Alarm company valuation: how RMR multiples work

What is an RMR multiple?#

An RMR multiple is the price a buyer pays for an alarm company or a block of accounts, divided by the recurring monthly revenue those accounts produce. RMR normally covers contracted monitoring fees, interactive and video service fees, and other recurring charges such as maintenance or inspection plans billed on a schedule.

One-time revenue sits outside RMR. Installation charges, equipment sales, service calls billed by the hour and false alarm fees do not repeat under a contract, so they are valued separately or not at all. A buyer quoting a multiple is really making a forecast: how many months of payments it expects to collect, after costs, before the average account cancels.

Because the multiple applies to RMR, every adjustment to RMR changes the price. Two parties can agree on a multiple and still be far apart if one counts past-due accounts and promotional pricing and the other does not.

Why do buyers value alarm companies on RMR?#

Buyers value alarm companies on RMR because the business is a stream of subscriber payments that continues long after the installer leaves. Monitoring an existing account costs far less than finding and installing a new one, so a buyer compares the price of purchased RMR with what it would cost to create the same RMR through its own sales and installation.

That comparison explains why multiples move with attrition. If accounts last longer, each purchased dollar of RMR produces more months of payments and the buyer can afford to pay more for it. If accounts cancel quickly, the buyer is paying for revenue that will not stay long enough to repay the purchase.

Broker and advisor sites publish multiple ranges, and those ranges often conflict. The difference is usually definitions: whether RMR is gross or net of past-due accounts, whether interactive fees are included, and whether the figure applies to a full company or an account block. Ask any source how it defines each term before comparing.

What moves the multiple up or down?#

The multiple moves with anything that changes how long accounts are likely to pay or how much it costs to keep them. Buyers test each factor against records, so the strongest position is a factor you can prove from an export rather than describe in a meeting.

Which RMR counts, and which gets adjusted out?#

Buyers count only the RMR they expect to collect, so a seller's headline figure is rarely the figure a multiple is applied to. The adjustments below come up in most alarm deals; making them yourself first lets you present a number that survives diligence.

Keep a written schedule that starts from billed RMR and shows each adjustment line by line. A buyer will build its own version, and a seller who already knows the gap between billed and qualified RMR negotiates from facts instead of surprise.

• 1Past-due accounts beyond the buyer's cutoff are removed, even if they have not formally cancelled.
• 2Accounts that have stopped signaling the central station are treated as at risk or lost.
• 3Free months, promotional pricing and expiring discounts are adjusted to what the customer will actually pay.
• 4Accounts in a cancellation notice period, or already notified of a move, are removed.
• 5RMR from accounts you service but do not own, such as accounts held under another company's dealer program, is excluded.
• 6Bulk commercial billing under one master agreement is split by site so concentration is visible.

When do buyers switch from RMR to EBITDA?#

Buyers switch to EBITDA when recurring monitoring is no longer the main source of profit. A commercial integrator that earns most of its margin installing access control and video systems, or a fire company driven by inspections and repairs, looks more like a contractor than a monitoring portfolio, and buyers price it on adjusted earnings.

Many deals use both methods. The recurring book is valued on RMR, the install and service operation on earnings, and the two figures are reconciled so the buyer does not pay twice for the same profit. Lenders and some investors also look at steady-state cash flow, which estimates what the company would generate if it stopped spending to add new accounts.

Illustrative: two dealers with similar RMR and different offers#

Illustrative: two fictional dealers in neighboring metros report similar RMR. The first is mostly residential, bills by mailed invoice, and still has a large group of accounts on landline communicators. Contracts for its older accounts sit in paper files, and some were never scanned.

The second has a mix of small commercial and fire accounts, most on automatic payment, with signed agreements stored against each account in its billing system. Its central station list shows communicator type and the last signal for every site.

Buyers make the second dealer a stronger offer and ask fewer questions. The first dealer delays its sale, replaces outdated communicators under new agreements, moves customers to automatic payment and builds a monthly RMR roll-forward from its billing data. When it returns to market, the discussion is about price instead of whether the accounts exist.

How SourceX looks at alarm company records#

SourceX looks at alarm company records as operational history, separate from the subscriber book a buyer values. Event and signal histories, dispatch logs, service tickets and inspection reports show how alarms are handled and how problems are diagnosed, which is the kind of record some AI developers license once subscriber details are removed.

Any license runs through the SourceX five-step transaction: Supply, Rights, Preparation, Approval and Delivery. The fit check uses metadata only, the rights review reads subscriber agreements and central station contracts, and the SourceX Evidence Packet records provenance, permitted use, the privacy record and release authorization. Data is licensed, not sold outright, and anything signed should be disclosed to a future acquirer.