March 13, 2012

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comments on Sarrg

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Thank you Ron. Your experience with your insurance company is not uncommon. It is precisely why Security America Risk Retention Group was started - affordable and stable insurance for ESA members.

It is important to note that alarm company owners can maintain the relationship with their local insurance brokers and save money with SARRG. Our claims committee is headed by an alarm industry professional with 30 years experience and is well versed in the protection good contracts provide. In addition, our lawyers are trusted partners of our industry.

You will hear brokers attempt to keep charging you more than you need to for premiums by pointing out the ESA membership requirement. We all know that membership in ESA is worth its weight in gold IF you get involved. You might also hear that we are not a real insurance company. That is wrong. We are B++ rated by AM Best and re-insured by Lloyds of London.

The best insurance still requires the protection of good contracts. If you are operating with even one customer without a contract, stop what you are doing and get it signed. All you have to lose is everything.

Michael J Keegan, President

Security America Risk Retention Group

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In reply to the March 5 post by Ron regarding losses, contracts and insurance, there seems to be a reluctance on the part of some insurance brokers to write policies with SARRG, usually due to lack or knowledge or misinformation on the part of the broker. Some believe that their commissions will go away, not so. SARRG was created for our industry by people who best know what we do and the risks associated with our businesses. If your broker hesitates, PUSH, and get a quote...or get one on your own, fast and easy.....you may be surprised. One of the positive differences I have observed with SARRG is that unlike most insurance companies, SARRG actually looks at the nuts and bolts of any claims, and where the claim in dubious (or a "nuisance" claim) they will not pay it. This reduces costs and premiums for all policy holders.

As far as running an alarm company, think about a three legged stool....

leg one, a proper business structure such as a corporation or LLC. Speak to your money and tax guy, an accountant who know this business, for advice. Don't build the business structure (Corp or LLC) yourself (online services) unless you also do your own dental work.

Leg two of a well built company, good contracts (think Ken Kirschenbaum) which contain the necessary protections for you and your insurer. These are discussed regularly on this forum, read it religiously.

Leg three, an insurance policy custom tailored (think good suits-no pun intended) to the security business, such as SARRG.

The three legs will be what you need to help you sleep well while running an alarm company. I didn't say lawsuit proof (for that think Tom Hanks in Castaway), but at least you will have built a "tip-proof stool). Remember, take away one leg of a three legged stool, and it will fall over..without much of a push.

Joseph Hayes

Past President, NY Burglar & Fire Alarm Association

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Ken

I want to echo Rons sentiment about SARRG and local agents.

My local agent handles all workers comp, auto and other insurance. When I considered SARRG I asked him to look into it. I also had SARRG contact him. I wanted to go with my local agent because he is the one I call when I am in trouble, and he is always there for my other needs.

My agent called and said I would be a fool not to take the ESA carrier, and that he would write the policy and handle the paperwork for me. He said SARRG will pay an agents commission and he would not lose by administering the plan. Commission was not a full service agent commission but as long as I was his client he would handle SARRG.

My premium reduction the first year was 50%

Joel Kent

FBN Security Co LLC

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Question on company valuation - whats my alarm company worth?

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Ken,

I was just reading something you wrote on alarm company valuations. If I

understood right, a company with RMR of $45k could sell for 32 to 38 times

that number? So possibly $1.4M to $1.7M? Or is that $45k first multiplied by

12 months, and then by the multiple of somewhere in the 32 to 38 range? I'm

really not sure what might be the value of this company. Can you shed some

light?

Thanks!

Kevin Wellwood

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Answer

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its your RMR 45,000 x a multiple, anywhere from 20 to 40 plus

this is why we set up and offer

Whats My Alarm Company Worth ?

http://www.kirschenbaumesq.com/newalarm2.htm

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For those who missed the March 5, 2012 email, here it is again:

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Question on contracts

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Hi Ken,

I have a question about your alarm contracts.

I subscribed to your email list a few months back and keep hearing references made to your standard alarm contracts for sale. I can't seem to find more information about them besides the order form on your website. Can you give me some additional information about what's contained in your contracts, why I would need them, and which contracts I would need? I am a small dealer in California doing mainly wireless low voltage residential systems with plans to start offering interactive services through Alarm.com (lighting, locks, and thermostats controlled remotely and eventually remote video)

Thanks in advance for your time,

Cason

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Answer

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The Standard Form Contracts are customized state by state and include the provisions generally considered essential in the alarm / security industry. The various contracts address the different services that alarm companies provide and when possible combine services. The All in One for example is a generic security equipment sales, monitoring and service combined contract. One advantage of the Standard Form Contracts is that the terms are the product of years of revisions based on feed back from alarm companies all over the country. Though I am sure you need all the basic contracts, including the All in One and if you do commercial fire, the Fire All in One, from your email is seems like you can start with the Subscriber Enabled Monitoring Service Contract which features the subscriber remote services. That contract has no central station monitoring, and for that use the Monitoring Contract. You can order the contracts on my web site at https://www.kirschenbaumesq.com/alarm2.htm

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Question on alarm company valuation - Whats My Alarm Company Worth ?

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Ken

Your letters are very useful and informative.

Not too long ago you mentioned to one of your readers that monthly

revenues are worth between 30x-45x multiples. What determines the value

of such a wide gap? is it the market or the proper installation.

Thanks

CK

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Answer

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First let me direct you to a new service offered by my law firm - a team of lawyers specializing in assisting sellers and buyers navigate their way through a buy - sell transaction. You can start by finding out what your alarm company is worth by going to WhatsMyAlarmCompanyWorth.com http://www.kirschenbaumesq.com/newalarm2.htm

Although you'll have to pay a modest fee for a quick evaluation, I can tell you that the evaluation will include the two items you mentioned, your market and your installations.

There are many factors that should be considered for an evaluation of an alarm company. I'll list a few here, and the list is certainly not all inclusive and some factors should be given more weight than others. Keep in mind that the process and evaluation is not something you should be doing on your own and the time to engage knowledgeable counsel, hopefully me and my attorneys, is before you have your first conversation with a potential buyer. You don't want to start agreeing on terms that you will later regret.

So few things to consider:

size of your subscriber base; residential / commercial mix; intrusion / fire/ other mix; monitoring / service / leased systems mix; your area of operations; your contracts; license and other laws compliance; type of equipment; do you operate your own central station and if not do you have your own lines into the wholesale central station; what contract terms have you agreed to; do you have insurance; claims history; historical attrition rate; number of employees; profitability; have others expressed an interest in your subscriber accounts;

 

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woke up - now using contracts - newsletter endorsement (unsolicited)

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Hi Ken,

Thank you for your impassioned dedication to our industry and your sound advice. We found you through the ESA and got your newsletter after getting the employment agreement.

We too, are a mom & pop with 300 active alarm accounts, all of which were secured with a firm & friendly handshake. We ran for years with only our self created "limit of liability" construction agreement and the Limit of Liability from our sub contracted monitoring company. We even got lax on those.

We did get sued by a jewelry store that supposedly and suspiciously suffered a $500,000 loss but we won. Winning means we got to pay a lawyer and got dropped by our liability insurance company. We paid a lawyer because we didn't trust the insurance company's layer. Newer insurance policies were much more expensive than our old policy. We have been with Scottsdale insurance since that incident as it was the only insurance company that our local agent represented that would even insure an alarm company.

We are a fully convergent technology company and install data, voice, video and security systems. We had a real incident happen where a customer's property, fiber optic cable, was damaged.

We repaired the damage and the Scottsdale claims agent stalled our claim from December to April. In October we were handed a renewal by our Agent whom I had given information on SARRG in September. He said he looked into it and there were some prerequisites. One was that we had to be a member of the ESA. I pointed to the certificate on the wall and asked what else. I refused to renew and insisted that he contact SARRG. We now deal with our same agent and our premium is less. SARRG requires us to use contracts with our customers so we have been diligent with that using your contract. Getting customers to sign the contracts has been easy and now I have more peace of mind when investing in projects.

I don't think we would have done this had we not subscribed to your newsletter.

Thanks again.

Best Regards,

Ron B