Do You Have an Attrition Problem?
Article Published By Amy Kothari of Alarm Capital Alliance on Security Infowatch, November 5, 2014
Attrition is a key metric in the security industry. It directly impacts a company’s health, profitability, and the ultimate value of its accounts in an acquisition.
Attrition is also one of the most misunderstood concepts in the alarm industry. Many security company owners are shocked to learn that their attrition rate is much higher than they estimate – in part because they don’t know the essentials of attrition: how to calculate an accurate attrition rate, the important difference between gross and net attrition, and what these rates really mean in terms of revenue and account value in an eventual sale.
In its recent whitepaper, “Attrition: Do I Have a Problem?” at http://partner.alarmcapital.com/Attrition-The-Silent-Killer.html, Alarm Capital Alliance explains the fundamentals of this key concept and offers three key strategies for combating attrition:
1.Understanding and addressing the reasons your customers are cancelling;
2.Focusing on the customer experience as an antidote to attrition; and
3.Using a best-in-class sales program to minimize attrition from the start.
Attrition: The Essentials
Both gross attrition and net attrition are important, yet different metrics. Gross attrition measures the percentage of accounts that cancel — either outright or that are 90-days past due — over a period of time (usually the trailing year) divided by the average number of accounts the company owned over the same period. Net attrition adds back those accounts that a company has gained over the course of the year that replace those that have cancelled.
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