Lessons Learned: How I Built and Sold my Alarm Company

Longtime owner shares his experience as he underwent the process


Fairness, integrity, transparency, and professionalism were also very important to me and I did my own due diligence before selecting Alarm Capital Alliance. For me — and I think for most business owners — this is the transaction of a lifetime. We want to get it right the first time, because there probably won’t be a next one. I asked for at least three references from companies that had sold to ACA in the last year to two years, and I thoroughly vetted each one.

 

Lesson: Do Your Part to Create a Successful Business

We operated the business to ensure professionalism and customer service from day one. As we grew and hired employees, we trained them the same way. It is something I learned from my early days in the industry: do it right the first time. If you offer great service from the start, you will always have a steady stream of referrals from your base.

We had standard procedures for properly filling out contracts, for how our technicians installed and serviced systems, and how we kept our subscriber account records. We kept extremely detailed customer records, which not only allowed us to provide an excellent customer experience throughout the relationship, but also gave us in-depth information to monitor and manage attrition.

If you wait until you want to sell your accounts or your company to focus on attrition, you are too late. In our industry, it is simple — it is more expensive to create a new account than to save one. Along with the basic account information (name, premises, etc.), we also documented every detail of the account history for every account, including the reasons for any cancellations: the customer moved or went out of business, we cancelled them for non-payment, or on the rare occasion, they went to a competitor or cancelled because of a service issue.

Our record keeping not only helped us evaluate our accounts and our customer service efforts on an ongoing basis, it allowed us to provide detailed customer history for every account. One practice that worked well for us and that I highly recommend is maintaining a digital database of your records. We hired a document service that scanned all of our records and stored them online for us, and we scanned every account record going forward. Every piece of paper for every account was accessible by all employees through the document company’s software, so we could easily provide Alarm Capital Alliance with access to account histories online. Having that kind of account information gives you a great deal of credibility with your buyer and it takes the mystery out of what they are actually getting — which made this portion of the due diligence process painless for both parties.

Good billing and collections practices are also important. At AMSA, we did all our collections in house, and my advice is to aggressively pursue on collections. We sent letters and also called delinquent customers at 30, 60, and 90 days past due. On the 91st day, we would terminate the account for non-payment. I believe it is bad business to have accounts aged over 90 days, because it gives you a false representation of how many accounts you actually have.

The difference between a good transition and a bad one also depends on solid installation and central station practices. It goes right back to doing it right the first time. No matter what else you do, you must own the phone lines — the 800 numbers — so that you can swing the lines to a new central station. Otherwise, it is a time-consuming and expensive process to switch each account and it may reduce what a buyer is willing to pay for your accounts. At AMSA, we loved our central station provider and it was traumatic to think about changing. I was worried that we would lose hundreds of accounts, the phones would light up, and customers would be irate. In reality, it was a simple swing and ours went really well. Installing your subscribers’ systems correctly also allows you to download to the panel instead of making expensive and time-consuming site visits.

 

Lesson: Be Prepared for Due Diligence

Every purchaser will have a list of critical due diligence items and a process for completing the acquisition. I found that being prepared ahead of time made the process run much more smoothly. You cannot wait until you are in the middle of the deal to make sure your contracts are signed and your subscriber records are in order.