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Is there difference valuing low RMR accounts  
August 3 2023
Is there difference valuing low RMR accounts
          If I want to sell accounts is there a sale price difference between an account that is being billed $40/month vs $35/month (as an example) -assuming they are both basic accounts with no video and monitoring?  Or what about $30/month vs $45/month?
          The multiple applies to the net RMR, so higher RMR yields higher price.  The only time a multiple will drop is when the buyer thinks the pricing so low the account would struggle to make a profit.  I've seen RMR charges so low that buyers don't want to consider the accounts.  
          The opposite is also an issue, an account with an unusually high multiple.  A buyer may not want to gamble on that account.  A recent deal had one account at $2000 RMR when the overall account RMR was $26K.  The one year guarantee offered by seller on all accounts was rejected by the buyer and this account was given a two year warranty, 24 months [the multiple on the deal was 26].
          We see this analysis when the RMR is for repair plan and inspection service, both of which have indeterminate expenses associated with providing the service as opposed to a monitoring account that has a relatively fixed expense [such as the and central station charges].  This really is an assessment of profit the account is actually yielding.  Perhaps the most dramatic example is stationary guard service, where the cost of providing the guards eats up most of the charges to the customer.  But repair service and inspection plan RMR that isn’t priced right can end up ending with a loss rather than profit. 
          Keep in mind that even monitoring accounts have what we can call “hard costs” and “soft costs”.  The hard costs would be the cost of the communication device and installation [especially if supplied without charge] and the actual monitoring charges.  The soft costs would include the alarm company’s office rent, insurance, clerical personnel, and general overhead.  An alarm company would be hard pressed to operate a monitoring only retail business when the charge to customer is $8 a month and the central station charge is $7 a month.  Even 10,000 accounts comes to $80,000 a month and if you think about billing monthly and incurring a 66 cent stamp charge you end up with 34 cents, and that’s only $3400.  Now figure the envelope and the clerical personnel to send the invoice and record payment.  You’re losing money and if this is your model then some other part of the operation is supporting the business.  And, if you think you have $80,000 in RMR to sell at 35 times, you’re way off.  Even if you think you have $10,000 in RMR, you’re not going to find a buyer. 
          While buyers may not discuss soft costs as openly as hard costs when tossing around a multiple, that is certainly on the buyer’s mind.  In fact some buyers are using EBITDA valuation in addition to or in place of the RMR calculation.  This is especially the case when the selling alarm company has significant revenue from non RMR revenue, such as sales for alarms or other related services, such as IT or non-security audio and video. 
          For quick valuation go to WhatsMyAlarmCompanyWorth.  To build you company value go to 
           And yes, K&K will represent you as counsel if you're a seller or buyer, and will also broker the deal at significantly reduced brokerage charge.  Give Ken Kirschenbaum a call to discuss.  516 747 6700 x 301.

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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