Question:

Ken
I have 2 parts for you:

The first part:

I have a novel idea.  Why not run an Alarm Company on honesty and
professionalism, have good service. low false alarms, follow ups on all
alarms, etc.  Why make people sign up for 3 or 5 years when it seems it is
becoming more illegal?  I know it takes some legal business away but I
would rather deal with a Company that says ˜you don't have to sign for 5
years.  You have the option of leaving if you don't like the way the
monitoring and service treats you.  By doing this, it makes the
monitoring companies and the alarm companies work harder to provide
excellent service and stop false alarms.  This would separate the men from
the boys, or am I missing something?


The second part

What would the financial implications be on the alarm company if the
clients were not offered 5 year contracts, but have the clients pay
annually, in advance, for their monitoring and service contracts?

Thank you

Donald Lehman
Attack Cat Security, Inc.

+++++++++++++++++++++++

Answer:

            There really isn't anything novel about doing business without
a contract, which renders the relationship with the subscriber "at will,"
or the contract terminable at any time by either party.  Lots of security
companies continue to do business that way for a variety of reasons.
Unfortunately for them, none of the reasons make sound business sense.
Contracts in any transaction are desirable and in the security business
essential.

    The contract not only defines the relationship but sets the boundaries
of performance and the scope of responsibility and limits of liability.
The contract terms will quiet disputes regarding performance, come into
play in your efforts to enforce the contract in the event of the
subscriber's breach and in the event that the subscriber sues you for a
loss which the security was intended to minimize risk.  [by the way,
"minimize risk" is a term that I use as an attorney - trust me, your
subscriber and its attorney would use the word "prevent."

    Now you could have a contract that protects you and at the same time
permits the subscriber to cancel the service at any time.  Why any security
company owner would want that is beyond me.  If you are in a locale where
all of your competitors are permitting this and all potential subscribers
know it's the custom then perhaps you can convince me.  However, I know of
no such area, and if there was I doubt it could afford to support two
security companies.

    Of course a long or longer term contract adds more value to your
business.  If you sell the subscriber contracts or your business you will
get more if you have proper contracts, and that means unexpired term
contracts, with renewal provisions.

    I am not aware of "laws" regarding length of term in alarm contracts,
or a renewal.  There are laws regarding automatic renewal and notice
provisions and I invite you to read my web site where I have some of the
renewal laws, state by state.  {see Alarm Law page].

    Excellent service has nothing to do with proper contracts.  In fact,
its the "fly by nights" who typically don't use contracts and don't give
the best service.  It's an endless argument and I am not inviting
comments.  Let me simply conclude that the only sound business judgment is
to use proper contracts, and from an economic point of view, contracts with
recurring revenue with long terms.