April 16, 2011

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comment on increasing RMR

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Ken,

There also appears to be a valuation question here. What happens to the RMR valuationÂ… ?

If the company has raised the RMR due to a price increase (if permitted in the contract), the value of the contract would increase within reason (i.e. the RMR from the agreement is still a market rate and is reasonable). It is not unusual to see many long time customers paying higher RMR than the original contracted amount. One thing that we do look for during due diligence is across the board rate increases shortly before the company is put on the market with the intent of raising the RMR to increase the selling price.

An increase in RMR due to a pass through (sales tax, phone line charges, etcÂ…) would typically not increase the value of the contract as the gross margin has not increased.

Mitch

S.I.C. Consulting, Inc.

Fort Worth, TX

WWW.SICC.US

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Comment on sales tax

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Hi Ken,

Once again, thank you for this forum. I have learned a lot from you and the other readers over the years. I start every morning by reading this post on my iphone. I then spend the next half hour worrying about the information included in the post and how it will effect (cost) me. Nonetheless, the insight is invaluable.

In response to the recent post regarding sales tax. We here in Florida are required to collect sales tax on all monitoring services and have been for some time. In addition, we are now required to collect sales tax on all burglar and fire alarm maintenance. Yes that is right, tax on labor. This information can be found in Florida publication #800018. It clearly states that maintenance on both these services will be taxed. I believe this went into effect in August of 2010. I get many complaints on this tax from my customers. They say none of my competitors charge tax on labor and I must be wrong. I have lost business over it.

This information will be helpful to all your subscribers doing business down here. And look out for the State auditors as they will look to catch you on this one.

Sincerely,

Rob Garfield

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Question on door to door sale

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Hi Ken

Why would this be called a door to door sale if the customer called the company.

Brett

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Answer

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doesnt matter who initiated the contact - it matters where the deal was

negotiated and executed