KEN KIRSCHENBAUM, ESQ ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com ****************************** should you offer Service Plan and comment on what expenses are covered by Service Plan April 7, 2025 ******************* should you offer Service Plan and comment on what expenses are covered by Service ******************* Ken Thanks Ryan and Ken. Great question and answer. Here is a basic formula we used with residential and small commercial installations. Two no fault calls with up to 1 hour free. After that normal service hourly charges. Parts were 30% off retail price. When we sold the business we had about $75,000 a month at today's dollar of Service Contracts and received 35 times that number. Sell service contracts. They provide profit dollars, help retention and additional money when you sell. Jim Wooster Sr Alarm Financial Services jtwooster@alarmfunding.com cell 917 747 5379 *********************** Response *********************** Service Contracts should seriously be considered and yes, you need to be careful pricing the service plan. While the Standard Residential All in One or the Standard Commercial All in One [and the other All in One agreements] all provide for a Service Plan option [as well as a "per call" option], which includes labor, material and equipment, you can modify that inclusive plan as you desire; it's your contract terms offered in the first instance, subject to negotiation by the customer. Keep in mind that the Service Plan includes only repairs necessitated by "ordinary wear and tear", so that does leave you a lot of flexibility whether to charge for the repair outside of the Service Plan. Unlike the monitoring charge you don't have a fixed expense to provide the service so you need to be careful pricing the Service Plan because once you commit you are committed. With new installations you can factor in the Limited Warranty that comes with the sale and installation. Most of the kinks should be ironed out during the warranty period. For older accounts that you sign onto a Service Plan you should have a history or repairs as a guide. For very old accounts keep in mind that obsolete or end of life equipment [end of the equipment life, not the consumer] that equipment is excluded from the Service Plan. Batteries, electrical surges and lightening are also excluded as is vandalism and damage caused by other than ordinary wear and tear. As for what multiple you should anticipate when selling your accounts you should expect something less than you're getting for the monitoring RMR. There's a little more risk in calculating profit with Service Plans compared to monitoring RMR so that is reflected in the purchase price. If also matters what the mix of RMR is for Service Plan RMR and Monitoring RMR. When the Service Plan RMR is a low percentage of the overall RMR a buyer might just combine it with the total RMR or may price is separately from the monitoring RMR. Depending on the percentage of Service Plan v Monitoring RMR you may also see a blended multiple where the buyer has factored in the Service Plan and reduced the offer on the overall RMR calculation. It's not an exact science and there are plenty of other factors that come into play. Suffice it to say that without experience of hundreds of deals it will be hard to determine where to price the deal and what offer to make or accept. On the other hand, what a buyer is willing to pay and a seller is willing to sell at is the ultimate determining factor if there will be a deal. Be sure to give me a call when ready to sell or buy. ********************** STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com *************************** CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304. *********************** WEBINARS: https://www.kirschenbaumesq.com/page/alarm-webinars *********************** ALARM ARTICLES: You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles updated daily ******************** Wondering how much your alarm company is worth? Click here: https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth *********************** THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily ************************* PODCASTS: https://podcasts.apple.com/us/podcast/ken-kirschenbaum-presents/id1794851477 ************************* Getting on our email list / Articles archived: Many of you are forwarding these emails to friends or asking that others be added to the list. Sign up for our daily newsletter here: Sign Up. ************************** Ken Kirschenbaum,Esq Kirschenbaum & Kirschenbaum PC Attorneys at Law 200 Garden City Plaza Garden City, NY 11530 516 747 6700 x 301 ken@kirschenbaumesq.com www.KirschenbaumEsq.com
