Security Dealer Programs: Great Way to Generate Cash Flow

A proven way to maintain cash flow is to join a security dealer program and sell the accounts back. A $39.95/month monitored alarm account with a 700+ credit score can earn as much as $1,400.

Security Dealer Programs: Great Way to Generate Cash Flow
Jason Knott · March 16, 2012

Many integrators look at the residential security business as a long-term exit strategy for their company. But what if you need the money now? Dealer programs offer that solution.

There are several successful security dealer programs in the market, including Monitronics, Diebold, Guardian Protection and the big daddy of them all, ADT. But they are not all the same. Some have strength in terms of providing leads for dealers, while others differentiate with sales and marketing assistance, solid customer care that results in longer-term clients, technical expertise or higher payouts.

In a security dealer program, integrators install financed systems and then immediately sell those accounts and receive cash. For many companies playing in the entry-level market, selling the accounts gives them the cash flow they need to operate or even meet payroll commitments.

The specific amount of the contract payoff is based on several factors, including:

  • How much you are charging for monthly monitoring
  • Your client’s credit score
  • The term length of the contract (longer contracts get more)
  • Residential vs. commercial
  • The number of accounts the dealer is selling

All of this adds up to create a multiple that will be paid based on the recurring monthly revenue (RMR).

For example, a $39.95/month, three-year term account with a 700+ credit score might earn a 35X multiple, or about $1,400. Some programs also offer annual revenue sharing payouts to the dealer from the monitoring. Finally, instead of requiring dealers to sell every account they install, some programs allow dealers to cherry pick accounts they want to keep themselves and only sell particular accounts. The programs protect themselves from “bad” accounts by holding back a portion of the dealer payoff for at least one year to make sure the account does not cancel.

For example, at Guardian Protection based in Warrendale, Pa., dealers get 5 percent of the annual RMR after the first year. According to Hank Groff, national director of the dealer division at Guardian, the company’s average residential account stays active for 12 to 13 years. Guardian pays the revenue share in perpetuity for active accounts. Others pay only for a certain number of years.

Technology is now also starting to play a part in differentiating the programs such as offering quick turnaround on financing for the customer. Guardian has built an electronic contract for tablets for integrators to use in the field that automatically uploads the contracts for approval.

  About the Author

Jason has covered low-voltage electronics as an editor since 1990. He joined EH Publishing in 2000, and before that served as publisher and editor of Security Sales, a leading magazine for the security industry. 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 is currently a member of the CEDIA Education Action Team for Electronic Systems Business. Jason graduated from the University of Southern California. Have a suggestion or a topic you want to read more about? Email Jason at [email protected]

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