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Valuing your alarm and integration business / ISC Schedule
February 16, 2024
ISC schedule
    I'll be at ISC in April and again sponsoring and conducting informative meeting.  Vendors who wish K&K to schedule meetings for them should contact Stacy Spector,Esq at 516 747 6700 x 304 or now.  Dealers who want to participate in private meetings with me or vendors listed on The Alarm Exchange should also contact Stacy to schedule a time.  Meetings [private and group meetings on scheduled topics] will be schedule for half to one hour, without charge, and conducted at the Palazzo Prestige Lounge.  Times and schedule is limited so please contact Stacy soon as possible to request a topic or schedule an appointment.
Valuing your alarm and integration business
          In the February 14, 2024 article I listed a number of items that are useful, if not necessary, to know when selling [or buying] alarm accounts.  The list included:

  *  number of accounts
  *  % residential
  *  % commercial security
  *  % commercial fire
  *  RMR for inspection or service
  *  RMR for monitoring
  *  what cs you go to
  *  how much you pay cs each month [average for all accounts]
  *  number of techs you have
  *  are employees under Employment Contract
  *  where are most of the accounts concentrated
  *  what equipment do you usually use
  *  panels?
  *  software you use?
  *  contracts?

          It shouldn’t surprise you that this same information is used to value your alarm business, especially if your business is based on the RMR model.  Most of you do follow the RMR model, though many of you are also engaging in other profitable ventures, some related to alarm or security or fire, and some not [shades, solar, generators, digital displays, outdoor living, to name a few]. 
          Those aspects of your business that do not involve RMR will be evaluated on an EBITDA method, basically figuring out what ends up in your pocket.  That calculation a lot of financial investigation and disclosure, though I like to simply ask, what do you end up with. 

          RMR also involves variables and likely gets you to the same result as an EBITDA calculation, close enough anyway.  With monitoring RMR we know the amount charged and the cost of monitoring, so it’s pretty easy.  Some buyers of these accounts will insist and investigating your finances, but I don’t see that as a legitimate inquiry, because how you run your business and what expenses you have should be unrelated to how the buyer is going to incorporate your accounts into its operation [assuming buyer has a separate operation to role your accounts into].  Presumably the buyer’s cost of providing monitoring to your accounts will be less expensive, and more profitable, than your experience.
          Accounts are valued differently.  There are probably statistics out there that show life expectancy for residential, commercial, fire, security, cameras, etc.  The variables can be exhausting.  I am not so sure that there really is a precise way to calculate the value of these different accounts because most alarm companies have unique experiences with their customer base.  So unless we are looking at an ADT or other company with similar market share, customer base can be somewhat unique for each company.  Maybe you’re in an area with limited competition, high or no crime, lots of or few rules or enforcement of alarm system installations, high value homes or buildings, etc.  There are too many variables to really list here.  Interestingly enough most alarm company owners think their accounts have some distinction, a reason to be worth more [or less].  And they are often right. 
          Of course the best measure of the value of your accounts is what someone is willing to pay for them.  Buyers also have different reasons for wanting accounts and that influences what they are willing to pay and how they are willing to pay. 
          Whether you’re ready to sell or buy you should be guided by the best practices.  Rules of physics don’t change, and how the alarm business works, or doesn’t, shouldn’t change either. 
          Selling or buying, engage K&K first, so your first move isn’t your first mistake.
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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