and I were on the only panel to discuss this, I thought it might be appropriate for me to comment on the subject.
First, I don't believe that multiples have started falling, but rather, the potential for conditions to arise that would cause them to fall, is certainly there. Right now, demand is certainly outweighing supply. If anything, that reason alone would cause the multiples to continue to remain high, and perhaps, go even higher. However, and this is a big however, if there is continued pressure to lower the price of monitoring by new entrants into the industry (i.e. cable companies, telephone companies, direct marketers, etc.), then surely it will impact what traditional alarm companies are able to charge their customers. Look no further than what it used to cost to make a long-distance call, and what it costs today.
Next, look at the market and who is buying, particularly among the big players. Part of the reason the big players are "big" is that they understand the economics of buying or not buying portfolios of RMR. Every company, regardless of size, either does or should do, an analysis of what their exit strategy is going to be. If the big companies are buying high, and their goal is to exit within the next two or three years, they will not be able to sell at a high price and come out ahead financially. That is a negative arbitrage. The same would hold true for small and medium-size buyers. If the new entries into the alarm industry charge what is industry standard monitoring fees, it's entirely likely that multiples will continue to stay high. I think Mr. Myers approach to keeping abreast of market multiples is right on target. It's something we all have to keep watch on, and be prepared to act if we see any changes. Right now, virtually all of the sellers we represent have received offers, at good multiples, for their businesses.
Finally, I hope your readers understand that sellers are not really getting a multiple of RMR so much as a multiple of cash flow. Your suggestions about good contracts and owning your own lines are right on target, but they should be followed closely by standardizing on product lines and installations, adding service contracts, and development of a systematic approach to modest price increases( a dollar or two every two years rather than a larger sum once every five years), and by the way, maintaining files of original contracts on all of the monitored accounts.
Keep up the good work, Ken, you are performing a real service to the industry. If any of your readers are interested in more information about buying and selling alarm accounts, you might direct them to our website, www.graybeardsrus.com. It's a good place to start to find out what's happening on the mergers and acquisition side of our business. Best wishes for a happy and prosperous new year.
Ron Davis