Question:
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Ken -
I notice a great number of acquisitions in the Security System News and other publications involving both mega entities and small companies. Do they all involve long term contracts (3 yr., etc)? How does the acquisition market look at month to month contracts in general these days. Thanks.
Billy Rauers
Security Services Inc.
Savannah, Ga
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Answer:
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The value of your subscriber contracts depends upon a number of factors, length of term being one of them. Obviously a longer term contract is going to be worth more than a month to month contract. It is not uncommon to see a provision in a buy - sell agreement requiring the Seller to represent that all of the contracts to be included in the sale have at least 3 years left on the contract. If all of the contracts are for month to month, either because that's the term of the contracts or because they are in renewal at month to month, a Seller will generally value those contracts at less than "going rate".
But it's rarely just the term that's a problem for the Seller. A Seller who has month to month contracts or who has allowed his contracts to go into month to month renewal is also likely to have poorly written contracts and other bad business practices. I won't go so far as to say that someone like that is also likely to be behind in technology and skills, but it's a thought.
It's worth repeating that you can get properly worded contracts at www.alarmcontracts.com and that I recommend getting your subscribers to sign new updated contracts rather than relying on the renewal provisions, even in states that do not restrict the automatic renewal of the contract.
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Comment on batteries
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Excellent observation by Pres/CEO. We check batteries on every service call and install with the ACT teser, We replace panel batteries free on a regular service call. All our panels are programmed to send low batt, but not ac fails.
The batteries you use can make a huge difference. We prefer the Interstate, Elk or Genesis (old yuasa) because they are made with new lead not recycled lead. These batteries give us approx 4 years or more of service before they fall below 60%.
We also keep fully charged batteries on the service vehicles so when you replace a battery in the field you don't have to wait 45 minutes to charge enough to remove low battery condition on the panel.
In our area burglars are cutting cable lines, pulling meters and cutting phone lines on a random basis, so the panel and communicator battery is very critical.
John Elmore
Security By Elmore Inc
Birmingham, Alabama