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How To Sell YourAlarm AccountsWritten by:Jonathan Knoder

Before We Get StartedThere is a lot of information to consume when it comes to selling your alarmaccounts. In this article we address why you should sell your alarm accounts, howto get funding, evaluating your accounts and more.This in-depth eGuide provides links throughout with additional resources on thistopic. You can click on the bullet points in the table of contents to jump to thatsection.ContentsWhy Sell Your Alarm Accounts. 03Funding. 04Evaluating Your Accounts. . . 06Things That Determine The Value of an Account. . 06Improving The Value of Your Contracts. 08Buyer Verification. 09Conclusion. 1002

Going out of business Fund your retirementWhy Sell YourAlarm Accounts?A large portion of this questiondepends on what stage you are in asan alarm dealer. Dealers who are juststarting out might will most likely beselling their accounts to gain capital,while a dealer who has been inbusiness for a number of years couldbe selling accounts simply to stayafloat. Some of the most commonreasons to sell accounts are: Gain capitalPay off debtExpansion in businessBuy a partner outOne of the most unique things in thisindustry – and also what makes thisindustry so attractive – is that you canstill maintain revenue even thoughyou are selling. Let’s say you want togain capital to buy a new vehicle foryour installer. Your business holds500 accounts. You can sell 100 ofthose accounts – you might evenbundle together your least attractiveaccounts – to fund the new truck,but you can maintain revenue fromyour existing 400 accounts. This isbeneficial because you can get rid of“bad” accounts, and maintain yourcore clientele. Essentially, you arereceiving money in two ways: RMRand the sale.Watch the webinar03

FundingAs a seller, there are a number ofoptions you have as a company tosell your accounts. Some commonmethods include: Dealer Program Brokers Bank LoanDealer ProgramsOne of the main purposes of dealerprograms is to provide securitycompanies with cash to continuetheir operations. Dealer programscan do a lot of good for a buddingsecurity company, but there are someinherent risks when choosing to sellaccounts to a dealer program.ProsThe biggest benefit of joining adealer program is the immediateincome. Instead of serving anaccount for years, simply sellingthe account and getting the profitsupfront is the ultimate benefit. Thiscan be especially beneficial for smallcompanies who don’t have enoughaccounts to generate the cash flowfor new equipment or other costs.ConsThere are some things you should beaware of if you are considering sellingyour accounts to a dealer program.The first thing to consider is thatmost dealer programs require youraccounts to stay in good standing forat least one year after they are sold.If one of those accounts expires forany reason, you will have to pay thefull life of the contract in full. You canalso make this cost up by signing anew account and essentially giving itto the dealer program for free. Oftentimes these “chargebacks” haveadditional costs to losing a contract,so the cost could actually be greaterthan just the penalty of paying thelife of the contract.Attrition can become a real issue withsigning on dealer programs. Almostall partnerships require the dealerto service the accounts for free for ayear after the sale. So, in a scenariowhen you lose an accountafter the sale, but you pickup another account, you04

not only lose out on the RMR, butthe cost of equipment, installationof the equipment, tech costs andcommissions are all sunk. If thatcontinues to happen, your costs cansoon outweigh your income.It’s important to remember thatattrition can be completely out ofyour control. Accounts can be lostfrom death, job loss, moving, divorceand a number of different reasons.To think that you can avoid attrition isunwise.In terms of contracts, most dealerprogram contracts run for threeyears. These contracts are airtight,so it becomes basically impossibleto break a contact with a dealerprogram after the contracts aresigned.Security Equity Partners is a uniquefunding program that can customizeadvancement plans to help yourcompany with contracts.Bank LoanJust like you would go into a bank fora business loan, industry banks canloan you money based on the valueof the contracts you hold. Much likea dealer program, you can bring yourfuture revenue forward from the contracts.ProsIndustry banks can offer competitiverates. It is also speedy process to getmoney because you don’t have towait or look for a buyer because thebank is the one purchasing or loanagainst your accounts.ConsDefaulting on your payments can ruinyour credit.The edmonds Group is an exampleof a bank that can help your companysell contracts.05

Evaluating YourAccountsThe most important piece to this puzzleis the recurring monthly revenue fromyour accounts. Alarm accounts sales arecalculated by a multiple of the RMR. You’llhear terms such as, 32 multiples or 12multiples when talking about the valueof an account. Essentially, what is beingsaid is the buyer believes the contract willbe good for so many months (multipliedby that account’s RMR). So, if the RMR is 15, and the account is being sold for amultiple of 32: 15 x 32 480 is what thebuyer believes is the value of the account.Now, if you have 100 accounts all at 32multiples of 15, that’s 48,000. As youcan see, the instant cash injection canreally become valuable quickly.Things ThatDetermine theValue of anAccountThink of buying an account the sameway as you would buying a house. If thehouse has problems with it, the valueof the house goes down. The bettercondition the house is in, the moreit is worth. The same goes for alarmcontracts. The better a contract is, themore value it has to both the seller andbuyer.Characteristics of Good Contracts1. Good payment history from customer2. Landlines - different communicationslike cell phones have more problems,and might require technician visits3. All system compliant with tradestandards4. It provides customary service5. The contract is up-to-date6. Good record keeping can drasticallyhelp the sale7. Equipment is modern and able to beserviced and updated remotelyHome Security Market Trends - 201906

Things That Lower Your AccountsValueapplied to the leftover value (20 - 7 13).Attrition 640 ( 20 x 32). Sometimes the buyer willSo, if the account is worth 32 multiples ofthe account: 13 x 32 416 instead ofAll security companies will have attrition.have better pricing with your passthroughThat’s simply a fact of this industry. Somevendors and a broker can help keep youof it you won’t be able to control: deaths,from being overcharged here.moving, etc. But some of the attrition youcan prevent. To reduce attrition, you firstBeyond passthrough costs, there areneed to understand where it comes from.additional contract characteristics that canimpact the value of an account negatively.There are many dealers that have no ideawhat the attrition rate is on their accounts.Characteristics of Less Valuable ContractsAre you one of those dealers? It is within Old/out of date contractsyour best interest to discover what your Old equipmentattrition rate is. This provides a better Bad communication systems - 2G or 3Gunderstanding on the health of yournetworksaccounts, and can provide you a roadmap Bad payment historyof what is causing your attrition, and how to Bad service historylower your attrition rate. Bad record keeping Providing offbrand services that aren’tPassthrough Coststhe norm – paying false alarm fees, etc.Passthrough costs are all of the additionalcosts of upkeep on an account.Understanding passthrough costs is crucialto determining the real value on an account.This could account for costs on equipment,service, etc. This deducts from the value ofthe account. After passthrough costs areaccounted for, the multiple is taken fromthe net value of the account. For example,Watch the webinarif the RMR on the account is 20, but thepassthrough costs is 7, the multiple is07

Improving The Value of Your ContractsIt happens more often than not – theit could also be an opportunity tovalue of your accounts makes youretain existing accounts and sign newrethink the sale. If you find out the valueaccounts.is much less than you anticipated, youcan work on raising the value of theMany dealers lose accounts when thecontract before you sell. You can do thisindividual moves, but if the dealer hasa few different ways:a retention plan set in place, they canpotentially sell another account to the Diversifying the accounts – Goodindividual in their new home and signmix of residential and commerciala new account to the individual(s) whoaccountsare moving into the old house with the Improving payment methods -– ACHover invoicing, etc. Keeping all your accounts in adedicated CRM for record keepingexisting system.This sort of plan can turn an otherwisenegative attrition attribute into apositive retention plan. Keeping contracts on hand Improve attrition ratesIt Takes Time Improving equipmentImproving your accounts value is not aswift and easy process. It will most likelyImproving attrition ratestake a couple of years before you canThis may be one of the most importanttruly improve upon the value of yourthings you can do to raise the value ofaccounts. After a year or two of makingyour accounts.improvements on your accounts, youThings such as an account moving tocan get your accounts reevaluated anda new home, or the individuals on theaccount are getting a divorce is oftenperceived as a bad thing (and don’tget us wrong, divorce is horrible). But08

get the value on the accounts that youwere originally seeking.Read our eGuide: 5 Powerful Ways toGrow your RMRBuyer VerificationOnce the value of the accounts aredetermined and the buyer wants toproceed, the buyer will want verificationof all records concerning the accounts.This is why it is so important to keeporganized records of all your accounts.The buyer will want verification on: Payment records Service activity Activity recordsPayment RecordsIt’s important to keep meticulous recordsof all forms of payment. This could bethrough a database, receipts etc. But itcan’t be overstated that when the timecomes to sell your accounts, havinggreat records of your payments will saveyou the nightmare of tracking downpayment records.Service ActivityKeeping records of what accounts arestill in service can help the buyer knowthe health of the accounts. If you don’thave any records of the service activity,the buyer will have no idea how stablethe account is, and could potentially pullout of the deal.Activity RecordsDoes the panel still communicate withthe central station? When was thelast time a test was run on the panel?These are the types of questions anactivity record will answer, and these areimportant verifications for the buyer tohave to know the health of the account.The main takeaway is to keep goodrecords of all of your financials andservices. You will save yourself a massiveheadache in the long-run and keep thevalue up on your accounts when you areready to sell.Watch the webinar09

ConclusionThe responsibility of keeping the value up on your accounts lies fully in your hands.Keeping good records of all of your accounts, as well as putting attrition recoveryplans in action will keep you business and your accounts in good shape. It pays to bemeticulous now. Your accounts could be your retirement.10

Dealer Programs One of the main purposes of dealer programs is to provide security companies with cash to continue their operations. Dealer programs can do a lot of good for a budding security company, but there are some inherent risks when choosing to sell accounts to a dealer program. Pros The biggest benefit of joining a dealer program is .