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when does account value diminish / hacking liability September 9, 2017

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
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when does account value diminish / hacking liability
September 9, 2017
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when does account value diminish
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Ken
    Does the account value diminish depending what is left in contract?  What about completed contracts. Does the RMR value still hold since they are month to month and have no obligation to remain?
Mike
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Response
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    Valuation of the RMR is not a precise science, but its not all that complicated either.  Buyers bank on continuation of business, so they aren't that concerned that a contract has only a year or two to expiration, or is already in a month to month renewal term.  If all or most of the contracts are approaching end of term or are in renewal then you can expect an offer to be on the low side of the spectrum.  The range for multiples is so broad, stretching from under 20 to over 40, it may not even be possible to figure out why a buyer offers a given multiple.  
    The thing is, if all your contracts are in renewal or old then there are likely more serious issues that will cause an offer to be lower.  Contracts that are old or in renewal probably means that the systems are old, possibly outdated, and that the subscribers are paying lower charges and may have been neglected.  I say that because if they weren't neglected then the systems would be updated, the RMR charges would be maxed out and there would be new contracts.  That's how you get a multiple of 40 plus.
    Don't bother to update systems or contracts and expect to see offers closer to 30.  
    I don't want to count your money, so you do the math:  Your gross RMR x 10 = the amount you likely are giving up on a sale; your loss.  
    First update your contracts, then update the systems.  Then you'll be in a position to sell.  If you don't follow this "program" then your buyer will, quickly adding that 10 times the multiple you lost to its equity in its business.  If you think it's better in your pocket then get with the program.
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hacking liability
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Ken
    Wouldn’t our contracts protect us if a subscriber’s security system got hacked?
Sally
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Response
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    The Standard Form Agreements make it clear that some alarm systems are connected to the internet or operate over unsecured airwaves, and that the alarm company is not responsible for damage caused by hacking in through the security system.  The contract terminology should hold up, until it doesn't.  Try and get insurance for this exposure.  Thinking that you can rely just on the contracts is like the jeweler who didn't get insurance and figured he could rely just on the alarm system.  Bad bet; didn't work out for him.
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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