Alarm Company Performance KPIs: Monitoring the Health of Your Security Business

business analytics intelligence concept representing KPIs for alarm companies

There are measurable indicators of your company’s performance that help you understand how your business is doing each year. These include your monthly recurring revenue (MRR) and your gross profit margin. If you want a better idea of your security company’s current performance at any given time, you can teach yourself and your team to track certain metrics from month to month. These metrics are your company’s key performance indicators (KPIs).

While some alarm business performance KPIs are the same as any company’s, there are others that are specific to the alarm business model. In this article, we’ll review the KPIs your business needs to measure regularly. Tracking these will help your business establish new benchmarks to keep growing and reaching greater success.

First, What is a Key Performance Indicator?

KPIs are measurable aspects of business operations related to a company’s overall success throughout the year. They do not include “soft” indicators, like employee satisfaction. They also don’t include new initiatives, which are experimental and not part of the “bread and butter” of your business until you add them to your regular services. They include things that can be tracked daily, weekly, and monthly to provide important information about the health of your business.

KPIs can also be contrasted against the performance of competitors to understand where you stand in the market. To use the example of employee satisfaction: great company culture can drive business success, but it is not a guarantee or indicator of it. Customer retention is a clear KPI that can be compared across many businesses. Within the alarm industry, the number or size of monitoring accounts or list of vendors your business is approved to sell and install can be KPIs that speak to different aspects of your company’s success and reputation.

Let’s look closer now at the KPIs your security company can track to identify its strengths and opportunities for improvement.

KPI #1: Customer Loyalty and Retention

Customer retention is one of the most important key performance indicators for any service-based business! Setting up alarm accounts and maintaining alarm systems is costly work. The big revenue for your company comes from the ongoing maintenance of those systems, not from the sale of the systems themselves.

The regular inspections, testing, and monitoring of each customer adds up to support your business’s reliable, daily operations. This is the case, whether a customer has one alarm system with a single panel or several. Losing customers in security operations involves expensive downtime as well. So, measuring your customer retention each month will give you a sense of how stable your revenue is. If you lose customers often, it’s time to assess the reason for their dissatisfaction and find solutions before your company’s profits drop.

KPI #2: Response Time in Security Incidents

The incident response time of your alarm company’s monitoring center directly impacts your company in several ways. The average time it takes your team to respond to errors in the alarm system also hurts your company. But, the speed with which security incidents are handled can help or hurt your alarm business more than anything.

In that moment, when your customer’s property or his and his employees’ own lives are at risk, every second spent waiting for a response feels like an eternity. When something triggers your customer’s alarm system, whether one or six alarms are sounding, they want to know within seconds that police are on the way. That comes down to whether or not you are providing the service you promised them.

A slow response time can be caused by several factors. It could be you’ve partnered with an unreliable monitoring center that uses dated equipment. It could be that your team is not installing or servicing the alarm systems themselves correctly. It could be that your own company’s relationship with the monitoring company is tainted, and so they are not prioritizing your customers.

Whatever the reason may be, if your company’s incident response time is slow, you will lose business. Your reputation will suffer, and so will your profit margins. And these things are clear indicators of poor performance. At the same time, fast incident response times can help you keep your customers and gain some of your competitors’ accounts as well! This is why your company’s ability to guarantee a fast alarm response is an important performance indicator for your business.

KPI #3: MRR – Yes, It Can Be a KPI!

Yes, your average MRR is an important annual indicator of your company’s growth. But, each month’s recurring revenue should also be one of the key performance indicators you track as each month closes. Measuring your monthly revenue gives you real time data about the health of your company as the year progresses. Instead of doing this per quarter, doing it per month helps you spot problems faster and address them quickly.

If your monthly revenue is not growing, that means you are not selling enough new accounts to make up for the normal attrition (losing old accounts). If you’ve stopped gaining new security alarm customers, you need to find out why.

Keeping track of your MRR and using it as one of your go-to KPIs throughout the year can help you keep the financial side of your business moving toward set benchmarks. It can also help you improve the effectiveness of your operations, as it will identify weak points earlier than quarterly or annual financial reviews.

KPI #4: Accounts Receivable Aging Report

Another key indicator of your company’s financial status is your Accounts Receivable Aging Report. Your company can be doing a large amount of work, but it doesn’t matter if you aren’t getting paid! Servicing so many alarms each month only equals profitability if customers pay on time. Running an AR Aging Report for your company every month or two will help you focus on true profitability.

Implementing habitual practices for your office admins to ensure payment is collected on time can help resolve overdue invoices. One of the best practices your team can implement is keeping accurate records of all accounts that have late payments and outstanding invoices. This will help you get a better sense of which customers are delinquent on their bills, so you can work with them to bring these overdue invoices up to date.

This can be more easily achieved with the right accounting and invoicing software in place. If your company is using outdated or limited software, it may be worth investing in a better program to improve your team’s productivity. Investing in something that helps keep regular cash flow coming into the business is money well spent!

How to Measure KPIs: A Brief Overview

The first step in tracking KPIs is to establish a system for collecting the data. This can be as basic as manually keeping track of numbers each month or using automated accounting software that tracks your performance metrics. Depending on the size of your company, you may already have a billing system in place where reports and overviews of certain metrics can be pulled at any time.

Once you have collected the data, it needs to be analyzed and interpreted. Depending on your company’s goals, you may need to establish benchmarks or targets for each KPI. This can help you understand how your business is performing relative to those benchmarks and identify areas of concern that need attention.

To keep these KPIs relevant over time, it is important to regularly review them and make changes where appropriate.

Not Sure Where Your Business Stands? Request a Free and Confidential Business Valuation with AFS!

If you are not sure exactly what your company’s value is or how to begin tracking the right metrics, Acquisition and Funding Services can help! We offer a range of financial services for fire safety and security business owners looking to increase profitability or prepare their companies for sale.

We can start by giving you a free business valuation so you know where you stand in today’s market. To request your valuation today and learn more about our services at AFS, fill out our secure contact form here or give us a call at 800-354-3863 to get the conversation started.