Are you ready to sell your alarm company?

If you wanted or needed to sell some of your accounts to free up cash to achieve your growth objectives, or pay down your debt, are you confident a buyer would give you maximum value for them? If you decided to retire and sell your company, could you start the process of looking for a buyer immediately? Would you know how to find the right buyer and be able to provide that buyer with the information they would want to see, quickly and easily, during the due diligence process?

In other words: Are you ready?

No matter your timeline — tomorrow, next year or in 10 years — the key to achieving your personal and business goals is to work with a trusted and experienced buyer, one who will respect the company you have built and recognize the true value of the accounts you created. However, attracting this kind of buyer requires planning. You cannot wait until you decide to sell to get your company and accounts in top shape. You need to operate your business every day in a way that ensures your accounts are attractive, valuable and ready to sell when you are.

In other words, to maximize the value of your accounts, whether you are contemplating a partial or complete sale of your customer base, participating in a dealer program, or making a complete exit from your business, you need to establish your company as a high-value business.

Six Steps to Transform Your Business

Ideally, you have been running your company from day one with your short- and long-term goals in mind and with a strategy for how to accomplish them. Your operations incorporate industry best practices for customer service and installation, business processes and standard operating procedures, and managing your central station relationships; and you protect your company with an appropriate insurance program.

But what if you are not running your business this way, or you aren’t sure? It is not too late — you can transform your company into a high-value business by taking a critical look at your business and making some changes. Here are six key steps that you can take to ensure that potential buyers see your company as an attractive investment:

1. Plan your growth and exit strategy. Companies that set their short and long-term goals, identify their strategy for achieving those goals, and then run their operations with their end-game plan in mind, ultimately attain the most value for their accounts. While there is no “right” strategy and no “right” method for you to develop that strategy, you should consider including a few key elements:

  • Short and long-term goals, both business and personal;
  • Steps to reach those goals;
  • Challenges you anticipate; and
  • a tentative timeframe.

While your goals might change over time and you will want to review your strategy periodically, it is critical that once you have your plan, you use it to guide everything your company does, from management decisions and standard operating procedures, to your central station and vendor relationships, and even your day-to-day operations.

2. Monitor and manage your attrition. Attrition is a key value-driver that directly impacts how much potential buyers are willing to pay for your accounts. An accurate attrition rate provides buyers with both significant comfort in your record keeping and a general picture of the economic health of your company. Taking consistent steps to maintain attrition rates at or below industry standards (about 12 percent gross attrition) establishes your company as a high-value business. In addition, monitoring and managing attrition helps your company identify and react to problems, and to develop procedures to minimize account aging and loss as well as maximize your revenue.

3. Adopt and follow standard operating procedures. Developing and implementing solid standard operating procedures will help your company provide excellent customer service for your subscribers, lower your attrition rates and increase revenue. When it comes time to sell your accounts, having good standard operating procedures enables you to provide crucial information to your potential buyer. While there is no right way to operate your company, your standard operating procedures should include:

  • Maintaining accurate subscriber and business records;
  • Reconciling accounts with your central station on a monthly basis; and
  • Adopting and following sound billing and collections practices, including canceling accounts at 90 days past due.

4. Maintain valid subscriber agreements. Valid, enforceable, and assignable subscriber agreements not only help to establish your qualified account base, they are critical to protecting both your company and your potential buyer — before, during and after the sale. Your subscriber agreements must comply with state and federal laws — especially those relating to consumer contracts for residential accounts — and include specific information and key provisions to protect your company from legal and financial liability.

Without contracts meeting the necessary legal standards and providing appropriate protections to your company, most buyers will view your accounts as worth little, if anything. If your company has not documented every account with a valid agreement, you can still take protective remedial measures. Review your account records, identify any accounts that do not have proper contracts and have the subscribers sign new contracts.

5. Manage installation and monitoring to facilitate easy account transfers. The more difficult it is for a buyer to transfer and integrate your accounts into its monitoring system, the less the buyer will be willing to pay for those accounts. A high-value company anticipates the technical aspects of selling its accounts. It maintains good installation practices, such as setting up panels to receive downloads remotely, which eliminate the need for manual reprogramming. It uses standard equipment that is technologically sound and scalable, accommodating advances in technology and increased subscriber needs.

Contracting with your central station to have clean receiver lines and owning your toll-free receiver number (or IP address) is also essential to ensuring your potential buyer will not encounter any technical issues in transferring your accounts to its central station.

6. Maintain an appropriate insurance program. Potential buyers not only look for the key elements that make your accounts a good investment, but also at whether you would be a sound business partner. One key indicator is how your company manages risk through insurance. The best way to make sure you have the right type and amount of insurance is to use a professional agent who will help your company put together a comprehensive insurance program.

This article was adapted from Alarm Capital Alliance’s recent whitepaper, Transforming Your Company into a High-Value Business, which is available at www.alarmcapital.com/media-center/whitepapers.

Amy V. Kothari is President and CEO of Alarm Capital Alliance. Under her leadership, ACA has grown to more than 170,000 customers nationwide, generating $5.9 million of RMR. She received the Women's Security Council 2012 Women of the Year Award for the Dealer category. To request more info about ACA, please visit www.securityinfowatch.com/10746349.

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