A Crash Course in Recurring Monthly Revenue

Starting from $0 in recurring monthly revenue (RMR) in 2003, Pat Egan of Select Security in central Pennsylvania now makes $400,000 per month from contracts in alarm monitoring, service and inspection.

“That’s a whole lot of money in the bank before I do a single installation,” says Egan, who was among a panel of RMR high achievers at the CE Pro 100 Summit. Alex Dunn, CEO of Vivint, and Tim McKinney, group director of residential Custom Home Services for ADT, were the other panelists.

The information from the panel was not something many integrators want to hear for several reasons. First, many do not delve in the world of recurring revenue at all, so the enormous revenues certainly bred some jealousy. Second, the entry-level systems, sometimes as low as $199, sit at price points that many integrators deem disdainful.

Egan, who previously had a successful alarm company he sold in 1997, says the number of alarm accounts being paid for is in the mid-40s, meaning he could sell Select for approximately $16 million. But he is not stopping there.

The RMR income has allowed Select to make several acquisitions, including a fire inspection firm and a fire extinguisher company, both of which earn RMR from code-required inspection fees. Select is also starting to sell PERS systems that use cellular networks for monitoring so users are not tethered to the homes from a monitoring standpoint.

“You guys can do this too. You can’t tell me you can’t sell PERS systems for $50,” he said to the audience, who are predominantly A/V-based contractors who have avoided the recurring revenue business.

Dunn talked about his company adding 100,000+ accounts in 2011 and its total RMR of $70 million annually. Vivint, which was formerly named APX Alarm, has recently added an entry-level home automation package to its offering that includes lighting control and HVAC control. Dunn says sales are “beyond expectations.” Vivint is No. 18 on the CE Pro 100 list.

McKinney described ADT’s entry-level play in the market and its hopes of partnering with A/V integrators through its custom home program. ADT was recently named No. 1 on the CE Pro 100 list.