Recurring revenue can make a security company look more valuable than it really is.
A strong base of monitoring accounts may generate reliable income today. However, if customers are leaving, contracts are weak, or the company heavily relies on its owner, protecting that revenue after an acquisition may be challenging.
In a recent episode of the Entry & Exit podcast, hosted by Jack Carr, you’ll learn all about what buyers should examine before acquiring a security company and what owners can do now to build a more valuable business.
The number at the top of the RMR report only tells part of the story. You also need to understand what supports it:
- How many customers cancel each year?
- Are monitoring agreements transferable?
- Who holds the licenses required to operate?
- How concentrated is the customer base?
- Can the service department keep customers satisfied?
- Does the business continue running without the owner?
- Is the central station relationship helping or hurting growth?
A company can add hundreds of accounts and still make little progress if it loses nearly as many.
Real growth means adding customers faster than you lose them.
That requires strong agreements, dependable service, low attrition, and systems that continue working through an ownership transition.
The same principle applies if you're building a security company from scratch. The decisions you make today will influence what the business is worth five or 10 years from now.
Chasing installations may increase revenue. Building a durable operating system creates long-term value.
Don’t buy the revenue. Buy the system that produces and protects it.
