Question:
Ken,
Having been in the business for about 20 years, I have a been conditioned ('cause we always did it that way') to want to go to the mat to initially get a long term contract from subscribers then to vigorously enforce the term, and the renewal. In past years it was rare that subscribers were even aware of the term, much less take issue with it. Lately, I have noticed that they are more aware of it, and we expend a significant effort in attempting to enforce the contract. At best, it's a confusing process, dealing with letters, moves, people die, sold the house/business, collection agencies, etc, etc
I have been giving a lot of thought recently, to whether or not it makes much economic sense to attempt to enforce renewals at all. And for that matter whether it makes sense to go to the mat on the initial term, if you have gotten a fair price for the install. Leases, or low down/no down systems are
different. While I am not persuaded, we seem to devote a significant effort to enforcement, with questionable payback, get a lot of negative feedback and bad will, and while we may collect a fraction of the money, we rarely change the outcome. The prospect of tracking, then sending out registered notices of renewal in a narrow time frame surrounding the renewal date may push me over the edge. I think my major reservation would be how competitors would react.
Now I know an attorney might sooner eat their young than recommend not enforcing a contract term, I would be interested in hearing from others on this.
Tony DiVento
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Answer:
Well, Tony, I am also curious how your competitors will respond to your inquiry. The standard form contracts I sell to the trade have been upgraded to increase the initial term of the contract, as well as the renewal term. Commercial leases are now 10 years. Monitoring and service at least 5. You
need to remember that in this industry the hope that there will be a pot of gold at the end of the rainbow is going to depend on your contracts. The better your contracts and the more under recurring revenue, the more you will be able to sell your subscriber accounts for when you are ready to pack it in.
Unless you have found a way to make real profit on the installations, service and monitoring, you should be focusing on the retirement benefits this industry offers. Like other types of commercial and residential construction or improvement, the security industry is tough competition. Obviously the
'free installation' offerings have the long term recurring revenue expectation, or the transaction would make no economic sense at all.
Enforcement of the contracts is a team effort, and it starts with the alarm company conducting itself in a professional manner and providing the service promised and expected. For those subscriber who for any reason at all fail to honor the contracts, despite the alarm company's efforts, the alarm
company attorneys get involved. You need to use attorneys familiar with the industry and committed to the industry. You may know (I'm not sure where you are located) that my law practice's largest department is devoted to alarm contract enforcement (collections), and I know that we are reasonably
successful at it.
So, my recommendation is, long term recurring revenue contracts, and send them to be as soon as the sub breaches.