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Are longer term RMR contract worth more when selling
September 30, 2022
Are longer term RMR contract worth more when selling
          We use your Standard Form contracts and I was wondering if and when we were ready to sell, does the prospective buyer offer a greater multiple for contacts that have more time left on them?  I know there are other variables as well but just as a general guideline.
Thank you,
          Generally long and short term contracts shouldn’t affect the multiple, but that can change depending on the mix of accounts.  So if all of the contracts are in renewal, or all of the contracts are month to month or year to year, as opposed to perhaps half the accounts, it could cause the multiple to be in the lower range. 
          Individual contracts are not generally looked at; it’s a bulk purchase.  Whether to pay 42 times or 28 times involves a lot of factors are variables; average term of contracts is one of the variables.
          There is a reason the Standard Form Agreements have 5 year term for residential and 10 year term for commercial.  That will maximize your value.  Do everything right and have a large enough book of accounts then you are looking at range 35 to 40 plus.  Start deviating from “everything right” and the range drops, 30 to 35.  Really screw up, expect 20 to 25 range.  Complete screw up and you probably won’t find any buyer unless it’s in the 10 to 18 range. 
          In case you were wondering [or expecting this advice] the first deviating is not using the Standard Form Agreements.  How far you drop in multiple will depend to a considerable extent on how poor your contract is and what other mistakes you are making in your operation.
          K&K is here to help you maximize your alarm valuation and enhance your alarm operations in all legal matters.  All you need to do is call or email us.

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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