Security Business Valuations
Independent valuations for electronic security and guarding businesses across Australia.
Green Standard values electronic security installers, alarm monitoring businesses, security guarding and patrol companies, and businesses that combine them. Two security businesses with the same profit can be worth very different amounts, and the difference is usually found in how much of the revenue recurs and how much of it is labour that has to be paid at award rates.
An alarm and CCTV business with a large base of monitored sites on written contracts, low attrition and equipment that has been kept current is a different asset from a guarding company that holds a few short contracts on thin margins, or an installer whose income comes from new jobs for a single builder.
We examine the recurring revenue, the contracts, the licences, the labour model and the customers, then form a view on the earnings a new owner could reasonably expect to keep.
How much is a security business worth?
A security business is worth what its maintainable earnings support, and the question that matters most is how much of those earnings recur. Monitoring and maintenance charges that keep arriving, on contracts that can be assigned and with low attrition, are worth more than installation income that has to be won again or guarding income that is mostly labour. The worked example below uses illustrative figures.
Security businesses we value
What affects the value of a security business?
These are the questions we work through when we value a security business. Electronic security and guarding are different businesses with different value drivers, and many companies run both, so we assess each stream on its own terms.
Recurring revenue and contracts
Recurring monthly revenue
Monitoring, maintenance and rental charges billed monthly or in advance are the core of an electronic security business’s value. We measure recurring monthly revenue, how many sites it comes from and how long they have been customers, and separate it from installation income that has to be earned again.
Attrition
Customers leave when they move premises, switch providers or stop paying, and the rate at which that happens decides how long recurring revenue lasts. We look at cancellations by month over several years and at what the business has done to hold or replace them.
Contract terms and assignment
We read the term, renewal, notice, price increase and termination clauses in monitoring and service agreements, and whether the contracts can be assigned to a buyer without each customer’s consent. Customers on a written term are usually worth more than customers on a rolling month-to-month basis.
Equipment ownership
Where the business owns the equipment at customer sites under rental or lease arrangements, it holds an asset and an obligation to maintain and replace it. Where the customer owns the equipment, the business holds a contract but no asset. We check which applies to each part of the customer base.
Maintenance and service agreements
Scheduled testing, inspection and servicing of installed systems bring revenue and keep the business in front of customers when upgrades are needed. We look at how many systems are under agreement and how often a service visit leads to follow-on work.
Monitoring, licensing and technology
Monitoring centre arrangements
Some businesses run their own monitoring centre while others use a wholesale monitoring provider. We look at the cost, service levels and terms of the arrangement, since owning a centre brings control and fixed cost while outsourcing brings dependence on the provider.
State security licensing
Security businesses and the individuals who install systems, guard premises or monitor alarms generally need licences, and the classes and rules differ by state. We check that the business and its people are licensed for what they do, who holds the business licence, and what happens to it on a sale.
Technology change and obsolescence
Phone line and mobile networks used by alarm communicators have been retired over time, and the closing of the 3G network forced many sites to have equipment replaced. That produced a one-off spike in revenue, which we remove from maintainable earnings, and it leaves a question about what the next change will cost.
Age of the installed base
Older systems cost more to support and may need replacing, while the brands and platforms the business sells determine its supplier dependence and training needs. We look at the age and spread of the installed base.
Guarding and labour
Guarding labour cost and award compliance
Guarding is labour intensive, and wages, penalty rates, allowances and superannuation make up most of the cost of a contract. We rebuild labour cost per site and check that pay, hours and classifications match the Security Services Industry Award, because an error repeats across every guard and every roster.
Guard engagement and subcontracting
Subcontracted guards or patrol companies can shift cost and risk but do not remove it, and treating workers as contractors when they are in substance employees creates a liability a buyer will price. Subcontracted guards also need the right licences. We look at how workers are engaged and what is documented.
Guarding contracts and tenders
Guarding contracts are often retendered, priced on hourly rates and, in some cases, open to termination on short notice. We look at the term remaining, price review rights, tender history and the margin per hour by site.
Customers and the owner
Customer concentration
A business that earns a large share of revenue from one builder, retailer, shopping centre or government customer carries a risk that the profit and loss statement does not show. We measure it for both recurring and project revenue, over several years.
Installation and recurring mix
Installation revenue is lumpier and often tied to builders and new developments, while recurring revenue is steadier. We separate them, because a buyer prices a dollar of monthly recurring revenue differently from a dollar of project work.
Technician and officer dependency
Experienced licensed technicians and trusted guards are hard to replace. We look at tenure, licences held and who key customers actually deal with.
Reliance on the owner
In smaller security businesses the owner often holds the key accounts, quotes the major jobs and holds the master licence. We ask what would happen to the work and the licences if the owner stepped away.
How a buyer reads a security business
Buyers of security businesses include larger security and monitoring groups adding accounts in a region, electrical and communications contractors adding a recurring revenue stream, and individuals or managers buying into ownership. For electronic security in particular, the monitored customer base is often the asset a buyer thinks it is acquiring.
A business with a large monitored base, low attrition, written contracts that can be assigned and equipment that has been kept current tends to attract the widest interest. A business whose profit comes mainly from installation work, from a few guarding contracts or from the owner’s own licence and relationships is usually priced more cautiously, even when recent profits are higher.
A valuation works through the same questions, independently and with the reasoning written down, including the effect of one-off work such as communicator upgrades.
Adjustments we often make in security businesses
Reported profit is restated to what the business earns on a commercial footing before any method is applied. Every adjustment is listed in the report.
Owner wages
Replacing drawings, or a salary set for tax reasons, with a market cost for the quoting, supervision and licensed work the owner actually does.
Communicator and network upgrade revenue
One-off revenue and margin from replacing equipment after a network closure, removed because it will not recur.
Acquired account books
Monitoring accounts bought from another dealer, restated so earnings reflect the revenue actually held and the purchase cost is treated consistently.
Revenue billed in advance
Annual or quarterly monitoring charges billed up front, matched to the period they relate to, with unearned revenue treated as a liability.
Related-party subcontractors
Guard or technician work passed to subcontractors owned by the owner’s family at rates above or below market.
Award underpayment and back-pay
Guarding wages that should have been paid at award rates, with any back-pay separated from normal running costs.
One-off installation projects
A single large installation for a builder or developer that lifted a year and would not recur.
Event security peaks
Large one-off events or temporary contracts that lifted guarding revenue above a normal level.
Information we typically review
You upload documents through the secure client portal after the engagement is confirmed. We send a list specific to your business; nothing needs to be gathered before the intake.
The financial pack
- Profit and loss statements, usually the last three years and the current year to date
- Balance sheets for the same periods
- Tax returns where relevant
- Payroll summary and employee information
- Vehicle, plant and equipment schedules
- Major customer information
- Recurring contracts and service agreements
- Revenue breakdown by service line
- Owner remuneration and drawings
- Unusual or non-recurring income and expenses
For a security business, also
- Monitored customer list: site, monthly charge, start date, contract term, billing frequency and equipment ownership
- Attrition report: cancellations and reasons by month for the last three years
- Monitoring centre agreement, or details of the business’s own monitoring centre
- Business and individual security licences, with holders, classes, conditions and expiry dates
- Maintenance and service agreement schedule, with term, price and renewal history
- Revenue split between installation, monitoring, maintenance and guarding
- Status of communicator and legacy equipment upgrades, including how many sites still need work
- Guarding contracts, rostered hours by site, hourly charge rates and award classifications
- Subcontracted guard or patrol arrangements, with licences, insurances and agreements
- Record of acquired account books: purchase price, accounts transferred and accounts since lost
- Rental and leased equipment register, plus stock and vehicle schedules
What a security business valuation costs
Fixed fees, confirmed in writing before work begins. The standard fee applies to most established security businesses.
Independent Business Valuation
$1,995+ GST
For established trade and field-service businesses requiring an independent valuation.
- Review of financial information
- Normalisation of earnings
- Valuation methodology selected for the business and purpose
- Industry and business risk assessment
- Consideration of plant, vehicles and equipment
- Owner dependency assessment
- Goodwill analysis
- Valuation range and conclusion
- Professionally prepared valuation report
- Draft provided before finalisation
Accountant and Adviser Partner
$1,495+ GST
For accountants and professional advisers who refer valuation matters regularly.
- Streamlined client onboarding
- Adviser kept informed with client authority
- Independent report addressed to the client
- Secure document portal for the client
- Repeat-client workflow
- Partner pricing on every referred matter
Complex Valuations
From$2,995+ GST
For matters with more moving parts. Quoted as a fixed fee in writing before work begins.
- Multiple entities or divisions
- Significant plant and equipment
- Unusual ownership structures
- Partnership and shareholder disputes
- Complex normalisations
- Significant customer concentration
- Historical valuation dates
Fees are fixed and confirmed in writing before work begins.
Security valuations: common questions
How is a security business with monitoring contracts valued?
The recurring monthly revenue is assessed on its own, by looking at how many sites it comes from, the contract terms, who owns the equipment and how quickly customers leave. A business with low attrition and assignable written contracts supports a higher value than one with the same revenue on rolling terms. Our guide on recurring maintenance contracts and business value explains how recurring revenue is weighed.
Does the revenue from the 3G shutdown count towards the value of my business?
Not as maintainable earnings. Revenue from replacing communicators after the network closure was a one-off, so we remove it from the earnings a buyer could expect to keep. We do look at whether the work has been completed, because sites still running unsupported equipment are either a risk or a further source of work.
Does it matter that the business licence is in my name?
Yes, because the business licence and the individual licences of installers and guards decide what work the business may lawfully do. If the licence is held only by you, a buyer will need to hold one or bring in someone who does, and the rules differ by state. We look at who holds each licence, and questions about transferring or applying for one are for the licensing regulator or your lawyer.
We run both guarding and alarm monitoring. Are they valued together?
They are assessed separately and then brought together, because the two streams carry different risks. Monitoring revenue is judged on contracts and attrition, guarding on contract terms, labour compliance and margin per hour. The report shows how much of the value comes from each, which helps if you might sell only one.
Related industries and guides
Valuing a security business? Start with a short intake.
An Independent Business Valuation is $1,995 + GST, with a draft before the report is finalised. Typical turnaround is 3 to 7 business days once all required information has been received.