How to Know When It’s Time to Sell Your Alarm Business
Most businesses routinely reinvest in their company – upgrading services or software, hiring additional staff, purchasing additional equipment. These routine upgrades are a traditional part of growing a business, and it’s no different for the security alarm industry. But how do you know when the time is right to stop reinvesting and start planning for a financially rewarding exit?
The answer is: by having an exit strategy already planned.
If Only I Had…
In a perfect world, your business plan would be executed exactly as written. You’d hit your targets when you predicted and position the company to sell when you predicted, whether that was in five, ten or twenty years.
But as we all know too well, the world is not perfect. And chances are, you’ve run into some bumps along the way. Perhaps the alarm industry changed more rapidly than you predicted and you had to reinvest more than you planned to keep up with current technology trends. Or an unexpected competitor opened up shop and started a pricing war that impacted your forecasted revenues.
Suddenly, you are reinvesting more into the company than you planned…
Want all our insights and advice in one place? Download our informative ebook. It’s FREE and filled with industry advice on when to sell and how to get a premium price for your business. Then, continue reading below for tips on how to determine if you should reinvest in or sell your business.
…The business equity you thought you would have built by now is not at the levels you hoped, and retirement starts to seem like a far-away dream. How do you know when you’ve reached the tipping point – the point where re-investing capital will not get you the return you hoped for, and selling is a better option.
Evaluate Your Current Condition
Ideally, you’d like to be able to sell your security alarm business at the point in time when you can maximize the selling price. Pinpointing that exact time isn’t always possible, but there are several things you can do to gauge your position so you can pick the best course of action.
Take stock of your assets on a regular basis. In addition to keeping an eye on your client list, your recurring monthly revenue (RMR), your attrition rate, and the current value and condition of your equipment, monitor your other “assets” as well
- Do you have a good relationship with your staff? If a key employee decided to leave your company, how would that affect your business?
- How respected is your company name? Are issues such as poor customer service or accounting mix-ups starting to tarnish your reputation?
- How much does your business depend on certain critical accounts? Would losing one or two of these accounts create a domino effect that might force you to close your doors?
Perform a competitive analysis. Make a list of your competitors, and note the strengths and weaknesses of each one. Ask yourself the following questions:
- Do you really need to compete head-to-head with each company on the list, or are you more focused on a niche market?
- How tough is it for a newcomer to start a competing security business in your area? Could a tech-savvy startup set up shop overnight and immediately put a dent in your bank balance?
- Who would you classify as your biggest competitors? What are they offering that you can’t currently beat or match – and how much would you have to invest to overtake them?
Re-examine your target market. Are neighborhoods in your area growing or shrinking? Are current economic conditions having a positive or negative impact on local businesses, home prices and employment rates? In short, how hard is it for you to currently attract new clients – and will it be harder or easier in the future?
Keep up with the latest technology news. Five years ago, the concept of smart homes and the Internet of Things movement may have seemed like sci-fi dreams, but technological advances are moving these ideas closer to reality every day. Are you willing and able to invest in new technologies that potential customers will expect to have integrated with their security and alarm systems?
Honestly assess your own health and state of well-being. Do you enjoy getting up and going to work each morning, or are you constantly filled with dread? Are you always in crisis mode, waiting for the next inevitable problem that only you can fix? As a business owner, you’re always going to be subject to some level of stress, but if it starts to impact your health – physical or mental – then it is definitely time to make some changes.
If you’re considering reinvesting in your business, outline your expectations. In order to make your investment worthwhile, what would you need to gain? What milestones will you use to gauge your success in meeting these goals? Are the potential rewards worth your efforts?
Keep Your Finger on the Pulse
If you want to really stay on top of your game, it’s important to update all of the items above on a quarterly or annual basis. That may sound like a lot of work, but most of the effort is in creating the initial analysis of your business and making note of when and why you should start making serious plans to sell. After that, updating your strategy will be much easier.
Need a little help getting starting? Contact the experts at AFS for a free valuation of your security alarm business, and find out more about the different market conditions that could affect the selling price of your company. If you’re more interested in reinvesting in your business, the AFS team at 800-354-3863 can help with that as well. Learn all your options so you can make the best decision for your unique situation. You can also get some great insider tips on selling your alarm business by downloading this ebook.
© Rory Russell and Acquisition and Funding Services, 2014. Unauthorized use and/or duplication of this material without express and written permission from the author and owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Rory Russell at AFSSmartFunding.com with appropriate and specific direction to the original content.