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Question on valuing RMR- phone v radio - from March 11, 2014 article

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Ken,

    Here is a question that I'd like to ask.

    Which account is worth more? An account on a phone line, or an account on a radio.  All circumstances are equal, and of course we use Kirschenbaum contracts...

    Which account is worth more all things being even.

Scenario 1

    I charge the customer $30 monthly for a phone line account and pay

monitoring fees of $5, net is $25.

Scenario 2

    I charge the customer $40 monthly for a radio and pay monitoring of $15, net is $25.

Kindest Regards,

Captain John Minerva

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Answer

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    I would value the accounts equally only because you charged for the radio, leaving the same net.  Arguably the radio account may have less value because of a possible increased transmission cost which you might have to swallow unless you can pass it off to your subscriber.  I suppose a radio account has an additional service component, but your question seems to address only monitoring charges.  BTY, using the Kirschenbaum Contracts insures top dollar valuation.

    I thought I would ask one of the industry experts on valuation and a broker found on The Alarm Exchange, Steve Rubin.  Here's what Steve had to say.

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Ken,

    If the customer has a 2G radio (assuming the alarm dealer adds at least his costs for the radio to the monitoring), the account is worth the same as one on a regular phone line.  Remember, we are assuming that all charges are the same.  The reason 2G is not worth more is because those radios need to be upgraded to 4G soon.  If we are comparing a 4G radio to a phone line, the 4G is worth more.  Why?  There is less chance of a cancellation.  There is more of a chance that a customer will cancel their phone line.      POTS lines are going away.  Also, with cellular, you have an opportunity to talk with the customer about selling more services such as apps., texting, etc. which could increase your RMR.  The higher the Contracted RMR, the more a potential buyer, if the dealer is looking to sell, will pay.

Steve Rubin

Davis Mergers and Acquisitions Group, Inc.

847 550 1557  Office

847 340 2555  Cell

srubin@graybeardsrus.com

www.graybeardsrus.com

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Response

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    Steve actually raises an interesting point.  One real consideration is the cost of servicing and changing the communication path as POTS or the radio becomes obsolete.  Question is which one is more or less permanent.  A potential buyer will ultimately be the one to decide valuation, at least what the buyer is willing to pay, and changing communication will be a consideration.

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Comment on financing RMR - Where on The Alarm Exchange should you look - from March 11, 2014 article

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Ken,

    I am responding to the request for information on RMR Capital and AFS from your anonymous post on 03-11-14.  First, right off the bat let me say that these are two excellent companies. RMR Capital is actually out of Minneapolis and I have had the real pleasure of working with Mike Donegan and Kris Kirby over there for over two years now.  These guys are of the highest integrity and they have a very strong program.  I have many dealers using their services and I have never heard a negative word about them.  Their funding is very timely and they do exactly what they represent.  They are also very easy to work with.  Regarding AFS – Jim Wooster is a tenured industry veteran who has a keen understanding of the needs of alarm dealers.  I have also had the pleasure to work with Jim at AFS for many years.  He is a true gentleman and like the guys at RMR Capital, there is no chicanery in his approach.  He will do exactly what he says he will do.  He has also helped several of our dealers and like RMR I have never heard a negative word about him or his program.  So, to whoever posted the request for information, I hope this helps and I assure that you are looking at two great options. 

Mark Matlock, SVP

UCC

San Antonio, TX

www.teamucc.com

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Response

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    Both RMR Capital and AFS [Alarm Financial Services] are on The Alarm Exchange in the Financial category, and thanks to Mark, whose company UCC is also on The Alarm Exchange in the Central Station category.  You can do business with these companies with confidence.

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TO SUBMIT QUESTIONS OR COMMENTS REPLY TO THIS EMAIL OR EMAIL Ken@Kirschenbaumesq.com.  Most comments and questions get circulated.

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Speaking Engagements

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Sonitrol Verified Electronic Security.  Annual convention March 22, 2014 at The Worthington Renaissance Fort Worth Hotel in Fort Worth, Texas.

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SentryNet's 19th Annual Dealer Conference.  April 22 - 24, 2014 at Harrah's in Tunica, MS.  register at http://www.sentrycon.us or call Peggy at 800-932-3304 for more information.   www.sentrynet.com

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Northeast Security & Systems Contractors Expo.  Thursday, May 22, 2014 10 am to 5 PM at  Royal Plaza Trade Center,  Marlborough, MA.  registration  https://www.expotracshows.com/neacc/2014/  Presentation on Alarm Law issues and Q&A will be at 2 PM.  For more info contact Gary Spaulding, NEACC President

207-384-2420 gary@spauldingsecurity.com
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Alabama Alarm Association.  AAA's Fall Meeting and Trade Show - October 21, 2014 from 3 to 5 PM at DoubleTree Hotel 808 South 20th Street Birmingham, AL 35205  for more info contact AAA Executive Director: director@alabamaalarm.org  (205) 933-9000 

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Electronic Security Summit for 2014.  October 22-24, 2014  at the landmark Broadmoor Hotel. Colorado Springs, CO.  For more information contact Alexander J. Quirin, CEO & Managing Partner, Advisory Summit Providers, LLC.,  (786) 999-9738    alex.quirin@aspsummits.com    www.aspsummits.com