Security Sales & Integration November 2021 - 58

EXECUTIVE DECISIONS
Monitoring Matters by Morgan Hertel
Keeping Your
Company's Value Up
Today, buyers
and lenders
have much
diff erent
metrics when
it comes to
determining
what a fair
and equitable
purchase price
is for a given
customer base;
the days of just
taking monthly
recurring
revenue and
applying a
multiple to
it are for the
most part
gone.
▶ WE ALL KNOW THIS: there is no guarantee
how long anything will last. Your health, your
marriage, the roof over your head ... these and
more are all critical, and yet, we too often resist
the foresight, with which we are all blessed, to
prepare for these and other of life's changes. As
business professionals, it is not only prudent but
essential that we be prepared, not only for changes
in the market or in technologies or in the availability
of qualifi ed personnel, but for perhaps the
biggest decision of all, to either sell your business
or to acquire another.
Th ere have been mergers and acquisitions
going on in the alarm industry for as long as I
have been a part of it, now more than 40 years,
so there is nothing new about that, but what is
new the past few years are the types of buyers
and the level of oversight coming from lenders or
private equity. Th at trend means much needs to
be done far ahead of the fi nal decision to divest
or acquire even if you cannot now envision the
need for either.
Today, buyers and lenders have much diff erent
metrics when it comes to determining what a fair
and equitable purchase price is for a given customer
base; the days of just taking monthly recurring
revenue and applying a multiple to it are for
the most part gone. Because of the sheer volume
of dealers we support at Rapid Response Monitoring,
we see a lot of buying and selling and are
involved in most of the transactions one way or
another. We often supply data for a lender or a
buyer, and, in many cases, we are called upon to
analyze the data to determine a cost-to-monitor.
Sadly, in almost every case the dealer is completely
unprepared for this kind of transaction and is
compelled to rely on us to help them pull all this
together.
Usually, there are data elements that, heretoMorgan
Hertel is Vice
President of Technology
and Innovation for Rapid
Response Monitoring.
58
fore, were never a consideration but are now becoming
a signifi cant factor in account base valuation.
Th e following will help to illustrate some of
the key metrics we get asked about and how you
can, as a dealer or monitoring center, work toward
keeping the value of a customer base readily
and eff ectively apparent should major opportuSecurity
Sales & Integration NOVEMBER 2021
nities come knocking on the door.
Attrition: Th is is always part of the equation
but also one of the most misunderstood metrics,
having several ways to calculate it. Installing
dealers should know their attrition rates and
continue to monitor them as a complete customer
base but also broken down by diff erent
types of accounts such as commercial/residential,
chain accounts/fi re accounts and others; a lender
might only want to lend diff ering amounts for
each group of accounts.
I mentioned there are many ways to calculate
attrition. Th e simple way? Imagine that you
stop selling new accounts: calculate how many
you lose each month and then do the math for
a year. For example, if you had 1,000 accounts
and 10 cancelled each month you would lose 120
accounts every year, and that would give you a
12% annualized attrition rate. Again, there are a
lot of ways to do this, but this will give you a very
quick idea of where you're at.
Portability of Account Base: If necessary, the
eff ort to move the accounts to another monitoring
center can reveal time-consuming and expensive
preparations. You need to make sure that all
your accounts can be moved without reprogramming.
You also need to make sure that things like
voice lines and SMS numbers are portable and
that the outbound Caller ID can be spoofed to
the same numbers so that when a transition to
another center does occur your subscribers don't
know the diff erence.
Account Performance: Th is is another metric
that was not a concern previously. Now,
with most wholesale centers' pricing based on
activity and full-service centers more greatly
concerned with staffi ng, how these accounts are
performing becomes a key metric and one requiring
greater attention.
Among the most important performance statistics
deserving your attention is the OHE (Operator
Handled Event) ratio or Alarm Factor. It
indicates how many times a month each system
comes into alarm status and must be handled by
an operator. For example, if you have 1,000 accounts
and 200 of them had an event requiring a
dispatcher, those accounts would have an OHE
ratio of .2 (that or less indicates a well managed
residential customer base. If yours is above that
you need to work on the base to reduce that type
of activity. Th e lower you get it, the more valuable
the base is worth and the more economically
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Security Sales & Integration November 2021

Table of Contents for the Digital Edition of Security Sales & Integration November 2021

Security Sales & Integration November 2021 - Presentation Page
Security Sales & Integration November 2021 - Cover1
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Security Sales & Integration November 2021 - 1
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Security Sales & Integration November 2021 - Cover3
Security Sales & Integration November 2021 - Cover4
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