4.12.21 – SSI
Here’s a quick rundown on what alarm company owners can expect involving business valuations and company sales during COVID-19.
The COVID-19 pandemic upon us has impacted business and life in more ways than can be counted. It has changed the way people do business, put many things on pause and altered the world as we know it.
Amid the chaos of the pandemic, many alarm business owners are trying to continue business as usual. Some are trying to continue servicing their clients, providing essential services that both residential and commercial customers depend on. Others are trying to continue their progress toward the sale of their alarm business or the acquisition of another.
With all of this going on, one of the top questions we’ve been hearing is: How will the coronavirus pandemic impact the value and/or sale of my business?
While the COVID-19 pandemic is unprecedented and its impact can be difficult to predict in many ways, there are a few things we are confident you can expect when it comes to the valuation and/or sale of your alarm business during this time. Here are five factors to consider.
Things may move slower
With much of the world on pause or working at reduced capacity, it should come as no surprise that things may move more slowly with both valuations and sales.
Closings are still happening despite the COVID-19 pandemic. Just because things are moving slower doesn’t mean progress has stopped. If you had a sale lined up to be completed within the next couple of months, it may still be on track.
Though the pace of things may have slowed, if you are hoping to sell the fact that things are moving slower may actually provide you with the opportunity to get ahead. Initiating the sale process now could give you an edge when the market opens back up and you’re well positioned to sell.
If you’re looking for a valuation, be understanding if it takes a bit longer than usual to evaluate all the parts and pieces of your business. There are a lot of unprecedented factors at play and those involved in the valuation may face challenges and delays in trying to collect the relevant information needed for an accurate valuation.
Meetings will be virtual
Any aspects of a business sale or valuation that might normally be done in person will now be done virtually. They can still be done, but be prepared to engage in dial-in conference calls and online meetings instead of in-person meetings.
RMR and cash flow are still valuable and important factors in valuations
Despite coronavirus, recurring monthly revenue (RMR) and cash flow remain immensely valuable assets for alarm businesses of all kinds. From fire alarm businesses to commercial and residential security businesses, this revenue will continue to play an important role in determining the value of your business.
Higher attrition rates may impact alarm business value
Attrition rates are currently holding steady. However, due to COVID-19 there is a chance that attrition rates for alarm businesses may increase. The impact of this remains to be seen at this point, but it’s something you should be prepared for as an alarm business owner.
As always, it’s important to be aware that a shift in attrition rates could impact the value assigned to your alarm business.
There may be additional negotiations
Not surprisingly, buyers are a bit hesitant about certain aspects of purchasing alarm businesses. As mentioned, this includes the possibility for higher rates of attrition as well as repairs that are unfinished, upgrades that haven’t been completed, and the onboarding of new customers that may be paused.
This may cause additional complexities when it comes to sale negotiations; yet, it does not in any way mean a sale is impossible, especially if you are working with an alarm company broker.
Simply be prepared for more back and forth when you ultimately reach the sale or purchase negotiations phase, and keep in mind that deals may require more structure in order to ensure that it’s a win for everyone involved.
Rory Russell is owner of owner of Kattskill Bay, N.Y.-based Acquisition & Funding Services.