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What’s the current multiple?
January 15, 2020
What’s the current multiple?
            I did an alarm company valuation the other day [] using the Level Two Evaluation and Basic Report at, so the alarm company was given the range of multiple used to arrive at the value of the alarm contracts.  The client questioned the multiple I used, around 35, and said he’d heard the multiple was around 24 to 28.
            My response was, “not for you.”
            So what is the current multiple for most alarm companies?  Let’s define “most alarm companies” as those with less than $200,000 RMR to sell.  I see deals with RMR of several hundred dollars to several hundred thousand dollars.  The more RMR you have to sell the higher the multiple is likely to be.
            In the last 30 days my office closed on 3 alarm transactions.  The multiples were 23, 28 and 32.  They all shared one common factor:  none of the sellers used Kirschenbaum Contracts ™.  In two deals many customers didn’t even have written contracts.  
            If you want to get offers within the 23 to 32 range, keep doing business the way you have been; keep using your crap contracts and not bothering to get most customers to sign even those crap contracts.  That’s your range, and you’ll be lucky to get an offer at all.  
            You want to get at least 35 times, maybe as much as 42 times, then you need to make sure all your customers have signed updated contracts, Standard Form Agreements that are easily identified as Kirschenbaum Contracts ™.  
            Deals where Kirschenbaum Contracts ™ are the predominant form used and most customers have signed those contracts, command at least 35 times.  You would have to work very hard ruining your company to end up with less.
            So the answer to the perennial question, “what’s the current multiple” is that the multiple hasn’t changed much over the years, it’s still around 35 times your RMR provided have proper contracts and you have taken measures to conduct your business to maximize your equity in the contracts.  If your main focus is cutting corners on contracts, on insurance, on employees, on equipment, on central station, then what can you expect?  Not 35 times, that’s for sure.  Contracts are only one of the components used to figure out a multiple.  If it was the only factor then I’d give a guarantee that if you use the K&K contracts you’ll get at least 35 times.  But there are several factors and you need to pay attention to all of them to maximize your multiple.  Start with the Kirschenbaum Contracts ™, keep them updated, get all customer to sign them, and then your valuation will start with 35 times.  Add the other “best” practices [and there are plenty of K&K articles on this topic, and the multiple moves up to the 40s.  If I go back 4 months I can tell you that a small to mid-sized deal with all updated Kirschenbaum Contracts ™ fetched 42 times.  
            It’s still January; you have all of 2020 to get yourself straight.  Start this year off right and get the updated Kirschenbaum Contracts ™; you will find out they are worth it.

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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