When it comes to measuring the success, profitability, and overall health of businesses in the security alarm industry, attrition is a key indicator. As a result, tracking your company’s attrition rate consistently and taking the necessary steps to slow attrition should that become necessary is incredibly important.
By understanding attrition in the alarm industry, you can develop practices and procedures that can help to mitigate attrition within your organization by minimizing account aging and loss.
What is Attrition?
Attrition is essentially the number of subscribers, accounts (and revenue from those accounts) that your company loses over time. It is one of the key factors that impacts how much your alarm company is worth and influences how much potential buyers are willing to pay for your alarm business when the time comes to sell. Attrition also impacts the saleability of your company as well as the purchase price and the terms of the sale.
Types of Attrition for Alarm Companies
There are two types of attrition that most business owners are primarily concerned with: Gross attrition and net attrition. The two concepts are defined as follows:
Gross Attrition: The number of accounts or clients that cancel over a period of time divided by the number of accounts that your company owned during that time period.
Net Attrition: The number of client accounts that have left your company over a period of time and have not been replaced by accounts you have gained divided by the total number of accounts that your company owned during that time period.
Minimizing Attrition Within Your Alarm Business
As with businesses in most industries, some amount of attrition is essentially inevitable for alarm companies. The industry standard for gross attrition rates in the security alarm industry typically lingers around 10%.
If you want to build the value of your company, keeping your attrition rate at or below 10% is necessary. In order to do this, you must understand why clients are leaving your company and address those issues efficiently.
Causes of Attrition in the Alarm Industry – Why Clients Abandon Your Business
There are a few common causes of attrition in the alarm industry.
Your Competitors Win Your Clients Over
Whether they are marketing themselves more successfully, offering products and services that you are not, or providing better customer service, there are many ways that your competitors can steal away your customers and accounts. Keep an eye on what these competitors are doing! Chances are, you’ll have to keep pace or, better yet, stay ahead – otherwise you may start to see clients and accounts slipping away.
Your Company’s Performance
If your company’s performance has changed for the worse, your clients will undoubtedly notice. A negative trend may inspire some clients to look for alternative companies to work with.
Subpar Customer Service
Providing high quality, attentive customer service is one of the best ways you can ensure that your customers will happily stay with your organization. If your customers experience less than they’ve come to expect from your company in terms of customer service, they may seek other service providers.
Issues Outside of Your Control
Relocations, deaths, financial issues – these are things outside of your control that may impact consumers’ relationships with your organization. Attrition caused by these factors is often referred to as ordinary attrition. Though they influence your company’s attrition rate, they are not necessarily things you can avoid.
Keep in mind that customers rarely base their decision to leave your company on one factor. Typically it’s a combination of these, or other, factors that inspire your patrons to abandon your business.
If you want to prevent attrition, addressing any issues that may arise in a timely manner is imperative. Wondering what you can do to retain customers despite avid competition? Check out these tips for preventing alarm company attrition for some suggestions that may help.
Minimizing Attrition So You Can Sell Your Alarm Business Successfully
Attrition is a complex concept that is often misunderstood in the alarm industry. Still, it’s a key factor to consider on a regular basis when assessing the health and overall value of your alarm business.
Curious about how attrition may be affecting your alarm company? Wondering how much your alarm company is worth and if attrition might be impacting its value and appeal to potential buyers? Contact Rory Russell of Acquisition & Funding Services today!
Looking for ways to protect the relationship you’ve developed with your customers? We review some tips to keep competitors from stealing away loyal customers here.
Interested in combating increasing attrition within your alarm business? We cover tactics for preventing alarm company attrition here.