Page 55 - Security Today, March 2018

Dealer Strategies
2.72
2.46
2.48
2.3
1.0
-.03
-1.6
2.03
1.03
-1
Y16/05
1.82
1.53
-1.19 Y16/03
1.53
-0.93
1.33
-1.15
Y16/07
RMR Net Growth %
1.33
-0.31
-1.64 Y16/08
0.27
Y16/04
RMR New Growth Rate / Rate Increases %
Months
-1.55 Y16/06
RMR Attrition Rate / Rate Decreases %
ADVANCED METRICS
In the coming years, security dealers, along with industry buyers and lenders, will likely start grouping its accounts based on service levels, such as:
• Basic
• Standard
• Premium
Each of these groups will have its own metrics—average rate,
charges (services) per account, and so on. For example, perhaps the Basic subscribers pay an average of $22 per month. Some analysis shows that many of these subscribers pay relatively low rates of $15 to $18 per month, perhaps because they were signed on many years ago.
Implementing a selective rate increase for these low rate accounts, which is fair given current market rates, can bump up the $22 average to perhaps $23 to $24 and immediately improve margins. Given easy access to the detailed growth and attrition data described earlier, it’s much easier to take targeted action to improve the bottom line.
From a marketing standpoint, grouping accounts also allows deal- ers to focus on upgrading Basic accounts to Standard, and Standard accounts to Premium. Programs like this are especially important now, as cable and media companies aggressively advertise to try to poach accounts from traditional dealers. Assigning each account to a group allows a dealer’s management team to set goals for upgrades as well as for new accounts. It’s much less expensive to cross-sell existing customers than it is to find and sign on new customers.
Finally, while RMR is the most convenient metric for buyers and lenders, even more important is the margin each RMR segment gen- erates. “Once we get a breakdown of the RMR, we need to have the dealer show us how much they make on each segment,” says AFS’s Wooster. “The top line RMR is a great starting point, but what mat-
ters most to us is profit by type of recurring.” Again, good software should allow for assignment of costs—such as wholesale monitoring fees, billing costs, and other variable costs—to each recurring charge.
ACCURACY BREEDS CONFIDENCE
Whether it involves funding, buying and selling accounts, or simply ramping up growth, one of this industry’s biggest issues is determin- ing accurate growth and attrition rates. Many, many deals have blown up because of this. With the dynamism in this industry right now, it’s more important than ever to invest in account management systems that allow dealers to easily track—and build—their RMR.
If growth financing is needed, being able to immediately generate the reports and metrics a lender needs will breed the confidence that lender needs to extend credit. If a dealer is thinking of selling ac- counts, the same holds true – solid RMR reporting gives buyers con- fidence that the dealer ‘has its act together’, and may therefore boost the multiple a buyer is willing to offer. “Buyers and lenders don’t like uncertainty,” Wooster from AFS concludes. “Uncertainty reduces val- uation multiples, and on the flip side, accurate reporting can improve the valuation a buyer or lender assigns to a dealer’s accounts.”
The vast majority of dealers are neither selling nor seeking a loan, but they are certainly looking to both retain their customers and drive faster growth. Investing the time and money to implement an industry-specific software platform will provide a very quick pay- back, by offering a real-time look at how the business is performing, and why. Only then can confident decisions be made to set goals, and to follow through with targeted and measurable programs to achieve those goals.
Scott MacDougal is the president of Cornerstone Billing Solutions. WWW.SECURITYTODAY.COM DS7
Percentage