Add Recurring Revenue Through Alarm Monitoring Contracts

While a single alarm monitoring contract may not be worth your while, all the accounts you accrue over time adds up to a big chunk of recurring revenue. Increasingly, integrators are recognizing the value of this steady revenue stream and adding monitoring services to their repertoire.

If it's something you've steered clear of over the years, it's not too late to get in on the action. You just need to know how.

ADS Security, one of the largest electronic security alarm firms in the country, is ranked 22nd in the nation for its recurring monthly revenues, which come in at close to $1.5 million. Although the company chooses to put a heavy emphasis on monitoring -- and you may not -- you can still embrace the monitoring service and profit from it.

Anna Tate, assistant central station manager for ADS, offers some solid advice to integrators courting a potential monitoring partner. Simply stated, she says: Ask questions.

Is the central station UL (Underwriter's Laboratory) or FM (Factory Mutual) listed? If so, it shows that they've invested the resources necessary to ensure that both the central station facility and the operation have met the highest industry standards. Is the central station is "Five Diamond," meaning that all of its operators are trained in a nationally recognized central station training program?

Don't forget to look into the central station's automation system. It could, Tate cautions, limit the information that a dealer needs in order to oversee the account. For instance, software that isn't Windows-based can be limited and reports may not be easy to interpret.

"The automation system is also a litmus test as to how progressive the monitoring company is," she says. "Companies that have not kept up with technology in this area may not be as progressive in other areas as well."

Before selecting a monitor ing company, Tate also recommends checking its references and D&B report as well as confirming that it's licensed to monitor in the states you serve.

Should you go with a local monitoring company or a national one? A national alarm company may have made many advancements but be too large to provide the personal, one-on-one service that customers today expect, Tate explains. "Mid-sized regional companies are usually the best bet, as they're still hungry for business and small enough to give time and attention to the customers without fear of a set quota."

Gary Bridwell, an integrator and owner of BTS Technologies based in Greer, SC, says many customers are curious as to how a remote monitoring company can adequately serve them. "I explain that all the information that the monitoring company needs is on the computer system and pops up on the screen when an alarm comes in."

But will an operator in New Jersey, for instance, know how to properly pronounce an obscure street name or town in California or will they instead impede the response process when dispatching to the police? Consider your options and choose the service that best suits your needs as well as those of your customers.

Whether you ultimately go with a local or remote company, it's key, Tate notes, to check state and local licensing requirements and make sure that you have a great contract.

Make Secure Decisions

Shannon McGinnis, a highly successful integrator in business for over 10 years, has added security and monitoring to his scope of service and can attest to Tate's contract concerns. As president and owner of Home Technology Systems, based in Wichita, Kan., he advises fellow integrators to have an attorney review the document.

"We're not in the security business; we're in the custom home electronics industry. But we see the value of security and monitoring because we're out there." An authorized SetNet dealer, Home Systems Technology turns to them for its monitoring, but McGinnis wanted more verbiage in his own customer contracts. "Our attorney looked it over and made sure that all the legalese was correct."



To stay competitive, McGinnis is willing to adjust the cost of his security system installs, especially in the case of smaller homes. "We're competing with all the free, basic systems that are being advertised," he explains.

"In exchange, we want the customers' signature on a three-year agreement. So you have to be in a position to say you'll do the install at a discounted rate and be willing to take that sacrifice to get the monitoring account," he says. "So basically, they're buying time and we break even in about three years. That's when you start making money from the accounts."

Typical pricing on residential monitoring accounts in his part of the country ranges from about $25.95 to $29.95 a month, McGinnis says. Of that amount, it's standard to pay the monitoring company about four to six dollars per account. Although that's significantly less than what the monitoring company would bill direct accounts, these types of dealer contracts do increase their overall subscription base and are attractive to monitoring companies for that reason.

While some independent integrators and dealers choose to leave the billing to their monitoring company at a typical cost of a few bucks a month, McGinnis prefers to handle the billing of his monitoring accounts in-house. "Having the flexibility to do the billing yourself is important," he says. "We can just look on our system when we do the billing and have control of it ourselves."

The billings, whether done in or out of house, are nice enhancements to the revenue stream, but the downside McGinnis sees is that, at some point, you'll have to deal with the service agreement aspect of the monitoring contract. "Keep in mind that eventually service will come up and that's not usually revenue generating."

There is definitely money to be made in monitoring, but there's still more to consider before biting the bullet. You should, according to Tate, make sure that your alarm panel types and alarm reporting formats are compatible with the receivers at the central station you choose. If not, you may be required to reprogram your panels.

She points out that while price matters, you should also look for hidden charges, such as fees for runaway alarms and excess signals.

In addition, Tate suggests finding a company that allows you instant access to your customers' information. That way, you can input account information, change pass codes when necessary and check alarm history.

"I always arrange for is to be notified of low-battery and other system events instead of the monitoring company calling the homeowner at 3 a.m. when they do a system test," says Bridwell. "It makes the homeowner feel good about the quality of my company when I call to schedule maintenance of a problem they didn't even know they had. They'll often say 'Oh, so that's what that flashing light meant!'"

Tate notes that online changes are usually the responsibility of the dealer/installing company. "Most central stations provide this service for their own customers but do not want the responsibility of programming a dealer's panel," she states. "Some dealers and installers will enable customers to be able to make those changes themselves via the keypad. Online changes usually run $25 each."

The Effects of Tech

In terms of how voice-over-IP is affecting response, Tate points out that it varies with different providers and in the carriers of the service. "Communication can be non-existent, sporadic, or slow. At other times, signals are transmitted quickly with no problems. There are also issues around the backup power supply to the modem. The phone is still the best bet overall with a radio backup."

Reporting functions most commonly requested by customers, above and beyond the standard reporting for intrusion, fire and carbon monoxide, have to do with family. "Some residential customers with latch key kids request a call if the alarm has not been disarmed by a certain time," Tate says.

"Many residential customers now understand that the importance of having a backup means the alarm can transmit signals in case the phone lines are cut, [with such things] as cellular or radio backups. High-end customers may also request monitoring services for safe rooms, safes, gun and liquor cabinets or other supervisory-type monitoring services such as temperature sensors."

Temperature and electrical monitoring are also important. McGinnis, for example, has a client with a $30,000 aquarium. "He wants to know if there's a power outage. And, if a customer has an elderly relative on medical equipment that requires power, they want that monitored as well."

If you have customers requiring covert monitoring services such as with Nannycams, Tate says you'll need a central station that offers this particular service. "The station would need to have software compatible with the camera systems that are installed and would have to be committed to providing this service, usually with dedicated operators who only handle video accounts."

Tate adds that yes, there is money to be made in residential CCTV monitoring if the company understands that video monitoring is very labor intensive. "Pricing also varies if the customer wants the video used on a scheduled random tour or only used to verify alarms," she says.

"From a marketing perspective, with many cities going to 'non-response' for alarm calls, video verification of alarm signals assists central stations in upgrading an alarm call to an in-progress situation. Law enforcement loves it."

Although monitoring over the Web is an option, McGinnis isn't seeing too much call for it. "I'm not encountering too many people who do it over the Web," he says. "The security equipment would involve multiple IP cameras and standard interior security is designed to tie into a landline phone." Tate agrees that plain old telephone service is still the best bet with a radio backup.

It Can Be a Safe Offering

If you suddenly need cash flow, you can sell your monitoring accounts to your monitoring company. Tate echoes that "the easiest, smoothest transition for the customer and the installer would be to select companies that monitor and buy accounts. Customers are savvy to having their information bought and sold." If potentially selling accounts is a consideration for you, inquire if the monitoring company is actively involved in purchasing accounts.

McGinnis concurs. "I think you need an avenue to sell the accounts to. I've never had an interest in separating mine out -- they've been an asset for my business -- but it's nice to be able to sell them if you want. And, if you have cash flow issues, it can be advantageous."

One of the soundest pieces of advice that Tate offers is to be sure to understand and communicate to the customer exactly what the monitoring company can or can't do. In some areas, for instance, police do not respond to alarm calls. "The customer will have to have a guard response or accept the responsibility for responding to alarms themselves," she points out.

Keeping on top of local monitoring ordinances is key. McGinnis takes them seriously and advises that some local testing, such as NFPA 72, may be involved.

"There are some things you need to do to get into monitoring, but it's no worse than anything else. For us integrators, the hardest part is putting the equipment in, programming it and making it work for the customer. For me, offering monitoring services has been definitely worth reaping the recurring income. That's the easy part. We've had times where we're riding a wave in between house jobs and have had to make payroll. It's nice to have that steady money coming in."