One of the services that K&K provides is valuing your alarm accounts. You can begin that process by going to the K&K website and navigating to “What’s My Alarm Company Worth?”
There are options as low as $80 and as high as $950 or more, depending on why you need the valuation and how comprehensive it needs to be.
My curiosity was aroused when I saw an email from an online trade magazine that highlighted an alarm account value tool — basically, an online calculator for purposes of generating a valuation. So, I gave it a try.
Not Much Detail Needed
I expected a long list of questions that would have to be answered to get to a valuation. As it turned out, however, the calculator didn’t need all that much detail to come up with a valuation.
All I had to input into the tool was 1) total customer count; 2) average recurring monthly revenue; 3) average years into the contract; 4) average credit score; and 5) percentage of customers in five-year contract.
So, I put in 900 accounts, $40 average recurring monthly revenue (RMR), one to two years average into contract, average credit score of 700 (the minimum the calculator would accept) and 40% in a five-year contract.
Valuation was 25.6 to 29.6 times RMR — or $921,600 to $1,065,600. When I aggregated the RMR to $36,000, the numbers came to $903,960 to $1,033,560.
Utilizing the same stats, but with 400 accounts at $30 RMR, the calculation came to 22.5 to 26.5 times RMR — or $270,000 to $318,000.
The calculator page offers a formal quote (although still apparently from an AI program) if you fill out a template with more questions, including a prompt for your name and other information.
I have valued alarm companies for many, many, years. Based upon that experience, I believe that it takes more information than what was requested to get a fair valuation. I can also tell you that you can’t depend on a competitor and potential buyer of accounts to value your accounts for you.
Of course, a potential buyer can certainly tell you what they would pay for the accounts you have — and that might be more or less than what someone else would pay. But I believe that an independent valuation would serve you best.
Different Levels of Alarm Accounts Valuation
As noted at the outset, the different levels of valuation you can get on the K&K website start at $80. For that, you simply get a value. For $350, you find out how we arrived at that valuation.
And for $950, you find out what you can do to boost your value. This would entail making changes in how you operate, assuming you have the time to make those changes in the first place.
You should understand what your accounts are worth before you offer them for sale. Although I think that buyers will ultimately determine what the accounts are worth, a seller needs to know if the offer they receive is fair and within market range. I don’t think asking one potential buyer is really the most comforting, most reliable value.
