Business

No, You Are Not a Loser If You Don’t Earn RMR

Instead of focusing on recurring monthly revenue for his custom installation company, one integrator is building value in real estate as his future exit strategy.


Jason Knott · April 11, 2016

With all the hullabaloo (admittedly a lot of it from me) about the need to create recurring monthly revenue (RMR) to build value for your business for a potential exit strategy, you’d think you were a total loser if you didn’t have regular monthly contractual income.

But what if an RMR style business is just not feasible for your small integration company? Yes, there is still a way … a conventional way to retire with regular income.

First, let me back up. No, you are not a loser if you don’t have RMR. Many one-, two- and three-person CE pro shops have concluded that they do not have the ability to service their existing accounts with a guaranteed response time commitment without disrupting their business model. Plain and simple ... it's not worth the risk to try it. I respect that decision, so there is no need for an inferiority complex. 

Recently, I met with a long-time CE pro reader (who wishes to remain anonymous) here in New England who is a perfect example of finding another solution for an exit strategy. His business is a combination electrical/low-voltage integration company. He has two guys that work for him. His sweet spot is doing commercial wiring, but especially during the rough New England winters, he does a lot of residential service work … electrical panel replacement, rewiring for roof ice-melting systems, etc.

In the past few years, he has started installing audio and video, cutting in for in-ceiling and in-wall speakers, mounting flat panels, setting up wireless home networks, etc. He is very excited about the momentum for that portion of his company. But when I asked him if he was building any RMR, the flat answer was “No.”

“That would disrupt my entire business model. Plus, I don’t have the manpower to do that,” he told me bluntly.

But he still has a plan for building an RMR exit strategy for himself and his family: Real estate.

You see, instead of trying to recreate the wheel in his smooth-running business to inject RMR, his plan is to invest his profits into multi-family condos as rentals. To date, he has purchased two duplexes and one triplex. Each unit yields a monthly income more than enough to pay the mortgage. With aggressive 15-year loans in place, his goal is to have the units owned free and clear in the next decade or so. In total, the units currently generate about $18,000 per month in revenue. Down the road, he will also have sellable real estate assets that will easily generate enough money for eventual retirement.

So, in essence, he understands the RMR game very well, but instead of building it in his business, he is building it elsewhere.

He has a solid plan in place and he is certainly far from being labeled a loser.  



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  About the Author

Jason Knott is Chief Content Officer for Emerald Expositions Connected Brands. Jason has covered low-voltage electronics as an editor since 1990, serving as editor and publisher of Security Sales & Integration. He joined CE Pro in 2000 and serves as Editor-in-Chief of that brand. He served as chairman of the Security Industry Association’s Education Committee from 2000-2004 and sat on the board of that association from 1998-2002. He is also a former board member of the Alarm Industry Research and Educational Foundation. He has been a member of the CEDIA Business Working Group since 2010. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at jason.knott@emeraldexpo.com

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  Article Topics


Business · Business Operations · Service & Recurring Revenue · Blogs · · All Topics
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Comments

Posted by Joseph Kolchinsky on April 12, 2016

Thanks, Jason!  Always good to hear about other ideas and ways forward.  I posted a blog today on this topic and how CEDIA’s Technology Council is encouraging the industry to focus their development of RMR to counter the long-term trends, including price erosion and the customer’s shift in priorities from the latest technologies to ongoing support.  Whether it’s through your customer base or personal real estate, RMR is one way to build value.  http://onevisionresources.com/blog/modern-home-technology-professional/

Posted by Joseph Kolchinsky on April 12, 2016

Thanks, Jason!  Always good to hear about other ideas and ways forward.  I posted a blog today on this topic and how CEDIA’s Technology Council is encouraging the industry to focus their development of RMR to counter the long-term trends, including price erosion and the customer’s shift in priorities from the latest technologies to ongoing support.  Whether it’s through your customer base or personal real estate, RMR is one way to build value.  http://onevisionresources.com/blog/modern-home-technology-professional/