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Comment on attrition from Oct 29 2013 article 

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Ken

    I am glad that you have tackled the attrition issue in one of your daily briefs but I think there is much more than can be said that might be useful to alarm dealers in both Canada and the US:

    A company’s attrition rate is one of the top 2 or 3 parameters that every alarm company should be on top of and measuring at least quarterly. Certainly with companies like ADT, Monitronics or Reliance-Protectron it is a very important parameter.  When it comes time to sell, a company’s attrition rate is paramount. Companies with higher attrition rates simply attract lower multiples. It is amazing what a larger attrition rate over 3-5 years will do to returns on an investment proposal to buy a block of accounts.  Despite this, most small and medium sized companies don’t track their attrition. This does help their cause either with buyers

    There are lots of ways to measure attrition, some better than others. Just pick one that you can do easily each month or quarter and do it. I like the method of calculating total accounts lost in a period divided by the average number of accounts that the company had in that period- and then annualize this.  It is important to at least know if you are measuring gross or net attrition. Gross attrition is simply total cancellations before taking into consideration what is known as “resigns” like you would get when you cancel a customer in one location but take them on in another. Net attrition is usually a couple of full % lower than gross attrition. When you hear attrition numbers being bandied about, you should always ask which attrition number is being used.

    Regarding a good attrition number, in my experience, for companies under $100,000 in RMR consistently posting net attrition numbers under 7% would be a good target to aim for. My theory of the alarm business is that the larger the company the tougher it is to keep attrition down. Small alarm companies- under 2000 accounts- should be able to sustain net attrition under 6%.

    As moves are consistently one of the biggest- if not the biggest reason for attrition- all alarm companies should have policies and procedures in place for moves.

    Attrition is an issue that most of us do not spend enough time on

Victor Harding

Harding Security Services Inc.

www.hardingsecurity.ca

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Webinars 

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December 4, 2013   12 noon EST  Register here: https://attendee.gotowebinar.com/register/4919260455763006721

     Title:  10 Things Residential Security Alarm Companies should consider BEFORE entering the world of Commercial Engineered System Fire Alarms

      Presented by:  Bob Williams, President of Briscoe Protective Systems and his Management Team. 

Briscoe Protective Systems has been in the industry for 35 Years and has made the transition from a Residential Alarm Company in the late 70’s to a Engineered System Fire and Security Company that is an SDM Top 100 Company. Find us on the web at www.BriscoeProtective.com or on LinkedIn under Companies, Facebook and Twitter@BriscoeProSys 

      Description:  There is a big difference between installing Residential Fire Systems and Commercial Engineered Fire Systems and there are “Key Factors” that Security Company’s should consider before attempting to go into this lucrative but challenging market.

      Who should attend:  Alarm company owners and fire techs.  

 

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