Preparing to sell your company is a big undertaking! From gathering and organizing your finances to making decisions about your team, there’s a lot to think about and do. This can be especially difficult for a family owned and operated business, as the selling process can be an emotional one.
While there are some things any owner needs to consider when selling, there are specific items alarm security businesses need to remember as they prepare to sell. Here’s a checklist to help you get started:
Organize Your Financial Information: Cash Flow, RMR, and Assets
One of the first things that potential buyers will look at when determining the value and profitability of your business is your financial information and your cash flow. Gathering this yourself ahead of time will save time and annoyance at the start of the selling process. Working with an accountant to understand exactly where your business stands will also help you form realistic expectations around how much your business is worth.
Make sure you have all of this data organized and up-to-date. You will want to start with a clear overview of your company’s cash flow and recurring monthly revenue (RMR). You can read more about how to calculate your RMR here. These numbers will help buyers understand your asking price and decide whether they want to start a serious conversation.
Equipment and Commercial Property Assets
In addition to your business’s financials, you will also want to account for the assets that go beyond your cash flow. For security systems businesses, this means your equipment and commercial property assets. This includes company vehicles, your office space, and expensive machinery and tools. As a service company, these assets are essential to the operation of your business.
A potential buyer will want to know that the sale of your company includes everything it needs to continue running. He will also want to know what the cost is to maintain use of the equipment and to lease your property. Prepare a list of the equipment and properties your business has or occupies. List the payment plans for each and indicate if you or the company own any of the assets. Include any further details on the maintenance or condition of this equipment.
If you have a successful security business that also has valuable assets, you can increase your asking price and have an even stronger position as you enter negotiations.
Account For and Assess Your Team
Another key factor in selling your business is the quality and ability of your team. The basic information that any buyer will want includes:
- The number of employees, divided by role (manager, technician, admin, etc.)
- Details about employment contracts, restrictive covenants, non-competes, etc.
- The length of each team member’s employment (Any senior staff members who have been with the company for decades? Any new members?)
- Current benefits packages offered by the company
- Relevant information about employee/customer relationships (Is one technician the main contact for a major customer or large group of customers?)
This starting information helps the buyer shape an idea of your team’s talents and expectations. While some buyers will be less concerned with this information, others hoping to keep most of your staff will want to know this and more as they prepare to take over ownership.
Security and Fire Alarm Licenses and Certifications
In fire and life safety businesses, one of the most important areas of interest will be your team’s certifications and licenses. Knowing how many people on your staff are legally able to perform the full suite of services you offer is important for the buyer. If some employees choose to quit after the sale, the buyer needs to know if any services could be in jeopardy. More licensed and/or certified technicians means a greater likelihood of maintaining operations, even if some employees leave.
Outline Your Customer Types, Service Areas, and Competitors
When listing your business for sale, you should include a summary of the different customer types you serve as well as any relevant details about your typical service areas. You also need to include information about your competitors, both geographical and service-based. This information will help potential buyers understand even more about the size of your business, its capabilities, and its potential for expansion.
Customer Types: Just Commercial or Also Residential?
For most alarm security businesses, customer types will be either commercial, residential, or both. Within your commercial customers, it is important to separate the large companies, government contracts, and chains from the single-location small businesses. Substantial commercial accounts that generate a large portion of your company’s cash flow will be of great interest to a buyer.
If your security company does offer residential services, it is important to indicate how much of your cash flow comes from these customers. Large buyers may be more interested in expanding your business relationships than in maintaining your residential services. It will depend on each buyer’s long-term goals for your business.
Security Services: Areas of Coverage
As a provider of security services, it is important to outline the areas you cover. A long established relationship with a monitoring partner who can cover multiple regions means your company is well-positioned to continue growing. That may justify a higher asking price.
If your service areas expand beyond one state, this shows that your company is certified to offer security and alarm services across an even wider area. Other companies with a smaller service area will have to obtain those certifications and/or licenses before expanding beyond their current territory. If another life safety company is interested in purchasing your business, the ability to instantly expand into many new areas will be a major point in your favor during negotiations.
Geographic and Service-Based Competitors
Most security companies will have two types of competitors: those that compete in certain regions and those that compete for certain services. Outlining these gives a potential buyer important information about where your company stands, and why you are well-prepared to continue to win customers in spite of these competitors.
Depending on the type of buyer, you may want to highlight different aspects of your business as it compares to the competition. For example, if your company sells and installs security systems, but your competitor can only maintain them, you will always have a significant advantage when selling to new construction projects or developments.
Consolidate All Relevant Security Systems Information
When you are preparing your alarm security business for sale, you have to make sure a potential buyer can easily learn more about the central station, monitoring station, and any other providers who keep your security systems running. A buyer should be able to find out vital details about their services and the technologies they use.
Central Station Information
The central station is an integral part of any security business sale. Not only is it responsible for monitoring and responding to alarms, but it also provides a valuable service during installation and ongoing maintenance. To quickly inform a potential buyer, you should include details about the number of central station operators and their qualifications, as well as the types of security technologies they monitor.
Monitoring Station Information
The monitoring station that supports your business will be a vital asset to any potential buyer as well. Providing information about how many locations they have, where those locations are located, and what they monitor will show that they have the infrastructure and resources in place to facilitate growth.
The combined information about the central and monitoring stations gives a potential buyer an accurate snapshot of the security services your company offers and their reliability. It also shows if your business has a history of positive relationships with these key providers.
Other Security System Partners
A potential buyer may also want information about third-party security systems partners, such as fire alarm providers, camera installers, and equipment manufacturers. Including this information will help a buyer understand how you can leverage your existing relationships with these companies to expand into new markets.
This information allows the buyer to research all aspects of the services your company offers. It also enables him to understand what is required to keep your customers’ security systems running smoothly throughout and after the sale.
Need Help Preparing Your Security Company For Sale?
If you want to sell your alarm security company successfully, it’s important to be thorough and transparent when providing information about your cash flow, team, customers, and operations. With the right information and a competitive asking price, your company can stand out from other businesses for sale.
Collecting this information and understanding how to organize can be intimidating. If you are looking for help preparing your business to sell, consider working with a broker who specializes in preparing life safety businesses for sale.
How a Broker Can Help You Increase Your Asking Price
A broker can guide you through the process of identifying your company’s strengths and weaknesses. He can help you decide on an asking price that meets your goals, and increase it by highlighting your company’s value.
By helping you collect this information, your broker will learn all about your company’s value to the industry. He can guide you through increasing your cash flow if necessary and help you make a plan to address weaknesses in your operations.
Once your company is ready to sell, he can leverage his industry contacts and knowledge to help you market your business so that it stands out as a desirable acquisition opportunity.
Sell for the Right Price at the Right Time with AFS!
If you want to get the best possible price for your life safety company, work with a broker who understands your industry! With over 30 years of experience preparing fire and security businesses for sale, Rory Russell knows how to help you get the offers you want while taking care of your team.
As someone who owned and operated his own security business, Rory knows your unique challenges and understands your company’s true value. Don’t prepare this information alone. Start a conversation with Rory today!