The New Metrics of Tracking

A decade ago, Recurring Monthly Revenue (RMR) tracking looked like this:

Dealer accounts: 1,000
Avg. rate/account: x $25
Dealer RMR: $25,000

Sadly, this wonderfully simple approach rarely works these days, due to the rapid adoption of interactive services (, Total Connect, etc.) and the increasing stratification of subscriber service levels. Yes, most dealers still do have a base of plain vanilla digital, or cell-based, accounts at standard base rates. With the wide range of new services now available, bundled or a la carte, the metrics of tracking and reporting RMR are evolving quickly. Dealers need to embrace both consistent account management processes and software powerful enough to give them the key information they need.

“When dealers talk to me about their RMR, the first thing I ask is for them to break it down for me. That’s often when things bog down. Good RMR reporting is one of the biggest challenges we face,” said Jim Wooster Jr., president of Alarm Financial Services, Corte Madera, CA.

Because RMR is the basis for dealer valuations both in purchase and financing transactions, an upgrade of our approach to RMR may be in order. It has become far more complicated, so we need to rethink our process for defining RMR, tracking RMR growth, tracking attrition, accounting for rate increases/decreases, etc. As Cornerstone has worked with dealers, and especially with the funding companies that finance them, we’ve evolved our software and reporting to try to keep up with this brave new world. This white paper shares some of our conclusions.


The first step is defining RMR—below is a list of typical recurring codes:

Code Description on Invoice
MAI Maintenance Agreement
MED CSS Medical Monitoring Services
MON Monitoring Service
MUSC CEL Cellular Monitoring
OCR Open & Close
OCRSUP++V Supervised Open Close
PMT PLAN Payment Plan
POTSLINE Monthly Monitoring Phone Line
TC2 Total Connect Stand Alone
TC2 S TC2 Adv with Automation

While all of these are recurring charges, buyers and funding companies will not likely include them all in valuations. By definition, payment plan charges will roll off at the end of the agreed-upon payment term, so would usually be excluded. Dealers using payment plans would want to exclude these amounts when calculating attrition, to avoid overstating that percentage. Some funding companies would exclude maintenance agreements from their funding formula.

The bottom line for defining RMR is that, as with many things in life, it depends. So from a software perspective, it’s important to provide a code-by-code opt-in such as this:

Core Recurring Filter? Track selected RMR e.g., eligible for funding

Flagging ‘Monitoring’ as ‘Core Recurring’ while excluding ‘Payment Plan’ allows precise tracking and reporting, and the flags can be quickly adjusted based on who’s getting the reports.

In most cases, buyers/lenders will also disqualify seriously pastdue accounts. For that reason, it is easiest if at least one software report provides an RMR tally with a ‘Collateral Calculation—RMR for accounts with aging less than 90 days’ filter built in.

Collateral Calculation — RMR for accounts with aging less than 90 days = $23, 355.74


Once RMR is clearly identified, the next issue is whether to track dollars, counts or both. The old model was “average RMR” times the number of accounts, to arrive at a valuation or a funding base. In our view, the best RMR metric is Total RMR Dollars, after adjusting for non-core/non-qualified recurring charges. Below is the first line of our software’s RMR Tracking Report:

Recurring Changes Summary Amount Charge Count Account Count
Beginning RMR (includes Section 5 Continuing RMR) 76,418.38 1,819 1,012

A buyer/lender cares most about the green number above, but we also provide both the number of accounts (site locations) and the number of charges. Those numbers definitely tell a story. If the number of recurring charges are about the same as the number of accounts, that suggests that either the dealer likely has a more traditional base of accounts—few add-on services—or that the dealer bundles charges into a single amount. In the above example, the average account has roughly 1.8 charges and pays an average rate of over $75. Those metrics would normally be quite attractive to buyers/ lenders, because of the high rate and the relatively high ratio of charges to accounts.

So dollars are most important, but counts are also very useful to help establish averages, as noted in the paragraph above. Good account management software should provide both quick summaries and trends over time, as well as underlying counts and the ability to export raw data details to spreadsheets in order to allow for slicing and dicing data as desired.


Growth in RMR is more complicated these days, and can be the result of:

  • New accounts (brand new, or re-signed)
  • New services added for existing accounts
  • Rate increases to existing accountsIn addition, it’s worth reviewing a couple of other items:
  • Future RMR not yet invoiced
  • Pending RMR not yet online

RMR for new accounts is straightforward, though some new accounts are actually re-signed accounts due to a move. Dealers with an aggressive move/re-sign program can sometimes demonstrate that a chunk of their attrition is actually not lost accounts, but re-signed accounts. Flagging these accounts in the software should allow for a separate line item for re-signs. Likewise, it’s valuable to break out both the dollars and the counts for new services added by existing accounts, as well as for rate increases.

If a dealer puts an account online, but has not yet billed the recurring, is that RMR? Similarly, if a prospect accepts a proposal from the dealer, but the install has not yet occurred, is that RMR?

It is potential RMR, but it’s not active RMR, so our reports exclude these categories from current RMR. Nevertheless, it’s valuable to report these numbers “below the line” as FYI items.

This at least provides the dealer a view of RMR in the pipeline and can provide meaningful information especially for owners and managers— a preview of the backlog, accounts that will be added soon.


RMR attrition is more complicated as well, and can be the result of:

  • Cancelled accounts
  • Cancelled services for existing/continuing accounts
  • Rate decreases for existing accounts

These three are just the flip side of the growth discussion above. However, managing attrition can (and often does) mean the difference between success or failure. You can’t manage what you don’t measure, so entering reasons for every cancellation into the account management software is critical:

Cancel Reason List
Business Closed
Can’t Afford
Don’t Use Syst
False Alarms
Service Problem
Went to Compet

Assigning a cancellation reason should allow for easy—and extremely valuable—reporting:

Some of the cancellation reasons are controllable, some are not. The most common reason for cancellation involves a move of some type. In the above chart, ‘Moved’ and ‘New Location’ for a business adds up to over 36 percent. Properly managing move-in/move-out scenarios can have a huge impact on ‘net growth’. A high percentage of re-signs due to customer moves is the hallmark of a company that both tracks its move-driven cancels, and has a pro-active program to manage these subscribers. Yes, it’s complicated, but it’s also lucrative; good move programs can often generate brand new customers, from the move-in side of the equation.


Now that we’ve determined definitions, growth elements, and attrition elements, it’s time to look at the big picture. RMR changes can be reviewed for one year, two years, or perhaps six months to see more recent trends.

  Average Annualized
RMR New Growth Rate / Rate Increases % 2.1 25.7
RMR Attraction Rate / Rate Decreases % -1.2 -14.9
RMR Net Growth % 0.9 10.8

This summary shows growth rates in green, attrition (negative growth) in red, and RMR net growth in blue. In this example, top line RMR growth is excellent at 25 percent plus annualized, but attrition is also quite high at about 15 percent, resulting in net growth of more than 10 percent.

Just as valuable is a visual of trends for these three numbers, over time like the line chart on the next page.

Line charts like these give managers a quick read on where things are going. In the example, the blue line (net growth) seems trending downward—mainly because growth (green line) has slowed. So it may be time to review the growth program(s), and take corrective action.

From there, good software should allow for drilling down into each month to see the metrics—growth elements and attrition elements, by dollars, charge counts, and customer counts:


Recurring Changes Summary Amount Charge Count Account Count
Beginning RMR (includes Section 5 Continuing RMR) 79,558.04 2,185 1,915
Section 1: New RMR / New Accounts 843.88 18 17
Section 1: New RMR / New Accounts (Re-Signed) 39.99 1 1
Section 1: New RMR / Existing Accounts 151.49 5 5
Section 2: Stopped RMR / Closed Accounts -1,230.70 35 35
Section 2: Stopped RMR / Open Accounts -67.99 2 2
Section 4: Incremental RMR Increases 26.01 3 3
Section 4: Incremental RMR Decreases -3.00 1 1
Ending RMR 79,317.72 2,172 1,897

The above snapshot is for August 2016. The summary numbers smooth out the ups and downs by taking averages of multiple months, but a company should be able to scrutinize details for a period where performance was relatively strong or weak. A good software reporting system should allow dealers to go further, providing individual account and charge details behind these summary numbers. That level of detailed analysis will allow owners, managers and staff to review the ‘nitty gritty’ stories behind the raw data and then try to optimize things that worked, correct things that didn’t, or both.


In the coming years, security dealers, along with industry buyers and lenders, will likely start grouping its accounts based on service levels, such as:

  • Basic
  • Standard
  • Premium

Each of these groups will have its own metrics—average rate, charges (services) per account, and so on. For example, perhaps the Basic subscribers pay an average of $22 per month. Some analysis shows that many of these subscribers pay relatively low rates of $15 to $18 per month, perhaps because they were signed on many years ago.

Implementing a selective rate increase for these low rate accounts, which is fair given current market rates, can bump up the $22 average to perhaps $23 to $24 and immediately improve margins. Given easy access to the detailed growth and attrition data described earlier, it’s much easier to take targeted action to improve the bottom line.

From a marketing standpoint, grouping accounts also allows dealers to focus on upgrading Basic accounts to Standard, and Standard accounts to Premium. Programs like this are especially important now, as cable and media companies aggressively advertise to try to poach accounts from traditional dealers. Assigning each account to a group allows a dealer’s management team to set goals for upgrades as well as for new accounts. It’s much less expensive to cross-sell existing customers than it is to find and sign on new customers.

Finally, while RMR is the most convenient metric for buyers and lenders, even more important is the margin each RMR segment generates. “Once we get a breakdown of the RMR, we need to have the dealer show us how much they make on each segment,” says AFS’s Wooster. “The top line RMR is a great starting point, but what matters most to us is profit by type of recurring.” Again, good software should allow for assignment of costs—such as wholesale monitoring fees, billing costs, and other variable costs—to each recurring charge.


Whether it involves funding, buying and selling accounts, or simply ramping up growth, one of this industry’s biggest issues is determining accurate growth and attrition rates. Many, many deals have blown up because of this. With the dynamism in this industry right now, it’s more important than ever to invest in account management systems that allow dealers to easily track—and build—their RMR.

If growth financing is needed, being able to immediately generate the reports and metrics a lender needs will breed the confidence that lender needs to extend credit. If a dealer is thinking of selling accounts, the same holds true – solid RMR reporting gives buyers confidence that the dealer ‘has its act together’, and may therefore boost the multiple a buyer is willing to offer. “Buyers and lenders don’t like uncertainty,” Wooster from AFS concludes. “Uncertainty reduces valuation multiples, and on the flip side, accurate reporting can improve the valuation a buyer or lender assigns to a dealer’s accounts.”

The vast majority of dealers are neither selling nor seeking a loan, but they are certainly looking to both retain their customers and drive faster growth. Investing the time and money to implement an industry-specific software platform will provide a very quick payback, by offering a real-time look at how the business is performing, and why. Only then can confident decisions be made to set goals, and to follow through with targeted and measurable programs to achieve those goals.

This article originally appeared in the March 2018 issue of Security Today.

About the Author

Scott MacDougal is the president of Cornerstone Billing Solutions.

Digital Edition

  • Security Today Magazine - October 2020

    October 2020


    • No Touch, Low Touch
    • Going the Distance
    • Accelerating Security
    • Bringing Rapid Identification
    • Shifting Strategies

    View This Issue

  • Environmental Protection
  • Occupational Health & Safety
  • Infrastructure Solutions Group
  • Spaces4Learning
  • Campus Security & Life Safety