How Do You Price A 4 Month Surveillance System Lease?

Bay Area Client wants to lease a system for 4 months including installation for knockdown at 2 locations 2 miles apart line of site

The system is required to monitor progress and could potentially be used as evidence in litigation arising from project delays when all parties point the finger at each other.

  • 2 x AXIS Q6044-E
  • 2 x AV12186DN
  • Milestone VMS
  • 2 x Netgear 8 (4 POE) Port switches
  • 2 Ubiquiti M5
  • Dell rack mount server
  • Rack mount monitor / keyboard tray

No realtime monitoring required by us.

How do you price this? Setup, Knock down, Insurance, Time and maintenance (dusty environment)??

Is there an equation partly based on the value of the system?

I guess I need to throw in a liability clause of some sort?

This deal looks attractive to me any way I look at it. Sure...I'll price it, but the LAST thing I want to do is low ball it!

Time sensitive......I need to present tomorrow.

Thanks in advance.


It's just 4 months total? That's not much of a term and becomes more of a short term rental.

The big issue seems to be how to price the equipment. Can you easily resell / reuse the equipment after that 4 month term ends? How much can you get for it then?

I'd think you'd want to charge at least 1/3 or 1/2 the product price just for the 4 month rental, in addition to labor to install and remove. The reason being that typically used security equipment is not easy to resell, certainly not anywhere near full price.

I agree with your overall logic on this.

You'd want to figure out the residual value of the equipment (which, IMO, will be near $0), and price it accordingly, so in this case roughly 1/4 of equipment cost per month. Then add in fees for setup/teardown, either rolled into the monthly price, or as 1-time fees.

"You'd want to figure out the residual value of the equipment (which, IMO, will be near $0)"

Jee... you're quite the optimist!

I agree overall that resale values of security equipment is poor but $0 seems to be too extreme. Really, no one will pay anything for 4 month old Axis cameras?

"Really, no one will pay anything for 4 month old Axis cameras?"

Dunno. But I don't think his primary business is in selling used equipment. There is a cost to dealing with that stuff, high probability of components coming off of a job like that being damaged, dirty, reduced functionality, etc. Anything he doesn't sell he would need to dispose of properly, which for electronics can cost money.

Would the leftover equipment be worth *something*? Probably. Will that something exceed his cost of dealing with it, and exceed the money he could have/would have made dealing with presumably more profitable areas of his business? Probably not. So, the net value of the equipment *to him* is going to be near $0 at the end of the lease. He could choose to offer to sell it to the customer for some amount like $500, just to not have to deal with it. But in the grand scheme of things, the residual value of the equipment is not going to move his bottom line for his business, so he needs to value it as such, IMO.

Just like car lease... at the end of term 65% of resale value of car is paid off.

You could always offer the client the option to buy at a reduced rate afterward or put the items up for sale on eBay OR a post on IPVM!!!!

"post on IPVM!!!!"

No no no :)

That said, I really do think there would be value in having a craigslist specifically for used security / surveillance equipment. Part of the reason resale value is low is that it's simply hard to find a local / immediate buyer for something so niche.

"No no no :)"

Thought you'd pick that one up!........Glad to see you didn't dissappoint!

Toughest part is, like with all manufacturers, how to you maintain warranty on "second hand goods" however "short" a period of time they are installed, and under what conditions!

A construction site is notoriously harsh and most buyers, new and/or old!, want new looking equipment!

Great points folks. I too see the value of the equipment to be zero at the end of the term. Therefore I believe the hardware must be paid in full by the client along with setup / teardown, insurance i.e if cam is damaged onsite they are going to need another one and that needs to be paid also.

Off the bat it is looking like $6500 to $8K per month. I'll move all the hardware 'as is' and in one lot for $1K afterwards.

Thank you gentlemen. Good day.

Well, perhaps there is some residual value after all:

Therefore I believe the hardware must be paid in full by the client..

Have your cake...

I'll move all the hardware 'as is' and in one lot for $1K afterwards.

and sell it too!

But you really have to do it this way! To get an extra $1000? No, the best reason for you to still own the hardware after the deal regardless of how much has been paid for it is to avoid the inevitable exchange that occurs otherwise:

Confused Customer: So all this stuff is mine now?

Confident Contractor: Yesiree!, I'm jealous too, cuz its all top of the line stuff, but its only fair that you should own it because you had paid for it, and then some, by the end of the lease.

Calculating Customer: Cool, but hold on... Do you want it? Maybe you wanna buy it, maybe you could use it on another job, or sell it for me? Top of the line, right?

Cautious Contractor: Well, thing is that I couldn't offer you much right now, not anywhere near what its really worth, because I don't have a job for this exact system, and witb my recievables ...

Cajoling Customer: Well, I certainly don't have a job for it right now, so whatever you give me is fine, you know what is worth better than me.. Just give me a ballpark... Really whatever...

Cornered Contractor: For everything? Hmm.. I'm thinking maybe like a grand or so?

Compromising Customer: Its a bit lower than what I was thinking, but OK, Deal! Eight grand it is!

Yeah, but I agree, from the looks of things, you are not gonna get much more than a grand, tops...

I read this three times and I'm still not sure what point you were trying to make.

Do you have specific experience you're trying to interject?

I read this three times and I'm still not sure what point you were trying to make.

My delivery may have been a bit muddled, apologies, but actually your natural intuition was correct since I was actually trying to make three :)

1. A viable marketplace exists on ebay, at least, for used ip cctv equipment, which has enough volume so that one could reasonably estimate what 'hit' one might take at liquidation. The OP and John both seemed, IMO, to have uncertainity as to what degree this market was 'made'. So I tried to show transactions of similar products to the OP's, to aid in this appraisal.

2. On the surface at least, it might appear strange or ironic, that a contractor would, by design, have the customer 'pay in full' for the same product that he planned to move in 'one lot' at term.

3. I attempted to give a defense for this apparent avarice. I did this by creating a seemingly specific instance of dialog, which actually was just the opposite; it was an amalgamation of a dozen or so my own specific anecdotes rolled up into one. The anti-moral of the story being something akin to 'no good deed goes unpunished'. Surely you have your own example of this comic tragic situation? Here, the superfluous punch line of the dialog rests on the rather slim, but fitting 'wishful hearing' of the phonetically similar phrases 'a grand" and "eight grand".

Does that help, or did I make it worse?

The Arecont camera in your example retained about 20% of its street price when sold used. From the picture it also appears to be in fairly decent/clean condition.

My guess is the equipment coming off this job would not be in the same condition, and would likely fetch less than your examples.

So now we're discussing does it have a 20% or 10% residual value? Going back to the *actual* question, where one of OP's goals is to NOT underprice it you think that it's in his best interest to value the equipment at what percentage exactly?

Nobody is debating that there is a market for 2nd hand equipment. The equipment also doesn't sell and list and ship itself. So, when you look at this like a BUSINESS, one which presumably wants to make money... how would you recommend he value the off-lease equipment AFTER factoring in all related overhead and risk in dealing with it?

Nobody is debating that there is a market for 2nd hand equipment.

Correct, no one is debating the mere existence of this market.

On the other hand there was significant concern voiced about the efficacy and availability of this same market, see John, et al, above. This is what I was trying to illuminate, modestly, by giving a few relavent examples, examples that you yourself found informative enough to use in aid of your own arguments.

How can you deny that a large portion of this discussion revolves around the value of the equipment at term? And if you don't deny it, how can you object to my exposition of same?

Going back to the *actual* question, where one of OP's goals is to NOT underprice it you think that it's in his best interest to value the equipment at what percentage exactly?

You are confusing John's partially overlapping position with my own. I honestly do not know what is a fair percentage. That is why instead of just ass guessing something I provided real world information in aid of that determination.

Here's the rub in the OP's statement:

The crap is either worth something or not, right? And if you think its gonna be worth something, then by all means sell it and work the profit into your quote.

But if you think it has basically $0 value, then why not let the customer have it for $1 like you said? You still make $1. The OP already stated that it was 'fully paid for', right? I know you didn't say to squeeze the customer, but I wasn't responding to you in my first post. So either make an argument as to why Richard should keep ownership of the system and only to sell it 'as is' odd-lot style for nothing or recognize that we are actually in agreement...

Seriously, the more you post the less I understand the point(s) you're trying to convey.

Do you have first-hand data or experience, or just a lot of random speculation and free time?

"I too see the value of the equipment to be zero at the end of the term."

2 Axis Q6044-E sell for ~$7,000, 2 AV12186DN sell for $3,000 and a Dell rack mount server sells for (let's guess) ~$2,000. All of these combined go from ~$12,000 to 0 in 4 months?

I don't even understand how this is a lease anymore. It's merely a 4 month payment plan, but worse since after he pays for the whole thing, you take it back?

"2 Axis Q6044-E sell for ~$7,000, 2 AV12186DN sell for $3,000 and a Dell rack mount server sells for (let's guess) ~$2,000. All of these combined go from ~$12,000 to 0 in 4 months?"

Put them outside in a construction site for 4 months and see how they end up looking.

I didn't say the equipment will be absolutely without value, but that the residual value will just about eat up the business cost of dealing with it. So, if you're pricing this like a business, you plan to write the stuff off at the end of the term. If he ends up doing lots of these units, he may find that the real value at the end of the leases is higher and can adjust pricing accordingly.

While I can guarantee him it won't be *lower* than $0, you can't guarantee him that he will be able to get any substantial amount for the equipment. So, if he's looking for a price that won't put him out of business, $0 is a safe bet. If the customer agrees, he's all set. If the customer can't afford that price then he needs to make a calculated risk determination on the residual value and adjust his price accordingly, hoping his future prediction is accurate.

"if you're pricing this like a business, you plan to write the stuff off at the end of the term."

If you are pricing this like a business, you have to anticipate what competitors will do. Are we saying all competitors will demand 100% depreciation of equipment in 4 months?

And imagine you are the end user. What is the point of doing a 4 month lease for equipment, paying for that equipment in full and then returning it to lessor after 120 days of service?

"If you are pricing this like a business, you have to anticipate what competitors will do. "

Yup, and they'll do about the same thing, unless they don't know what they're doing ;)

A few things to consider as well. When somebody (the customer) does a lease on something like this, they're not just trying to get a payment plan on equipment, they're offlaying the risk and hassle of dealing with a component outside of their core competency. Although it wasn't explicitly stated, when the OP describes a lease scenario, I'm assuming they also mean the other risks that are associated with that. The customer is going to expect the equipment to be 100% operational and have any incidental outages fixed most likely within 24 hours. Damage from something like a backhoe hitting a camera wouldn't be covered, but if something fails due to jobsite issues like dust, vibration, bad power, etc., that should be covered as part of the equipment lease. All those things are factored into the price, and there is a moderate probably that during those 4 months SOMETHING will break.

I know of several integrators that are doing similar forms of equipment lease/rental. The going rate is closer to 1/6 - 1/8 of total equipment cost per month, but some of them also have minimums.

The equipment here would have an expected lifespan of about 14 months. Lease rates are based on street price of equipment divided by 6 or 8, but after about 30 days it loses a big chunk of value. So, a 4 month lease is going to have a premium attached to it. Theoretically the customer could rent the equipment for 6 or 7 months for the same out of pocket cost, but the integrator needs to make sure his business is covered first. If he loses the deal to someone who isn't aware of all the surrounding factors and underbids, well that happens all the time...

The $1 buyout lease is also common in cases like this. Where, if the end user really wants the equipment, the contract is structured so they have the option to buy it all for $1 at the end of the lease term.

There are lots of similar examples... leasing/renting electronic equipment is not cheap and I haven't seen any company become viable renting things for what you would at first consider "affordable". When I was in a different business, we rented A/V test and certification equipment to guys doing home theater installs. Stuff like spectrum analyzers and color-calibration equipment for TVs. It was priced at (Equipment Purchase Price/30) as the daily rental rate. Meaning that after one month of rental the equipment was paid for. I had several guys that over the course of a year bought an audio spectrum analyzer 4 times over in rental fees. Of course, they only rented it when they needed it, they baked that into THEIR prices to the THEIR end-user, and when a piece of equipment got lost or damaged by UPS, or suddenly died on-site, I had to expedite a new one out to them. So, that "paid for in one month" math didn't always mean we were rolling in dough, but it worked out that we made money overall, and the dealers renting the equipment didn't invest in expensive gear that could be a bit tempermental at the most inconvienient times.

When I rent A/V equipment now for trade-shows, it's about the same math still. For what I pay for 5 days rental of a "good" 42" display I can go to Wal-Mart and buy a decent consumer unit for about 10% less. That works great, until the Wal-Mart display dies halfway into the second day of your trade show. When that happens, I need to go source another unit and deal with swapping it out. When the rental unit dies, I call the company and two guys are there in an hour with a replacement. Both options have pros and cons.

Lastly, OP didn't ask "I'm starting an equipment leasing business, what's the going rate for X". If he had, I would have probably said (Equipment Cost/8) as a good rule of thumb for pricing. The price for a 4-month lease is going to have a premium, and because he most likely does not have more business lined up behind this to redeploy the equipment on, the value *to him* for the equipment at the end of the term is effectively $0. He's trying to make money, not run a rental charity.

I've also known a couple of integrators that tried to get into this business and lost big time. One guy was almost giving away some really nice trailers. I think he had close to $50K in equipment in each trailer, and was offering them for about $10K. A year later, they were still available. Some of this stuff has gotten so cheap relatively spekaing people don't want the risk of buying used, even if it's "never-been-used used". The complications of selling things go up when the equipment is possibly kitted together with other items that a buyer may not see value in.

Yes, he risks losing this bid to an underbidder by using my math and logic. But he doesn't (IMO) risk losing his ass on the equipment. I think there is enough information here now for him (or others) to decide which is the better bet for his pricing approach.

Again, this is just my opinion, but based on a moderate amount of first-hand experience.

"The equipment here would have an expected lifespan of about 14 months."

That's an incredibly specific estimate, given the 3 lines of information given on the site conditions. It's also incredibly short.

This is the key issue. If you really think the equipment is going to be dead in a little over a year in such a condition, then I can see this pricing structure. Otherwise, no.

It may seem specific, but like I said, I'm trying to base my responses on real data.

Stuff in/on portable units gets really beat up at sites like this (I'm making certain assumptions about this being a commerical construction type of site) and from being ported around. Also, because the customer knows they're paying a bit of a premium they want and expect relatively current-generation equipment. You're not going to get 3 years of utility out of a 720p camera.

Keep in mind too, most of this is common-grade equipment being put into rugged service duty. With a couple of notable exceptions like Cohu, nobody is really building CCTV equipment targeted towards things like this. The equipment that IS built for this kind of application, will have about double the lifespan, at 2x-3x the price in some cases.

"You're not going to get 3 years of utility out of a 720p camera."

I am confused. There's tens of millions of analog cameras in service for 5+ years, still going.

Plus, the Arecont model here is 12MP. So if we do pure pixel math, based on your statement, that's like 20+ years of utility :)

Ultimately, Richard knows the most about the site conditions. He also likes to mark things up a lot!

I just want to point out that the price / residual value is heavily dependent on the estimated lifespan assumed (whether it's 14 months or 14 years, etc.).

"I am confused. There's tens of millions of analog cameras in service for 5+ years, still going."

Are they mounted on trailers or portable equipment stands and dragged around to new locations every few months? Are they indoors in clean climate controlled environments, or are they outdoors with all kinds of dust and other things swirling around?

Compared to the overall mainstream camera market, the application here very non-typical. If you apply typical pricing and equipment lifespans to very non-typical applications you are unlikely to come out on the upside of that logic.

Analog vs IP vs megapixel is a not meaningful distinction when looking at the environmental conditions of a site. There are plenty of analog (and SD IP) cameras designed for such environments.

I think we've exhausted this line of discussion. Let's leave it to Richard for feedback or anyone else who has suggestions.

"Analog vs IP vs megapixel is a not meaningful distinction when looking at the environmental conditions of a site. There are plenty of analog (and SD IP) cameras designed for such environments."

My experience is that most customers today have come to expect higher resolutions from new CCTV deployments. So, it is relevant because I don't believe it would be in OP's best interest to build this around analog or SD equipment.

His only option (let's not go there...) remains megapixel IP cameras, where there are not many ruggedized options in the market.

You are correct. CohuHD rugged cameras are IP67 sealed and pressurized for dusty environments.

We can be reached at 858-391-1795

http://www.cohuhd.com/

(late for this project, but perhaps someone will see this thread and want to contact us)

Hello Dana:

In the future, please disclose you are a Cohu sales person when suggesting your product in a reply.

My bid ended up like this:

  • $4,750 install
  • $3,750 Teardown
  • $5,640 per month X4

$31,060 and they don't want the gear!

I'll let you know the result when I hear it!!

Good luck!

Curious, did you itemize the lease items by part# or just do lump pricing?

Richard, have you considered the enormous windfall profit coming your way if, as is often the case, the project drags on a few extra months? Then you receive the full benefit of the four month accelerated amortization amount, month after month! Plus, if the project goes over the deadline, the're not gonna remove the camera then, right?

Were there contingencies in your quote for overruns?

Undisclosed manufacturer great points all the way through. Yes big commercial site spending $1m per day for the next 3 years.

Yes John...lol....I do like to mark up significantly. But at the end of the day I have zero call backs because we spend as much time as it takes to install and network the correct equipment correctly, professionally, or however one chooses to call it.

On this particular lease replacing equipment same day, 24/7 support etc, etc is what client expects today. If deployment is 100% successful in every way then, client happy, vendor happy. Let's do it again

In Arizona at least, video rental systems for this kind of application are gaining popularity. Average monthly rental rate of a trailer mounted system (4 fixed cameras, 1 PTZ, Solar with batteries) is in the neighborhood of $5k per month to the GC. This includes installation, maintenance during the term and removal. The GC's are willing to pay the $ but they don't want to be bothered with installation or disposing of used equipment in the end. If Richard were to bring his monthly price to this customer down to $5k per month, the ROI for him is only about 7 months. Bring the equipment back to shop when the 4 months is over (unless customer decides to keep it additional time which would not be unusual) clean it up, test if then add a note on his website re: Ask us about Rental Video Systems, make a few calls to GC Project Managers and he just may have discovered a new RMR model to add to his revenue picture! I'm very interested to see if he wins this and if not, how much the low bidder offered.

This includes installation, maintenance during the term and removal. The GC's are willing to pay the $ but they don't want to be bothered with installation or disposing of used equipment in the end...

Meghan, in your experience then is it even a priority that the equipment is new? Do they care much as long as the dealer and equipment performs to the SLA?

@Richard, was the bid restricted to new items? If not, turn the tables! Buy on ebay what you can before the job and next job consider taking exact part numbers off the quote (or add the catch-all "*or equivalent").

Granted, warranty and reliabilty concerns are a headache, but $12,000 buys a lot of aspirin, no? Maybe you don't really want to be in the "rental business", but after a couple jobs like this it could be pretty lucrative RMR, as Meghan notes.

No they don't care, in fact, they expect it to be used just like when you go rent a carpet cleaner from Home Depot. You just expect it to work.

I didn't get the job!

After a phone conversation with the customer I followed up with a couple of questions in an email. This was the reply I received.

[IPVM Editor's Note: related - Earthcam Competitive Positioning Reviewed]

Condolences... FWIW, your bid looks like it was the most comprehensive and most desirable, but the sticker shock was too much. It sounds lame but sometimes you just want to ask, "Were we even close?". You know how when you get a written bid from someone that's more than you expected, and more than you could imagine paying, (even if the quote itself is reasonable), and you just say "yeah, right" and throw in the pile?

One wonders what boxes were on those $12K quotes... So in they end, are they buying the trail cams or leasing?

Who was really the decision maker here, your customer or their customer? I ask because it's a bit odd how the voicing changes from first person, e.g, "...the same to us" and "We had two bids", to the third person, "...those were rejected as well" and "they went with...", right at the pressure points of the message...

Rukmini, My customer is a full service construction management and general contracting firm. Basically they are project managing on behalf of the client.

Yes...they are purchasing the time-lapse cameras.

At the end of the day, if I think there is oportunity to make some money on a job, something like this job for example I'm usually one that will bid high (at least what I feel is "high").

From my experience, when bidding on small to medium sized projects (30+ cameras) it seems that everything from vendors gets more expensive whether it's hardware, labor, support etc. It's like vendors add on another "0" for the hell of it?? (I'm cool with that too)

So what might be the cheepest bid with a solution that fits the application but may not get the contract because it is 30% cheeper than the ball-park of the other three bids due to fact that sometimes this causes the customer to view it with caution. (too good to be true scenario)

I've looked at some of my proposals top to bottom and they look good to me, I have included everything, got some extra in their for error, travel etc. etc. Then I'll think "there's more money in this job!" So, I'll pull a number I'm happy with and build it in." More often than not, this has gotten me into the playing field where I have still been lowest bid but I'm in the ball-park and not too low to lose!!

Obviously I've priced myself out of it too. But when successful it is an awesome job which just flows well from start to finish.

Anyway, that's what I was shooting here!

BTW...Meghan Uhl, I liked your comments. Cheers!!

Have a great weekend all..!!

Ted (Richard)

Yes...they are purchasing the time-lapse cameras.

'They' meaning the client? Are they purchasing them directly or thru the management firm? But the management firm is installing them and monitoring them... Sounds a little like it was a competitive situation with the management firm.

Did the management firm give you guidance as to what was a good ball-park number for this bid? Sometimes, as I'm sure you have seen, when a client gets lazy, they will let one (favored/incumbent) contractor help decide where to get competing bids. In that case the favored contractor may suggest a reputable vendor who he knows will come in 'high'. The way to tell if you're that vendor is by how accurate their guidance is. Of course if you're getting other work thru them, that speaks volumes. You just don't want to be like that basketball team that follows the Harlem Globetrotters around from town (bid) to town (bid), putting up a good fight in a losing effort time after time. Probably not the case, but you never know...

I've looked at some of my proposals top to bottom and they look good to me, I have included everything, got some extra in their for error, travel etc. etc. Then I'll think "there's more money in this job!" So, I'll pull a number I'm happy with and build it in."

  • What does 'more money' mean here, more money to charge or profit or cut out?
  • When you say 'pull a number' do you mean as in 'out of thin air'? or do you mean to remove a line item?
  • When you say 'build it in', does that mean increase the total $ of the estimate, or does it mean to hide the cost in other line items?

Forgive all the questions, I am just trying to get right what seems to be very practical advice that you are providing...

I hate to bring this up at this late juncture, but... I think the Earthcam option has a higher resale value, being built around a prosumer SLR and semidecent photography lens. The housing can be tossed and the camera put on Ebay for a few hundred to a few thousand dollars (depending on which particular camera they use), plus a couple hundred for the lens. Those things hold their value.

A. "They" meaning the client has authorized the mgmt firm to purchase time lapse cameras.

B. No guidance

1. More money to profit

2. Out of thin air

3. Hide it in line numbers

Rukmini, what is your profession in the trade? Do you have a Linkedin account?

B. The reason I asked about the guidance was because in the letter you posted it seems to reference back to some communication where the writer had once suggested you specialize in this "niche", and furthermore was still advising you to. It therefore gave the impression that the writer was actively trying to guide you then, and one might expect him to have done the same with regard to ball-parking.

1,2,3. Honestly those answers were my first guess, but then in the overall context it didn't make sense to me how you could ever:

  • "have included everything, got some extra in their for error, travel etc."
  • artificially inflate line items of the already plump quote, i.e., "pull numbers" and "build it in"
  • add on "another 0 for the hell of it?? (I'm cool with that too)"

and still more often than not... been the lowest bid...

But now I think your strategy is to win only jobs that will be extremely profitable. Sounds like a good one to me, after all when you win a low-ball bid, its indicative of the miserly way the relationship is likely to proceed once the engagement begins, so not even worth the trouble...