Hello security and alarm professionals,
My business partner, Stephen Olmon, calls it the eighth wonder of the world. It’s the heartbeat of a security and alarm business. Do you know what it is?
Recurring monthly revenue (RMR).
Whether you’re thinking about operations, valuation, or long-term strategy, RMR shows up everywhere. It’s the thread that ties the entire business together.
In today’s issue:
Service Is a Risk Control System
That’s Not an Acquisition Win
This one acquisition mistake could be costing you a lot of time, money, and sleep. It’s definitely not a win.
Service Is a Risk Control System
Customer churn often starts long before a cancellation notice ever shows up.
Small breakdowns in service compound quietly. Missed appointments. Unclear pricing. Incomplete documentation. Inconsistent follow-up.
Each one creates friction that weakens trust and increases the likelihood of disputes and escalations.
This is why service should be viewed as a risk control function, not just an operational layer. A disciplined service department limits preventable issues that destabilize RMR and create downstream problems across billing, customer success, and retention.
Clear approvals, documented processes, photos, notes, and defined SLAs all exist to remove ambiguity before it turns into conflict.
A strong service operation reduces risk by:
Preventing avoidable churn tied to service breakdowns
Reducing customer success escalations and billing conflicts
Preserving trust through clear communication and documentation
Over time, that discipline compounds. Issues get resolved faster. Fewer cases spill over into customer success. Service becomes a system that absorbs friction instead of creating it, protecting stability as the business grows.
RMR: What You Need to Know
The overview: Recurring monthly revenue is what turns a security business from volatile to durable. When buyers evaluate companies, they are trying to understand how much of the future is already spoken for.
Contracted RMR answers that question. It shows that revenue will continue regardless of how strong or weak project sales are in a given quarter. Businesses that intentionally build RMR into their model are easier to value, easier to finance, and far more attractive to acquirers because uncertainty is reduced.
The details: RMR is often discussed, but many companies treat it as a byproduct instead of a core operating strategy. Monitoring, cloud software subscriptions, managed services, maintenance agreements, and hardware-as-a-service all create recurring revenue, but only when the business is designed to support them.
Billing systems, contract structures, cancellation processes, technician training, and sales incentives must all be aligned.
Buyers prioritize RMR because predictable revenue lowers risk. Contracted agreements clarify where future cash flow will come from and make it easier to justify higher valuation multiples. As the percentage of RMR increases, the business is seen as more mature and less dependent on one-time installs or large projects.
RMR also changes how a company operates day to day. With a reliable base of recurring income, owners can plan staffing levels, make long-term investments, and manage cash with greater confidence. Payroll and vendor payments become less reactive. The business becomes less cyclical and better able to withstand slowdowns.
Many buyers view a business as reaching a strong level of maturity when RMR approaches 40 to 50 percent of total revenue. At that point, recurring revenue can often carry most or all fixed overhead. When overhead is already covered, project and installation work becomes incremental profit instead of a necessity to stay afloat.
But remember, not all RMR is equal.
Intrusion monitoring often carries high margins but higher churn. Software-driven RMR tied to cloud access control and video tends to have lower margins but extremely low attrition because the system cannot function without the subscription. Accounts with multiple RMR services are the most durable and the least likely to cancel.
When buyers see consistent RMR growth, low churn, multiple services per customer, and clean contract data, they view the business as lower risk and assign a higher valuation.
How to start:
Calculate what percentage of your revenue is truly recurring. Buyers look at contracted RMR first, not projections or future plans.
Segment your RMR by category, such as monitoring, software subscriptions, managed services, and maintenance agreements, so quality and risk can be evaluated.
Confirm your back office can support recurring billing at scale. If billing, cancellations, or documentation are messy, RMR loses credibility with buyers.
Tie salesperson compensation directly to RMR. A meaningful portion of pay and quota must be connected to recurring revenue or behavior will not change.
Increase the number of RMR services per customer. Multi-service accounts have lower attrition and higher lifetime value.
Track cancellations and separate unavoidable churn from service-driven churn. Service-related attrition is preventable and directly impacts valuation.
Build a visible history of RMR growth. Buyers reward demonstrated momentum, not potential.
Why it matters: RMR transforms a business from transactional to dependable. It stabilizes cash flow, reduces operational stress, and supports disciplined growth. When recurring revenue is intentional, well-supported, and a meaningful share of the top line, buyers see a company that is easier to operate, easier to scale, and safer to acquire.
Three simple letters, one big transformation. RMR should always be top of mind.
Disclosure: Some of the content and links in this newsletter are sponsored or affiliate links, which means we may receive payment or earn a commission if you click through or purchase. However, all opinions expressed are entirely my own.
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