By Jim Wooster, Jr. Alarm Financial Services, Inc.
In the security and fire alarm industry, we all love RMR – Recurring Monthly Revenue from monitoring and related services. It’s how we measure the value of our businesses, it’s the high-margin cash flow that keeps on giving. It’s what we hope to cash in on someday for retirement. And over the years, through good economic cycles and bad, the value of RMR has held up.
But are you maximizing the value of these recurring revenue accounts day in day out? Certainly you are benefiting from the cash flow, any billable service, the referrals, the upgrade and add-on opportunities, the marketing visibility that comes from yard signs and window stickers. However, perhaps the most underutilized value of RMR accounts is your ability to borrow against them.
By tapping into the value of these assets to borrow money, you can increase marketing, expand geographically, and most importantly make acquisitions – yes, put on 200 new accounts or $6,000 in RMR, for example, with no money out of pocket. This allows you to add more RMR to your company, increase your borrowing ability and continue the cycle of growth.
Of course, you have to be careful about keeping your level of debt reasonable relative to the value of your assets, just as in all aspects of your life. But a responsible amount of borrowing helps you increase the worth of your company. That’s why they call it leverage! If you’re not looking into how you can borrow to grow, you are not maximizing the value of your alarm accounts.