The Dreaded “Spreadsheet” that all Monitored Account Sellers have to fill out

It is a pain but all sellers of monitored accounts have to fill out an Excel spreadsheet on their monitored accounts before they complete a deal. It doesn’t matter if the Seller is doing an asset or share deal or if the account base is big or small. The dreaded spreadsheet has to be filled out. I have attached the headings of a version that I use for my clients but all the bigger buyers (API, TELUS) have their own version of this spreadsheet. Each one contains all the same information only in a different order.

Sellers need to know about the need to fill out this spreadsheet in advance of selling because a typical version requires lot of different info and usually takes quite a long time to fill out unless the alarm dealer has someone on staff that is very good with Excel. This spreadsheet may well be the most time- consuming exercise involved in selling his or her accounts.

So why is this spreadsheet so important?

1. Firstly, it lists the accounts that are being sold in the deal and as the accounts are often the greatest source of value both the buyer and seller need to have a list of what is being sold. A shortened version of this spreadsheet with just the account name is often attached to the Asset Purchase or Share purchase Agreement in the closing documents.
2. Secondly there are columns on the spreadsheet that calculate the “deferred or unearned revenue” on the accounts as at the planned closing date. Deferred revenue is that revenue billed by the seller on each account beyond the closing date. Most, but not all, alarm account buyers today deduct the deferred or unearned revenue from the gross purchase before coming up with net purchase price. Most spreadsheets will calculate this deferred automatically.
3. Finally, the buyer will likely use the details on the spreadsheet to do the post- closing billing on the accounts. The spreadsheet tells the buyer on each account what the monthly billing rate is, how often the accounts is billed (monthly PAP, quarterly or yearly), what the next billing date is and finally where the invoice should be sent if the billing address is different from the installation address. It is very important that the buyer get exactly the right info to bill the accounts after closing. Nothing will frustrate customers more than if they get a series of incorrect invoices from a buyer immediately after receiving a customer letter from the buyer telling customer how much they care about looking after the customer.

With a deal I have been working on recently even after it took many hours to fill in the spreadsheet in the first place, it has gone back and for the between the buyer and seller for several weeks trying to get everything just right.

Let’s go over the major columns in a typical spreadsheet to explain to the reader what they mean:

• 1st column- refers to the number in the account list being sold.
• Account # - refers to the # that the existing monitoring station has assigned that account.
• Installation Address- refers to name of the customer and exactly where the system is installed including telephone number.
• Monthly monitoring refers to all the various monitoring services the account has on it but in each case, we want the rate (not the cost) that is charged and the service has to be Recurring Monthly Revenue (RMR). Here are some common RMR types:
  • Regular digital monitoring
  • Guard revenue but only if it is billed monthly as RMR.
  • Extra cell or alarm.com charges
  • Maintenance fees, again only as long as they are RMR
  • Equipment lease or rental where the installed equipment is leased or rented
• Billing frequency and deferred revenue- This section of the spreadsheet tells the buyer how the accounts are billed (monthly PAP, quarterly or annually), when the last and next billing date is and finally it calculates the deferred revenue. Columns here typically are:
  • Billing frequency- Monthly PAP, quarterly or annually.
  • Last Billing Date- before the planned closing date.
  • Next Billing date- after the planned closing date
  • Planned closing date -which is important to get the deferred revenue calculation right
  • Deferred revenue
• Billing Information and address- These columns tell the buyer if the billing address is different than the installation address:
  • Is the billing an invoice or PAP
  • If its PAP, what the banking or credit card info required to bill
  • The billing address- but only if the address is different than the installation address.
• Other Information- More and more buyers are wanting these columns filled in as well:
  • Is there a signed contract
  • Is the account residential or commercial
  • What panel type is installed in the account
  • What cell type has been added to the account

There is a lot of info required to fill in a spreadsheet properly and it is all important to the buyer.

Some tips from having seen sellers struggle with this spreadsheet:

• Someone with skills in Excell will have a much easier time with this schedule
• In some cases, info from the seller’s billing system can be “cut and pasted” in this spreadsheet.
• If deferred revenue shows as negative something has been done incorrectly
• The Next Billing Date and Deferred Revenue columns will change with the Closing Date
• If you are a Seller, start early on this spreadsheet and double check all your work, it can affect your purchase price.

Victor Harding

Harding Security Services Inc