How Much Is a Fire Services Business Worth?

What decides the value of a fire services business?

The recurring servicing it can show and keep. Building owners are generally required to maintain their fire safety measures, so extinguishers, detection systems, hydrants and emergency lighting are serviced at set intervals under routine service schedules such as Australian Standard AS 1851. That demand repeats whoever answers the phone, and it is what a buyer is mainly paying for.

Against that, installation income in new buildings has to be won again, and some of the value sits with the technicians and the owner who hold the accreditations. A valuer separates the streams and asks how much would stay under a new owner. An owner who came up as an electrical tradie, signs the statements and quotes the larger jobs is replaced at a market cost, as in any trade.

The factors are set out on our page on fire services business valuations. Every figure below is illustrative. None is a benchmark and none describes a real business.

Why does the asset register matter?

A register of every extinguisher, hydrant, detector and panel the business maintains, with its service history and next due date, is an operating asset. It drives scheduling and invoicing, and it is the evidence that the recurring revenue exists. We check how complete and current it is, who owns the data and what the software costs.

We also separate buildings on a service agreement from buildings serviced ad hoc. Agreements give a documented customer base, a term and price review rights. Ad hoc buildings still produce recurring work because the servicing is due, but a new strata manager or committee can move them without anyone ending a contract.

Strata and commercial buildings change managers regularly, so we look at how long customers have been held and how many buildings sit with each managing agent. Our guide on recurring maintenance contracts and business value explains how contract revenue is weighed more generally.

In several states building owners must also report on their fire safety measures each year, under names such as annual fire safety statement or essential safety measures report. Where the business prepares and lodges these it holds a recurring task that ties it to the customer, so we look at the volumes and at who is authorised to sign.

Are defect repairs recurring revenue?

Partly. Routine inspections find defects, and quoting the repairs is a large source of follow-on revenue. The work follows from the service base, but each repair is quoted and approved separately and the amount varies from year to year. We look at how many defects are quoted, how many convert to paid work over several years, and whether conversion depends on one technician or estimator.

We weigh defect work as less predictable than the scheduled servicing that produces it. A large one-year catch-up, such as a body corporate clearing a backlog of deferred repairs, is removed from maintainable earnings.

How is the value of a fire services business worked out?

We build the revenue up from the register, stream by stream, and apply a contribution margin to each. That ties the revenue to buildings and prices that can be checked, and it shows how much of the profit rests on each stream.

Routine servicing, contracted or not, supplies 59.0% of the contribution. Defect repairs that follow from it supply another 19.1%, so 78.1% of the contribution rests on the service base. Installation supplies the remaining 21.9%.

The contracted base alone covers 77.4% of overheads, so the business relies on defect work, uncontracted buildings and installation for the rest. If the 100 uncontracted buildings moved to another provider, contribution would fall by $54,000 and maintainable EBITDA from $200,000 to $146,000, before any saving in overheads. That is why a buyer prices a building on a written agreement differently from one serviced when called.

Installation is read in the same way, with one addition. A new system often becomes a recurring customer, so we look at how much service growth comes from the business’s own installs before treating the two as unrelated.

Servicing is scheduled work, so a dense run of buildings drives technician utilisation. We look at average revenue per visit, travel time and whether prices have kept pace with wage increases, because a price held flat for years is a cost a buyer inherits.

Technician requirements differ by state, and some states have accreditation or competency requirements for people who assess and certify fire safety measures. Installation may also fall under separate trade licences. We check who holds what, when it expires and what depends on a single person, and how much customers deal with the technician and not the business.

What reduces and what increases the value of a fire services business?

• Increases: a large contracted service base with a history of renewal. Term remaining and price review rights add to the case.
• Increases: a complete, current asset register that the business owns. It is the evidence a buyer can test.
• Increases: accredited technicians who have stayed. Requirements differ by state, so we check who holds what and when it expires.
• Increases: steady conversion of defects into repairs that does not depend on one person.
• Reduces: most profit from installation work for a few builders. It has to be won again, and a builder’s failure can leave a bad debt.
• Reduces: reliance on the owner’s accreditation to sign statements or certify work. A buyer has to replace it.
• Reduces: many buildings sitting with a few managing agents. One decision to retender can move them together.
• Reduces: an incident, audit or claims record that is unresolved. Fire protection work carries liability if equipment fails when it is needed, and a buyer will weigh the insurance held.

What should a fire services owner prepare for a valuation?

• a site and asset register showing buildings, equipment types and counts, service frequency and next due dates
• a service agreement schedule with term, price, renewal date and price review history
• revenue split between routine servicing, defect repairs, installation and fire safety reporting
• defect quote history, with conversion to paid work over several years
• a technician list with accreditations, licence classes, expiry dates and tenure
• a customer list showing strata, commercial and builder customers and the managing agents behind them
• compliance software or register reports, including who owns the data
• insurance certificates, claims history and any audit records

An independent valuation then sets out each adjustment and the evidence behind it, and a draft report is provided before it is finalised. Whether a particular accreditation transfers on a sale is a question for the regulator or your lawyer. Our guide on how much a security business is worth covers another business built on recurring revenue and contract terms. When your records are ready you can start online.