Generating recurring monthly revenue (RMR) has been an imperative element of running a successful and profitable alarm and security company for years – but now more than ever, companies should be focused on bolstering their sources of RMR.
Why is this the case? Here are our top 5 reasons why RMR should be a primary focus of traditional security and alarm companies in this day and age.
5 Key Reasons Why Recurring Monthly Revenue Matters to Alarm Companies
1. RMR Increases Alarm Company Profitability
Because companies without an RMR component often rely solely on the revenue generated from installation projects and alarm system products, they miss out on the steady monthly income that can be generated from service contracts, remote monitoring services, automated features and other components consumers are increasingly looking for. As a result, these companies are significantly less profitable.
In an article on SourceSecurity.com, Deborah O’Mara argues, “there’s money to be made, albeit it not in simply installing boxes and hardware” and asserts that to increase profits, security companies “should work on their existing customers to garner more RMR” by offering integrated features, enhanced services, and remote monitoring capabilities.
Essentially, these features and services are an immense opportunity to generate RMR – and if your company isn’t taking advantage, it’s missing out.
In fact, pursuing RMR in the commercial sector (even if you typically serve residential businesses) can be an immensely profitable way to generate additional RMR. You can learn more about pursuing commercial security RMR here.
2. RMR Increases Alarm Company Value
In the security alarm industry, company value is directly related to RMR. In fact, the amount an alarm company is worth is often estimated based on a multiple of RMR.
In an industry article about building RMR featured in Security Info Watch, Michelle Shewchuck – CFO of Envysion – explained, “RMR and company value go hand-in-hand.” The article asserts that, “with thorough due diligence, literally and figuratively, the security dealer and systems integrator can leverage RMR to increase company value — for financing, mergers and acquisitions, equity transactions — and simply to boost the overall health and viability of the company.” For this reason, alarm and security companies focused on bolstering profitability are increasingly turning to RMR to do so – and are finding much success in the long- and short-term.
Looking for other ways to build your company’s value? Check out 7 tips for increasing the value of your alarm business here.
3. RMR Saves Alarm Companies Money
It’s a well-known fact that retaining customers is far more cost-effective than obtaining new ones. Some research puts it at 5 to 7 times cheaper to keep clients than market to new ones., especially in competitive industries like alarm and security companies.
Not only do companies save on promoting their existing services, but they have a ready-made base of existing clients on which to promote new services and products. This saves a large portion of the marketing budget by only contacting relevant businesses who would be receptive to the approach.
4. RMR Enables Alarm Companies to Capitalize on the Internet of Things
In the past, RMR for security and alarm companies was limited to monitoring monthly contracts. However, with the advent of the Internet of Things, security and alarm companies have more opportunities than ever to profit from recurring monthly revenue.
Cloud based services, remote monitoring, and control features, and home automation technologies have presented traditional companies with new opportunities to expand and generate monthly revenue. Companies looking for new sources of RMR will thrive as the Internet of Things takes hold, while companies relying on more traditional revenue streams will fall increasingly behind.
Not sure if upgrading is the best option for your business? Here are 8 ways you can benefit from upgrading to incorporate IoT security features.
5. RMR Enables Alarm Company Owners to Exit the Industry as Profitably as Possible
If you’re preparing to exit the alarm industry by selling your security alarm company, chances are you want to do so as profitably as possible. Building RMR is an imperative element of constructing a successful exit strategy for alarm company owners. When alarm companies are valued, the RMR a company is capable of generating is significantly more important than the company’s gross sales. Companies without an RMR component often sell for significantly less than they might have otherwise.
Curious about how to sell for top dollar? Bolstering RMR is just one strategy. Learn about 5 other tips for maximizing the profitability of your alarm company sale here.
Increase Your Alarm Company’s RMR – Contact AFS Today!
Want to make sure your alarm or security company is living up to its full profit potential? Looking to increase your RMR but unsure of how to go about doing so? Interested in selling your alarm company for a profit or learning more about RMR in the security alarm industry? Contact Rory Russell at AFS for a confidential valuation of your security alarm business.
With decades of experience handling mergers, acquisitions, and alarm business financing, AFS can provide you with the industry insight and information you need to make the best decision for you and your security alarm company. Whether it’s positioning for a sale in the near future or seeking out new sources of recurring monthly revenue, Rory can help you get moving confidently in the right direction.
Give him a call at (800) 354-3863 (cell – 24/7 availability) today to get the conversation started and take the first step towards growing your company’s profitability through RMR.
Looking for additional insight about how to value your company based on the recurring monthly revenue it generates? Find out how to determine an accurate multiplier and how that multiplier will impact your alarm company sale here.
Seeking additional sources of RMR? Learn more about increasing RMR with the Internet of Things, and find out how you can generate reliable, valuable recurring monthly revenue through these 3 sources of contracted RMR here.
Editor’s note: This content was originally published in 2015, but has been updated as of October 2019.