The most valuable asset that an alarm company has in its portfolio, whether it is a new enterprise or a well-established business, is the standard alarm contract that it uses to build its client base. This is equally true whether the alarm company’s customers are residential consumers or commercial entities.
What are the main benefits of well-drafted alarm contracts?
- Shifting Liability
o Mandating that the subscriber obtain proper and adequate levels of insurance, and that the alarm company be named an additional insured, can oftentimes ensure that the subscriber has an adequate remedy for property loss without the need to bring a lawsuit against the company;
o Obligating a subscriber to waive rights of subrogation can be an effective means of preventing an insurance company from bringing a claim against an alarm company after it has paid out pursuant to the subscriber’s insurance policy.
- Limiting Liability
o Properly worded exculpatory and/or limitation of liability clauses in an alarm contract can typically serve to release, or otherwise significantly limit, the alarm company’s exposure to liability in the event of personal injury or property damage suffered by its subscribers.
- Ensuring Streams of Recurring Monthly Revenue
o The lifeblood of any alarm company is the agreement subscribers make to pay on a monthly basis for the services provided. However, in order to maximize the value of that agreement, it is equally important for the alarm company to make sure that in the event of default by the subscriber, all anticipated future payments for the remaining term of the contract become immediately due and owing.
- Enhancing Value of the Business
o When seeking to sell an alarm company, the ability to demonstrate a large client base that generates recurring monthly revenue over the short, medium and long term, as well as having provisions in the standard contract that limit the downside liability for subscriber-loss will ultimately build equity in the business and help maximize the multiple that can be applied in sales negotiations.
Enhance and Protect Your Business With Properly Drafted Alarm Contracts
Whether an alarm company is seeking to avoid or defend a lawsuit, or contemplating selling its business, the well-drafted alarm contract will ultimately inform nearly all of its decisions. As such, it is critically important for alarm companies to work with knowledgeable counsel that can ensure that the alarm business has proper contracts in place that offer the strongest possible protections and maximize business value.