Page 54 - Security Today, March 2018

RECURRING REVENUE
In addition, it’s worth reviewing a couple of other items:
• Future RMR not yet invoiced
• Pending RMR not yet online
RMR for new accounts is straightforward, though some new ac- counts are actually re-signed accounts due to a move. Dealers with an aggressive move/re-sign program can sometimes demonstrate that a chunk of their attrition is actually not lost accounts, but re-signed accounts. Flagging these accounts in the software should allow for a separate line item for re-signs. Likewise, it’s valuable to break out both the dollars and the counts for new services added by existing accounts, as well as for rate increases.
If a dealer puts an account online, but has not yet billed the recur- ring, is that RMR? Similarly, if a prospect accepts a proposal from the dealer, but the install has not yet occurred, is that RMR?
It is potential RMR, but it’s not active RMR, so our reports exclude these categories from current RMR. Nevertheless, it’s valuable to re- port these numbers “below the line” as FYI items.
This at least provides the dealer a view of RMR in the pipeline and can provide meaningful information especially for owners and man- agers—a preview of the backlog, accounts that will be added soon.
TRACKING RMR ATTRITION
RMR attrition is more complicated as well, and can be the result of: • Cancelled accounts
• Cancelled services for existing/continuing accounts
• Rate decreases for existing accounts
These three are just the flip side of the growth discussion above. However, managing attrition can (and often does) mean the differ- ence between success or failure. You can’t manage what you don’t measure, so entering reasons for every cancellation into the account management software is critical:
Cancel Reason List
Business Closed
Can’t Afford
Don’t Use Syst
False Alarms
Moved
Non-payment
Service Problem
Went to Compet
Assigning a cancellation reason should allow for easy—and ex- tremely valuable—reporting:
Some of the cancellation reasons are controllable, some are not. The most common reason for cancellation involves a move of some type. In the above chart, ‘Moved’ and ‘New Location’ for a business adds up to over 36 percent. Properly managing move-in/move-out scenarios can have a huge impact on ‘net growth’. A high percentage of re-signs due to customer moves is the hallmark of a company that both tracks its move-driven cancels, and has a pro-active program to manage these subscribers. Yes, it’s complicated, but it’s also lucrative; good move programs can often generate brand new customers, from the move-in side of the equation.
PUTTING IT ALL TOGETHER
Now that we’ve determined definitions, growth elements, and attri- tion elements, it’s time to look at the big picture. RMR changes can be reviewed for one year, two years, or perhaps six months to see more recent trends.
This summary shows growth rates in green, attrition (negative growth) in red, and RMR net growth in blue. In this example, top line RMR growth is excellent at 25 percent plus annualized, but attrition is also quite high at about 15 percent, resulting in net growth of more than 10 percent.
Just as valuable is a visual of trends for these three numbers, over time like the line chart on the next page.
Line charts like these give managers a quick read on where things are going. In the example, the blue line (net growth) seems trending downward—mainly because growth (green line) has slowed. So it may be time to review the growth program(s), and take corrective action.
From there, good software should allow for drilling down into each month to see the metrics—growth elements and attrition ele- ments, by dollars, charge counts, and customer counts:
Y16/08
Recurring Changes Summary
Beginning RMR (includes Section 5 Continuing RMR)
Section 1: New RMR / New Accounts
Section 1: New RMR / New Accounts (Re-Signed)
Section 1: New RMR / Existing Accounts
Section 2: Stopped RMR / Closed Accounts
Section 2: Stopped RMR / Open Accounts
Section 4: Incremental RMR Increases
Section 4: Incremental RMR Decreases
Ending RMR
Amount
79,558.04 843.88 39.99 151.49 -1,230.70 -67.99 26.01 -3.00
79,317.72
Charge Count
2,185
18
1
5
35
2
3
1
2,172
Account Count
1,915
17
1
5
35
2
3
1
1,897
DS6
0318 | DEALER STRATEGIES
RMR New Growth Rate / Rate Increases %
RMR Attraction Rate / Rate Decreases %
RMR Net Growth %
Average Annualized 2.1 25.7 -1.2 -14.9 0.9 10.8
The above snapshot is for August 2016. The summary numbers smooth out the ups and downs by taking averages of multiple months, but a company should be able to scrutinize details for a period where performance was relatively strong or weak. A good software report- ing system should allow dealers to go further, providing individual account and charge details behind these summary numbers. That level of detailed analysis will allow owners, managers and staff to re- view the ‘nitty gritty’ stories behind the raw data and then try to opti- mize things that worked, correct things that didn’t, or both.