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Service/Maintenance Contracts Are the Best Source of RMR

Service and maintenance agreements have become a leading weapon to fend off economic evils while helping security companies survive to grow another day. Discover their advantages and how to successfully integrate them into your business.

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[IMAGE]11976[/IMAGE]Developing a Pricing Scheme
So how do you price it so you not only boost profitability but can potentially pass some of it along to your treasured customers?

Brady recommends using 5 to 10 percent of the installation price divided by 12 months to determine the maintenance portion of bundled RMR on a commercial account. For residential customers, he suggests adding $10 to $15 a month to the package and charging for parts only when service occurs along with free labor.

Those are good starting points, but in practice figuring out what makes the most sense may require taking several variables into account. The Protection Bureau uses 12 to 14 percent of the value of the installation or system as a baseline. The type and complexity of the system (i.e. intrusion vs. video surveillance vs. fire/life safety) as well as the application (i.e. retail vs. health care vs. office) and environment (i.e. weather in Pittsburgh vs. Los Angeles) play a role.

One of the value-adds The Protection Bureau incorporates into its service plans as a customer incentive is priority response when assistance or repairs are needed. But such promises do not mean much if you don’t deliver when called upon. So Ladd also stresses the importance of proper training and adequate staffing.

“If we have to choose between going to a time and materials customer or a service plan customer, the service plan gets first response,” he says. “But the biggest factor is to make sure your people are trained on the products and services you offer. Make sure your service department is staffed appropriately. Can you respond in 24 hours or less? Nothing frustrates a client more than paying for a service plan and then having to wait eight weeks to get somebody out there.”

ComTec helps its clients feel like they are making an informed, intelligent decision by signing up for system maintenance. The company details the multitude of things that are likely to or could go awry and just how costly such eventualities could be fiscally as well as productivity wise.

“We talk about what it would cost to maintain their project, as well as the software applications and equipment over its life expectancy. We talk about some of the things that could go wrong with not having a maintenance agreement,” says Vertolli. “Maintenance agreements are insurance for both parties. There is a mathematical balance between what the equipment costs the end user, which would be the vendor’s cost plus markup, and then there is the vendor’s cost minus any depreciation in the market.”

For those starting from scratch or looking for more ballpark figures, some additional metrics from TRG Associates are helpful. The company’s data indicates the average number of annual service visits for a commercial intrusion alarm system is .85; access control or CCTV, 1.75; and fire, 2.5. Internally, job costing must include administrative, accounting and customer service expenses, as well as field technicians. The latter, according to TRG, tallies up to $3,600 to $5,504 per month, including salary, benefits, truck and communications.

New Service Paradigm Emerging
Rapidly advancing changes in security technology is having a profound impact on the way products and systems are used and serviced.

Evermore sophisticated, software-driven security and fire/life-safety equipment is helping reduce time lost in the field and the associated costs thanks to capabilities for these devices to be diagnosed, updated/upgraded and sometimes even repaired remotely. While this may require a little more training and IT expertise on the backend, it is more than offset by avoiding all the costs related to rolling a truck. If a field tech is required, it can lessen time spent at the location.

“A high percentage of the time we gain access to the customer’s system and can actually provide some remote service diagnostics,” says Ladd. “When we have the capability to get into their systems remotely, we might be able to make software changes. Or we can troubleshoot what the problem is so when the service technician actually goes onsite he has a better understanding of what the problem is and can get the repair done faster.”

As a telecom and IT specialist expanding into security, ComTec is especially familiar with providing service remotely and very comfortable with physical security’s migration onto enterprise networks. According to Vertolli, as convergence erases the physical-logical barrier service and maintenance becomes even more integral to the security proposition.

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Article Topics
Business Management · Features · Managing Your Business · recurring revenue · RMR · Service and Maintenance Contracts · All Topics

About the Author
Scott Goldfine
Scott joined SECURITY SALES & INTEGRATION in October 1998 and has distinguished himself by producing award-winning, exemplary work. His editorial achievements have included blockbuster articles featuring major industry executives, such as Tyco Electronic Products Group Managing Director Gerry Head; Protection One President/CEO Richard Ginsburg; former Brink’s Home Security President/CEO Peter Michel; GE Interlogix President/CEO Ken Boyda; Bosch Security Systems President/CEO Peter Ribinski; and former SecurityLink President/CEO Jim Covert. Scott, who is an NTS Certified alarm technician, has become a respected and in-demand speaker at security industry events, including presentations at the Central Station Alarm Association (CSAA) Annual Meeting; California Alarm Association (CAA) Summer and Winter Conferences; PSA Security Network Conference; International Security Conference and Exhibition (ISC); and Security Industry Association (SIA) Forum. Scott often acts as an ambassador to mainstream media and is a participant in several industry associations. His previous experience as a cable-TV technician/installer and running his own audio company -- along with a lifelong fascination with electronics and computers -- prepared Scott well for his current position. Since graduating in 1986 with honors from California State University, Northridge with a degree in Radio-Television- Film, his professional endeavors have encompassed magazines, radio, TV, film, records, teletext, books, the Internet and more. In 2005, Scott captured the prestigious Western Publisher Maggie Award for Best Interview/Profile Trade for "9/11 Hero Tells Tale of Loses, Lessons," his October 2004 interview with former FDNY Commander Richard Picciotto, the last man to escape the Ground Zero destruction alive.
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Features, Managing Your Business, recurring revenue, RMR, Service and Maintenance Contracts


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