It’s a competitive world, and a few dollars can decide who wins or loses an installation contract. It’s a place where the lowest bidder often goes home a winner, and the others leave empty-handed. There are ways to increase the odds your firm will emerge the winner of an alarm installation contract. One is to use competitively priced equipment, which may or may not be the ultimate answer. The other is to tap the power of recurring monthly revenue (RMR).
RMR can help offset the high cost of labor, allowing you to submit as low a price as possible. It also increases your company’s daily cash flow and builds equity in your company.
Having an RMR program in place allows companies such as Abbott Fire & Security Inc. of Canton, Ohio, to make price concessions in the short term while coming out ahead in the long run. Low-voltage contractors without RMR have little wiggle room in the highly competitive environment.
In fact, central station alarm companies, those who own and operate monitoring businesses, typically are the most profitable types of systems integrators. While this doesn’t mean you should start your own central station—because it is quite a costly endeavor—it lends credence to taking advantage of third-party offerings
Where mass marketing alarm companies, such as Brinks and ADT, make their money is not in the equipment but in the signing of long-term monitoring agreements—generally two or more years. In most cases, once the initial contract period is up, the owner continues to pay the monthly rate, perhaps at an even higher negotiated rate due to inflation.
“We began offering a $99 alarm package about four or five years ago, and it has given us an advantage over other companies,” said Brent Fatzinger, operations manager, Abbott Fire & Security. “The client receives protection for two doors, a motion sensor, one smoke detector, a keypad and an alarm panel.
“Early on, we realized the benefit of having recurring monthly revenue and, from day one, strived to build a monitoring base,” Fatzinger said. “RMR allows us to get down and dirty with our quotations when necessary. We also see it as a great way to build value.”
Alarm monitoring involves the use of a 24/7 remote central station manned with trained operators. Because the investment of establishing such a facility is out of reach for most, the usual way low-voltage firms offer monitoring to their clientele is to contract this work through the third party that specializes in this activity.
Operators at these facilities can deal with just about any conceivable type of emergency that might come up in a residential, institutional, commercial or industrial application. A third-party central station usually charges a flat fee per monitoring account. Contractors can mark up this fee to their clients. They also can charge for individual events, such as openings and closings or supervisory signals.
“The RMR our firm realizes from monitoring alarms has increased our cash flow and year-end profitability,” Fatzinger said. “As an electrical contractor, before we created our alarm division, we really didn’t understand the value of alarm monitoring. Since we opened our alarm division in 2002, we’ve made RMR a significant priority.” ¦
COLOMBO is a 32-year veteran in the security and life safety markets. He is currently director with FireNetOnline.com and a nationally recognized trade journalist located in East Canton, Ohio.