QUESTION:
Ken
I am a small electrical contractor in Florida (AAF member) with fewer than 100 security accounts. I would like to increase my sales and have seen many ads touting the purchase of my accounts (and perhaps my company) and available new sales leads. Do you have any opinion about these companies? AAF says they have no experience with this.
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ANSWER:
This is a tough question and the answer is complex, depending on lots of factors. I should start by admitting that I have a predisposed bias against dealer programs, and I'll tell you why. Although the dealer program is going to offer you some structure, standardized procedures, perhaps marketing and advertising, leads, name recognition, credibility, and a ready avenue to sell your recurring revenue contracts, nothing comes without a price. Sort of, sell your sole to the devil and sooner or later you pay the piper.
So what am I talking about? From what I can see, the single most important aspect of owning an alarm company is the build up of equity. A pot of gold defined by recurring revenue under contract. Not only will that recurring revenue eventually build up so that you are operating with substantial positive cash flow, but one day you will be able to sell your subscriber accounts. The market will be there for you and you will be able to cash out. That is of course if you have something to sell.
That is the my first concern. If you are hocking your contracts as you go along, no doubt spending that money, you will have little if anything to sell at the end, and you won't even have the build up recurring revenue to operate with, just the money you get for selling the contracts to the Program.
Other concerns are that you will be operating according to a national approach, something that won't necessarily work in your area. Let's face it, city markets may not be the same as suburban markets, and each market has its peculiar characteristics that a successful business, including an alarm security company [system integrator] needs to adapt to.
The structure you are required to follow may add costs that you might not otherwise have, such as central station charges, advertising budgets, franchise fees, dealer fees, decal and other paraphernalia, contracts, reporting forms, equipment, all of which you are required to get from the Program. If you're not getting all of this, then what are you getting? The right to use a name and the obligation or at least encouragement to sell your recurring revenue contracts to the Program.
I am certain that there are lots of dealers out there who have profited from the dealer programs, and we'd all like to hear your success stories. Guess I'll also have to circulate the responses from alarm dealers for whom the dealer programs didn't work out that well, assuming they are still in business and getting my emails.