How to Maximize Profit in the Sale of Your Alarm Company
If you’ve decided to sell your security alarm company, chances are you’re probably wondering what your alarm company is currently worth. You’re probably also wondering how you can maximize your profit by selling the organization you’ve worked so hard to build. After all, no matter why you’ve chosen to sell, negotiating the best terms possible and selling your company for top dollar is the ideal way to go.
So how do you go about assessing the value of your alarm company? And what can you do to ensure you’re well-positioned to maximize your profit when it comes time to sell?
Understanding alarm company valuations and realizing which factors most powerfully influence the value of your alarm company can help you greatly in positioning your alarm company to sell at a premium price. While companies in many industries are valued using the EBITDA model, which focuses on earnings before interest, taxes, depreciation and amortization, companies in the security alarm industry are assessed primarily based on the amount of recurring monthly revenue (RMR) they are capable of generating. A number of other factors, including equipment, technology and gross sales, also influence the value of an alarm company — but RMR is a key factor in determining what your company is worth when it comes time to sell.
Calculating and assessing the value of your alarm company is a complex process and one that should not be taken lightly, especially if you’re interested in putting your company on the market. While attorneys and traditional business consultants are capable of assessing companies in most industries, experienced alarm company brokers provide the most accurate valuations of security alarm companies. If you’re hoping for an accurate assessment of what your alarm company is worth, working with an alarm company broker is important.
Realizing the importance of generating RMR and choosing to work with an alarm company broker when valuing your organization are the first steps towards increasing the profits generated by the sale of your company. There are a few other best practices and strategies you can follow that will also help you to maximize the profit you generate, whether you’re hoping to sell right away or you see yourself putting your alarm company on the market sometime in the future.
1. Keep Your Eye on Market & Industry Trends
If you’re hoping to capitalize on the opportunity to sell your alarm company, timing the sale appropriately is crucial. Selling at the right price at the right time is imperative to increasing profits and keeping an eye on market and industry trends is the key to doing so.
Currently, the security alarm industry is in a seller’s market. There are more buyers in the market for security alarm companies than sellers — driving up competition, prices and, as a result, profits, for sellers. If you’re hoping to sell your alarm company quickly at maximal profit, now is a great time to do so. Additionally, with the capital gains tax at a reasonable rate but poised to increase in the near future, you’ll have more money left in your pocket if you sell your alarm company now.
Not ready to sell your company now? Keep an eye on the alarm and security market trends moving forward so you’re sure to put your company on the market when it stands to benefit you — the seller — the most.
2. Seek out Sources of RMR
Recurring monthly revenue is key to increasing both the profitability and the value of your alarm company. Companies should be focused on bolstering their sources of RMR in order to be successful in the short- and long-term. While RMR provides alarm companies with a steady source of income, it also enables company owners to exit the industry as profitably as possible.
As mentioned previously, RMR is incredibly important when it comes to alarm company valuations. The amount an alarm company is worth is often estimated based, in part, on a multiple of RMR. As a result, alarm companies with strong RMR typically sell for significantly more than their counterparts.
3. Keep Things Current
From maintaining up-to-date customer contracts and accurate financial records to keeping your finger on the pulse of your organization, staying on top of things is imperative to operating — and eventually selling — a successful security alarm company. Keeping things current helps you operate as efficiently and effectively as possible, and enables you to promptly address any issues or weaknesses that may undermine the value of your company. It also shows potential buyers that you’re a reliable, trustworthy seller when your alarm company ultimately goes on the market.
4. Develop a Diversified Account Base
You’ve probably heard it before: Don’t put all of your eggs in one basket. In the security alarm industry, having a diversified account base is very important. Ideally, you should work towards gaining — or maintaining — a mixture of residential and commercial clients. You should also offer a variety of core services that are consistently in demand. By doing so, you can feel confident that your organization is less vulnerable to the damage that might be caused by market volatility or lost accounts. Additionally, a diversified account base can help improve your company’s appeal to buyers when it comes time to sell.
5. Work With an Experienced Alarm Company Broker
Whether you’re planning to sell your organization as soon as possible or you envision yourself putting your alarm company on the market at some point in the future, working with a reliable alarm company broker is key to maximizing your profit from the sale. From providing you with an accurate, thorough valuation of your alarm company to negotiating favorable terms of sale, an alarm company broker will provide you with invaluable insight and assistance throughout the selling process.
Sellers who work with alarm company brokers typically see higher profits from the sale of their companies for a number of reasons. Firstly, brokers understand the true value of your organization and can work with you to ensure that your company is sold for what it is truly worth. Experienced brokers also have negotiation power and the industry knowledge necessary to back it up. They are familiar with the security alarm industry and can help you to navigate a smooth sale that results in a significant profit.
When preparing your alarm company for sale, understanding the valuation process and the key elements that add value and profitability potential to your organization is imperative. Whether you plan to sell right away or years down the road, monitoring market trends, establishing reliable sources of RMR, maintaining up-to-date contracts and records, developing a diversified account base and ultimately working with an experienced alarm company broker during the sale of your company will help you to maximize your profits and capitalize on the sale of the company you worked hard to establish and maintain.