#1, for a point of comparison, you can review how ADT did it here.
I won't suggest a single number since it depends on the install details (indoor, outdoor, how many cameras, etc.) but the ADT approach of is probably the max one should reasonably charge for a simple setup.
I would recommend partnering with a leasing company. This way you get paid in full when the job is complete and the customer pays the leasing company the monthly fee.
You need to figure the total cost and how many months you want the pay off to be. Max I would go is 16 months. Also consider the length of the lease and when the equipment being used might need to be replaced. You can roll labor in if you can afford to wait on the payoff or charge separately for it. You can also run it through a lease company that the customer pays directly to (Less liability) and you get your money up front.
Here is a basic example of similar situation I completed a few weeks ago. Hikvision DVR, 8 Hikvision TurboHD cameras, power supply, all wiring, install, training & maintenance plan. We charged a $2000 down payment with a $165 monthly.
This is a new service we're starting to offer. It is not a lease, the customer will never own the equipment. This will be a service with no length of terms, in theory it could be an infinite service. We do provide upgrades to all equipment at no cost after 6 years of using the service. With the maintenance plan, all parts are completely covered and the customer will not have any additional costs. The benefit for the customer is the ability to write off the monthly expense.
This is new idea we're trying with small customers. We feel this will not be a fit for medium to large customers.
A lease is a long-term contract with specific commitments. From what you describe, you would be responsible to continue to provide a fully functional system for the duration of the lease.
For multiple reasons, you will probably want to structure it as a $1 buyout lease, unless you really want the equipment back at the end of the lease term.
So, to get to your lease price you would need to factor in:
Add those up, divide by the number of months in the lease (probably 36-48), and that is the monthly payment the customer would make.
Though you did not ask this, for the same thing as a rental you would typically divide by 30-60 (days) to get to a daily or monthly payment. The reason you charge so much more for rental vs. lease is because for equipment that is rented you do not have the long-term guarantee up front, and the equipment generally goes through more wear and tear from setup/delivery and removal, which incurs more support and repair costs. Once you rent the products once, they can no longer be sold as new, and will sit on your shelf for an indefinite amount of time, so you have to charge more to make up for that.
If you know upfront that your rental offering is going to be high demand, and/or low wear, you can divide the costs by 180 or 360. It takes you longer to recoup your investment, but your risk is lowered so you can take a lower price.
IPVMU Certified | 12/23/16 05:40pm
Contact a leasing company like time payment and have them hold the paper.
I agree with BRK and John B - 'holding the note' yourself is a risk best mitigated by pros.
You can play it yourself - and reap better margins for awhile... but eventually one of them will go sideways and eat up all that (and maybe more) of that DIY margin that was so attractive to you in the beginning.
Dont forget to discuss this with your accountant. As i understand it, you can write off the products you lease. ADT has thought this out pretty well.
IPVMU Certified | 12/24/16 03:24pm
If your accountant is telling you that you can expense equipment you purchase intended for lease, it's probably time to find a new accountant. I'd be concerned that there's other things they don't understand about the security industry.
To the OP when you first get started leasing it's best to go through the leasing company do five maybe 10 leases with someone else and see how they do things. Once you figure it out you can start doing it on your own and make a lot more money. Leasing equipment provideds a lot of benefits to your security company including increasing the valuation of your business. There's major advantages for customers Who purchase on a lease rather than outright as well.
contracts and credit checks are important and should never be overlooked. Don't make things to complicated. Think of it like leasing a car. When you're done with the lease you take the car back and get a new one and start the lease all over again. Leasing can provide predictable revenue for a long time. A $4,000 system should typically go for about $100/month for 5 years if the business has good credit. You can give a 20% buyout option or renewal with new equipment. Great way to get people the lastest tech without spending a fortune.