Valuing a Security Alarm Company
The security alarm services industry is one of the most profitable industries I have come across. The sector has grown tremendously over the past ten years due in part to consumer spending and aging populations. In addition, consumers are more concerned about security than ever before, especially in residential areas. Peak Business Valuation resides in an area that is known for security alarm companies. As such, we have assisted in valuing security alarm companies across the country This article discusses the basics of valuing a security alarm company.
With technological advances through wireless capabilities, it has never been easier for consumers to install and create a “smart home”. One example is the application Ring, which has provided flexibility and convenience for consumers to identify who is at their door. Now the company has expanded to provide monitoring services for inside and outside the house. Security systems are also becoming more financially accessible as tech progresses, allowing more consumers to become potential buyers.
Industry Information
The security alarm industry generates over $34 billion in revenue. With over 82,000 businesses across the US, one would expect there to be several transactions a year between interested buyers of security alarm companies and sellers of a security alarm companies. Industry growth over the next five years is projected to be around 3.6% on an annualized basis, and profit margins average around 6.0%. With the expectation of higher growth, stable profit margins, and an environment of increasing acquisitions, now is the perfect time to consider selling your security alarm business or purchasing a security alarm business.
The first step to selling your business or purchasing a business is to obtain a business valuation. Whether you are looking to sell or hold on to your company, understanding the market value of a security alarm business is important. A valuation specialist will show you a range of values for your business and consult with you on how to increase the value of a security alarm company. Reach out to schedule a free consultation with Peak Business Valuation, business appraiser.
Over the past five years, Peak has provided business valuations for security alarm companies for various valuation purposes. To give you an idea of each of those engagements, we list out some of the key factors to use when valuing a security alarm company. Keep in mind that the factors listed below are only a guide.
Market Multiples for a Security Alarm Company
$1 – $5 million in revenue
- Annual Revenue: 0.56x – 0.81x, including inventory
- EBITDA: 3.05x – 4.90x
- Seller’s Discretionary Earnings: 2.15x – 3.20x
The above are average valuation multiples for a security alarm company. A business appraiser determines what methods and multiples are applicable when valuing a security alarm company. A valuation of a security alarm company can give you a clearer understanding of what your business is worth. This can help you begin taking steps to increase the value of a security alarm company prior to a potential sale. Below we touch on several ways in which you can increase the value of a security alarm business. In addition, the following information can also be used to value a security alarm company when looking to acquire. There are many factors to consider, but this will provide you with the basis of what your company is worth. It will also give a few ideas to increase your security alarm company’s value.
If you are searching for a more extensive valuation, reach out to a valuation professional by scheduling a free consultation.
Key Success Factors for Valuing a Security Alarm Company
Below are key success factors a business appraiser considers when valuing a security alarm company. For questions, schedule a free consultation with Peak Business Valuation, business appraiser. For more ideas see Value Drivers for a Security Alarm Company, Valuation Multiples for a Security Alarm Company, and How to Value a Security Alarm Company.
Compliance with Government Regulations
Companies in this industry must comply with and understand government fire regulations in the installation and maintenance of alarm equipment. In addition to national regulations, many states also have specific regulations to comply with.
Effective Cost controls
Given the overall low-profit margins for operators in this industry, it is important to have effective cost controls in place. A business appraiser at Peak Business Valuation assess your pricing strategy and cost controls when valuing a security alarm company.
Quick Adoption of New Technology
With the rapid pace of technological advances, security systems can become quickly outdated. It is advantageous to have access to the latest technology in fire and security systems. This is a key differentiator in maintaining and acquiring new consumers.
Ability to Vary Services to Suit Different Needs
Different clients require varying levels of system complexity that are based on their needs and industry. When valuing a security alarm company, a business appraiser analyzes your revenue streams and product offerings. They then compare these to industry averages and security alarm competitors.
Technical Knowledge of the Product
Systems providers must fully understand the capabilities and shortfalls of systems. With that knowledge, sales reps can sell more effectively and offer better solutions.
Ability to Compete on Tender
Most large jobs are advertised through tenders, so being able to compete in this area is important.
Summary
Understanding the value of a security alarm company is important, regardless of any near future transactions. Even if you have not thought about selling a security alarm business or purchasing a security alarm company, it is never too early to start planning. The first step in that process is a business valuation of a security alarm company. We are happy to value your security alarm business and identify ways to increase the value of a security alarm company.
At Peak Business Valuation we provide valuations of security alarm companies. We welcome any questions you may have about valuing a security alarm company. Feel free to reach out by scheduling a free consultation with Peak Business Valuation, business appraiser.
Schedule Your Free Consultation Today!
