Calculating what your integration company is worth, with and without RMR

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05/26/2011

If there’s one message that PSA Security CEO Bill Bozeman likes to hammer home with PSA integrators it’s this: Those who offer managed services, maintenance and service plans, and have other RMR generators as part of their business will have more, happier, and stickier customers.

Bozeman's been talking about that for many years. But, according to Jeff Kessler managing director for Imperial Capital, those with RMR, also have more valuable companies.

Kessler spoke about the economic outlook for the security industry on May 18 at the PSA TEC meeting in Westminster, Colo. last week. He was asked by PSA Security CEO Bill Bozeman to give a ballpark company valuation of a hypothetical company.

“The alarm guys know what they’re worth,” Bozeman said. “I get calls every day from integrators asking me: ‘What am I worth?’” 

Kessler said that the price goes up for an integrator who offers at least some service. Kessler likes to talk about valuations in terms of EBITDA (although he acknowledged that EBITDA can be calculated in different ways). He said that Bozeman’s hypothetical $7 million integrators that’s 100-percent installation with no RMR could expect to get five- or six-times EBITDA. The same company with at least some RMR, on the other hand, could expect to get six-times to nine-times EBITDA.

In addition to being more valuable, financial players (who are more actively looking at systems integrators than any time in the past five years according to Kessler) are more interested in working with integrators who have “at least some recurring revenue."