How Inflation Impacts Alarm Contracts and Business Acquisitions: Owners, Don’t Worry!

inflation and economic downturn concept

Inflation and economic tension are stressful for everyone. They make family budgets tighter and encourage businesses to reexamine their operation costs. For businesses, recurring costs like alarm contracts are quick to be re-evaluated.

This is because business owners have even more to consider when money doesn’t go as far. They need to keep providing quality products and services for their customers while also making sure they meet payroll and keep their employees secure.

For some industries, these difficult times can hit hard. But industries that supply essential services can weather these tense times a little easier. This is the case for fire and security companies, whose services keep businesses safe and compliant. Alarm monitoring contracts specifically may seem like they are at risk when businesses are struggling financially, but the opposite is normally true.

Here’s how alarm contracts are and are not impacted by inflation:

Inflation Hits Every Business, But Some Should Worry More Than Others

An inflated economy will have ripple effects on every family and business. Those that offer commodities should worry more than those that provide essential services. As tempting as it is to pay extra attention to monthly costs at this time, some like alarm monitoring contracts remain necessary for businesses no matter the economy.

But there are other purchases that people stop making when money is tighter. It comes down to which purchases can wait and which ones can’t. In a recent review of inflation’s impact, one Forbes article shared which types of businesses are hit hardest. The list included:

  • Tech businesses, as customers choose cheaper options and services in hard times
  • Car manufacturers, as consumers decide to wait on replacing vehicles until necessary
  • Luxury or Non-essential stores like Starbucks and Nike, as people choose to cut out the things they don’t need first
  • Home improvement stores like Home Depot and Lowe’s, as customers put off non-essential house projects or upgrades

While those industries took hard hits, the industries providing necessary items and utilities remained stable. Examples include the energy sector and spending categories like groceries and hygiene. Businesses continued to need power and electricity to keep their lights on and production lines moving. People continued to buy gas to travel to and from work and stores. And of course, everyone still needed to be clean and fed!

This same concept is why security companies and their alarm contracts can remain untouched through times of economic inflation. Smoke and fire don’t change their behaviors based on the economy. If anything, criminal activity increases as things shift for the worse financially. Business owners and facility managers must keep their alarm monitoring contracts up to date if they want to stay protected from these dangers.

Even Now Businesses Need to Maintain Their Alarm Contracts to Avoid Compromise

Businesses have a responsibility to keep their security systems up to date no matter the state of the economy. Keeping current alarm contracts in place is one important way to do this. Even if it may seem financially beneficial in the short term, cutting corners on safety can create long-term risks that far outweigh any potential savings.

This is very important for high-traffic establishments, like hotels, multi-property facilities, malls, and large office spaces. It is also true of industrial workplaces, which continue to operate as normal through most financial climates and need the same level of fire and safety monitoring. Even when buildings are used less, like during the pandemic, they still need to keep up with their security inspections and maintenance schedules to remain safe and reopen on schedule.

This is not just to comply with codes and keep people out of danger, but also to protect businesses from the financial ramifications of negligence. Buildings that do not keep up with their property’s specific safety requirements, including their alarm monitoring contracts, risk heavy fines and even temporary closures until the requirements are met. Buildings that were closed for a time may not be allowed to reopen until they get their systems back up to date. And if the property or its occupants are compromised because the owner allowed the alarm contracts or safety inspections to lapse, he can be liable for damages.

How Alarm Monitoring Contracts Provide Evergreen Cash Flow and New Income Opportunities

The necessity of fire, safety, and security systems makes alarm contracts a very valuable source of evergreen income. They are a golden source of recurring monthly revenue (RMR) that keeps cash flowing into the business during the most difficult economic times. These contracts keep fire and security businesses connected to their customers, even when other businesses are struggling to keep theirs.

Staying in regular contact with their customers through hard times helps fire and security companies build a greater sense of trust and comfort with them. It also keeps the door open for upselling new safety features or security options as they become available. Rather than cut back on their alarm monitoring contracts, some business owners may want to explore additional options or services that can better protect their physical assets through hard times.

Alarm contracts can also be useful as a source of extra income for companies that specialize in other areas of fire protection and want to expand their offerings. Companies that offer comprehensive solutions, from installation to maintenance to monitoring, can use their knowledge and expertise to help other organizations better understand their safety needs and upgrade their systems. For businesses looking to simplify their costs, being able to consolidate their fire and security services with one company may be an attractive option.

We Can Help You Sell Your Alarm Contracts or Provide Peace of Mind

With 30 years of experience, Acquisition and Funding Services knows how to help businesses stay steady or attract attention through good and bad economic climates. AFS Managing Founder Rory Russell is a business broker who specializes in serving fire and security businesses. This means he understands your business better than other brokers and can leverage your current alarm monitoring contracts to help you bring in extra funds for your business.

Whether you’re interested in selling some of your alarm contracts or ready to exit your company, Rory can help you start talking to buyers in a matter of days. He can also provide funding to help boost and stabilize your company during a difficult time. If you’re not sure what next step is the right one for your alarm business, Rory can also help you understand your options and learn which ones will help you reach your goals, both today and in the future.

To start a no-commitment, confidential conversation, you can fill out our contact form here or call Rory directly at 800-354-3863.

Don’t let the state of the economy scare you: AFS can help your alarm business navigate any financial concerns and stay successful!