Maximize Alarm Account Value Via Line Cards and Contracts

When someone decides to open an alarm installation business of their own, they must define their goals and make plans to achieve them.

Commonly, alarm dealers want to build a base of accounts to derive recurring monthly revenue (RMR) that will fund their operations; but, ultimately, those accounts provide a large asset that can be “cashed out” as needed or at retirement.

To maximize the value of the accounts, there are two key tactics that should be followed: always keep current contracts with customers and have all accounts residing on your own line card.

Contracts Define Responsibility

Contract law is based on the principle expressed in the Latin phrase, “pacta sunt servanda,” which translates to “pacts must be kept.” That means when you have a signed agreement with a customer to provide a service for a certain amount of time for a specific cost, you have a relatively high level of assurance that you will receive that revenue for the duration of the contract length.

Should you decide to sell your accounts, prospective buyers will perform audits to ensure they too can count on that revenue. If those audits show your customers are not under contract, but instead have a verbal agreement with you, those are worth much less, if anything.

The reason is that while you may have felt comfortable with personal assurances — and your customers felt comfortable with you — when a new company takes over, the subscriber does not have to do business with it. There is no pact to be kept. By neglecting to get contracts signed, alarm dealers damage the value of their companies.

Secure Your Own Line Card

All alarm dealers plan to grow their subscriber base. So it is important that newly formed companies work with their central stations to secure their own line card early on to standardize installations and, ultimately, maximize the overall account value.

A dedicated line card increases the value of a dealer’s account base at the time of a sale because it is much easier — and less costly — for the acquiring company to re-point the phone lines if the accounts are being moved to a different central station. Should your accounts be scattered on multiple line cards, the buyer would then have to schedule appointments with the end users to reprogram their systems.

Another advantage of having your own line card is that all of your subscriber accounts are programmed to dial a single set of telephone numbers and have the same two-character prefix. Not only does this standardize the installation process for your technicians, it will greatly reduce the number of phantom signals that land on your accounts.

Phantom signals can be particularly frustrating and could occur when another dealer — usually one with accounts on the same line card — transposes digits during installation programming. The result could be a false dispatch to your customer’s home, which could result in a fine. At the same time, you’d then have to explain to your customer why this happened when you’ve done nothing wrong.

Don’t Fail to Strategize

Keep in mind that a line card does not limit the alarm dealer in any way. In fact, line cards can be expanded to accommodate a growing account base and can be designed to accept multiple reporting formats so you are not locked in to one technology.

Having a dedicated line card also allows dealers to organize their accounts numerically by ranges, such as designating fire accounts as 1,000-1,500 and burglar systems as 2,000-3,000. Or, pending the size of your company, dealers can number their accounts based on geographic area.

At the same time, if your goal is to grow your business and ultimately sell subscriber accounts in bulk, it is imperative you have signed contracts that define your service agreement, thus creating a sellable asset.

By defining a company’s goals and planning how to best accomplish them, alarm dealers will be in a much better position when it is time to set new, loftier goals for their lives.

Kevin Lehan is manager of public relations for Des Plaines, Ill.-based Emergency 24 Inc. He also serves as executive director of the Illinois Electronic Security Association (IESA).


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