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20 Exciting Moments From ISC West 2015

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How to Transform Your Company Into an RMR-Generating Machine

Learn how to build your company's recurring monthly revenue by implementing a three-step model.

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I was fortunate enough to be able to sit in on a couple of educational sessions I had handpicked as being among the most intriguing on the ISC West schedule. One was titled “Structural Challenges in Converting Product Companies and Product Offerings Into RMR” and featured Brian Lohse of Secure-i and ASG Security’s Bob Ryan.

One of the great things about the RMR model is it is a win-win for the company and the customer since the latter obtains products/services for a low upfront cost while the former winds up with at least three times the value. RMR is all about building incremental value for the business. They walked attendees through the three-step process of:

  1. developing an RMR model
  2. creating a sales model
  3. instilling an RMR cultural change

Lohse and Ryan pointed out how a project-based business and a perpetual business are entirely different propositions. In fact, they said owners/operators should look at the business as being an RMR enterprise rather than specifically security or anything else. The model should be based on four elements:

  • properly structured contracts
  • automatic payment
  • fixed term with evergreen clause
  • the ability to institute price increases

Not so coincidentally, those are also key factors both prospective buyers of the company and creditors look for as well.

Lohse and Ryan offered some formulas to help better illustrate RMR concepts. They said while it takes about $20 (products, labor, etc.) to create $1 of RMR, that $1 becomes worth $50. In other words, $100 RMR costs $2,000 but is worth $5,000. The Rate Creation Multiple (RCM) is an important metric that is calculated by determining the number of months required to pay off the cost of acquiring a customer. RCM variables are: equipment + labor + sales commission = direct job cost. And so the RCM formula is: direct job cost – customer installation charge = net investment / RMR = RCM (direct and excluding overhead that would yield fully loaded RCM).

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Article Topics
Business Management · Blogs · ISC West · Managing Your Business · RMR · All Topics

About the Author
Scott Goldfine
Scott Goldfine is Editor-in-Chief and Associate Publisher of Security Sales & Integration, directing all editorial aspects of the magazine brand in print, electronically, online and in person. The voluminous, innovative and award-winning body of work he has distinguished himself with since joining the publication in 1998 includes groundbreaking research, landmark features, leadership roundtables, high profile case studies, and many industry exclusives. Well versed in the technical and business aspects of electronic security (video surveillance, access control, systems integration, intrusion detection, fire/life safety), Goldfine is a nationally known figure in demand as an industry presenter and subject matter expert to mainstream media. He is responsible for developing many unique products and programs, including the SSI Industry Hall of Fame, Control Panel (industry’s first E-mail newsletter), Police Dispatch Quality (PDQ), Marketing Marvel, Installers of the Year, Integrated Installation of the Year, Security Industry Census, Systems Integration Study, Installation Business Report, Operations & Opportunities Report, Commercial End-User Study and Security’s Fantastic Fleets. Recognized for his relationship building, integrity and lead-by-example ethic, Goldfine is a solutions-oriented team player who advises and collaborates with industry dealer/integrator, consultant, distributor, central station and manufacturer icons, luminaries and executive business leaders on a daily basis. He is also actively involved in several security events and organizations, including the Electronic Security Association (ESA), Security Industry Association (SIA), Security Industry Alarm Coalition (SIAC), False Alarm Reduction Association (FARA), PSA-Tec, SAMMY Awards, International Security Conference and Exhibition (ISC), Electronic Security Technology Summit (ESTS), Mission 500, Electronic Security Expo (ESX), ASIS Int’l, Honeywell CONNECT and other supplier conventions. Goldfine also serves on several boards, including the CSAA Marketing and Communications Committee and PSA Cybersecurity Advisory Council. A certified alarm technician, former cable-TV tech, audio company entrepreneur, and lifelong electronics and computers enthusiast, Goldfine graduated with honors from Cal State, Northridge with a management degree in Radio-Television-Film. His professional media endeavors have encompassed magazines, Internet, radio, TV, film, records, teletext and books. Goldfine resides in the Charlotte, N.C., area with his wife, son and three cats.
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