QUESTION: IS ANOTHER COMPANY STEALING YOUR SUBSCRIBERS
Over the past couple months my attrition rate has been much higher than usual. I noticed that a lot of the subscribers who terminated on the same day all lived within walking distance of one another. This makes me think that there must be another company poaching my subscribers, I don’t see any other reason for this out of the blue attrition spike. I am just starting to investigate, but assuming I am right and there is another company soliciting my subscribers and convincing them to switch over, what are my options?
RESPONSE BY JESSE KIRSCHENBAUM, ESQ.
If you discover that another company is in fact soliciting your subscribers and causing them to terminate their agreement with you, there are several options you have. The first is going to court for a preliminary injunction. If you’re successful, you will have a court order prohibiting the company from soliciting your subscribers. ADT was faced with this problem in Texas last year and this is the route they chose to go. Several dealers were making house calls to ADT subscribers claiming that their alarm system needed to be upgraded and that ADT was going out of business or that the dealer was taking over some of ADT’s accounts. After the dealer convinced the subscribers to terminate their contract with ADT they had those subscribers sign new contracts, which they later sold to Monitronics. ADT was successful in requesting a preliminary injunction and now these dealers and their sales agents are prohibited from making any sales pitches to ADT’s subscribers.
Another option you have is to sue for damages. If you do find out that another company is causing your subscribers to terminate their agreements with you and signing them up themselves, you can sue for tortious interference with contract. ADT typically does this in addition to seeking a preliminary injunction when they discover another company soliciting their subscribers. Over the past 3 years, ADT has received about $6 million in settlements against companies that have caused ADT subscribers to terminate their agreements with ADT.
If you use our Standard Form Agreements then you also have a strong case against the subscriber. You would be able to bring an action against the subscriber for 80% of the remaining payments under the contract, in addition to legal fees. If you are using poorly drafted contracts or no contract at all, then you’re best bet is to probably accept the loss and move on.
To show you how timely this question really is, Illinois Alarm Assoc Executive Director, Kevin Lehan, recently sent an email to his association members. Incidents like the one he describes are not unique to Illinois. Here is his email article:
A licensed alarm contractor in Illinois informed me today that his customers have been targeted in a telemarketing scam. His customers alerted him about calls from an entity claiming to be “GE Security Systems.” The caller says there has been a manufacturer’s recall on their alarm panel and they are contacting on behalf of “XYZ Alarm Company.” In some cases, the scammers inform the subscriber that they know their system is more than three years old.
The calls originated from a local Chicago suburb area code phone number, which is now disconnected. A search online yielded few clues.
To protect your customers from these rogues, contact your customers first. Even if you have a simple billing insert, you are protecting yourself.
My best regards,
ADT to be acquired
After all the rumblings over the past couple years that ADT would be bought, it appears such a deal is finally taking place. Apollo Global Management has agreed to acquire ADT for $6.9 billion. Apollo bought Protection 1 last year and plans to merge it with ADT. The new company is expected to generate about $318 million in RMR and over $4.2 billion in annual revenue. This deal is noteworthy due to the sheer size of the companies involved, but smaller alarm companies are being bought and sold all the time.
Before you can even entertain selling or merging your company you first need a valuation. Most of you will get the highest valuation by using the RMR method so long as you are using proper contracts. If you would like to have your company valued based on RMR visit WhatsMyAlarmCompanyWorth.com.
RMR is the most effective analysis that exists for most of you but if you want to put the extra effort into really maximizing the equity and value of your company then you might want to consider a more in-depth valuation of your company. Whether you are interested in having your company valued for an upcoming merger or acquisition or if you just want to get a better idea of your company and how to increase its value, contact Jesse Kirschenbaum, Esq. of our Mergers & Acquisitions Department at (516) 747-6700 Ext. 317 or at Jesse@Kirschenbaumesq.com.