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more on buying accounts with no contracts May 10, 2018

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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more on buying accounts with no contracts
May 10, 2018
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more on buying accounts with no contracts from April 28 and May 4 2018 articles
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Ken,
    I talk to potential Sellers all of the time who don’t have contracts for their entire account base, or don’t have any contracts at all.  The most common excuse that I hear is that theirs is a small, local, company and the customers are all personal friends.  When they tell me this I relate a personal experience to them.  I still maintain my Alarm Company and Qualified Manager Licenses from my old days in the retail alarm business.  I have three customers, my house, my office, and a warehouse full of alarm equipment.  The warehouse was burglarized a couple of years ago.  The central station got the signal and dispatched the police who arrived within ten minutes, checked the front door, and left.  The loss was significant, about $40,000 so I turned in a claim with the insurance company for the warehouse.  The insurance adjuster asked me for some information, including my Contract with the Alarm Company.  Fortunately, even though I own both the warehouse and the ‘Alarm Company’ I have a contract, a Ken Kirschenbaum contract, between the ‘Alarm Company’ and the warehouse.  He told me that had their not been a ‘limited liability’ clause, they would have asked the Alarm Company to ‘participate’ in the claim.
    The moral of the story… It doesn’t matter how well you know your customers, if there is a loss you will most probably be dealing with your customer’s insurance company.  My loss was small but what if it wasn’t, what if the claim exceeded the limits of the policy?  What if I had to pay to defend my alarm company against a claim from a former friend?  Bottom line… Well written, properly executed contract – limited liability, No contract, poorly written contract, unsigned contract, improperly executed contract – lawsuit. 
Mitch Reitman
Reitman Consulting Group
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Ken,
    Victor Harding is a sales broker that helps dealers, mainly in Canada, buy and sell their security business‎. I suspect in the past he has had to represent sellers that don't have all or some of their clients under agreement. The seller will insist he obtain monetary value for these accounts and a lot more than 10x. I suspect most sellers are trying to get even value for these accounts as they just don't get it.  Ignorance is everywhere.
    I've  bought accounts with no contracts but quickly remedied the situation.  Contracts are extremely important. Thanks for all your good advice‎. I will be purchasing additional contracts from you soon.
name withheld
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Ken
    Let’s not overreact. We both agree about the importance of having contracts and making sure it is a proper contract. At the same time we can’t ignore the fact that thousands of alarm accounts across North America are  being monitored and serviced without contracts and have been for years without incident. Maybe the dealers behind these accounts are just lucky.
Victor Harding
Harding Security Services Inc
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Response
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    I get a lot of kidding and comment that "all I talk about is contracts" and "all my articles are about me selling contracts".  I suppose there is some truth to that.  As soon as I learn how to wire a panel I'll try and mix things up a bit.  For now, what I learned how to do is write an alarm contract, and, believe me, it's a lot of work keeping the contracts up to date and accommodating all the changes that are requested or required.   It's not my fault that the industry doesn't use foil and a single loop around the perimeter anymore.  Who knew that devices would be wireless, that cameras would be so popular, that audio could be two way, that motion could trigger audio and video as well as signals over several communication pathways, or that access control and other devices could be accessed remotely by customer and alarm company.  Who could have figured that central stations would grow nationwide and be essential and a main contributor to the alarm industry.  And how could we have known how many MBAs with hedge funds behind them would discover the alarm industry with its RMR model and want to participate in the industry, bringing with them the onerous and ridicules demands of their bank and corporate attorneys, some of whom want change just for the sake of it, and others because they want their papers to look like deals they have done in other industries.  
    And who could have predicted that state legislatures and courts in all of the states would have endless laws and cases affecting every alarm company in their jurisdiction, and some out of their jurisdiction.  
    
Contracts are an essential part of the alarm industry, and you may as well use the best.  One thing I am certain of, one day you will be very glad you bought and used the contracts, or one day you will regret not getting them.  
    So I apologize for being repetitive, sometimes boring, always insistent, about contracts.  I'll try and learn how to design, install and trouble shoot an alarm system so I"ll have something else to talk about.
    Let me end this way, on topic.  It's OK to buy accounts with poorly drafted or no contracts, but it's not OK to continue serving those accounts without getting new contracts signed.  If you want to be shifting corporate shells, hiding from creditors, scurrying all the time to make a buck, there are easier businesses to be in than the alarm industry where you can go broke.  In the alarm industry you actually have to try and go broke.  It's pretty easy to be successful in this business.  Use our 
Standard All in One contract forms, get your customer, sign them up and collect the money.  Just like losing weight on Nutrisystem [eat the meals and lose the weight]. 
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THE ALARM EXCHANGE

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Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
516 747 6700
www.KirschenbaumEsq.com