Are you a business owner asking yourself, How much is my alarm company worth? Answer a few simple questions to see the current market value of your alarm company.
Our security company valuation calculator involves a formula using a combination of Recurring Monthly Revenue (RMR), financial metrics, security industry niche using industry trends, and current market multiples. While our method is not the only way to determine present value, it is helpful to give business owners a basic estimate of their alarm company’s value. That said, company owners may desire other valuation approaches to get a better idea of how much your alarm company is worth.
Here are some common alarm company valuation formulas used in the security industry:
RMR-Based Valuation = Recurring Monthly Revenue × security industry market multiple
EBITDA Valuation = (Net Income + Interest + Taxes + Depreciation + Amortization) × security industry market multiple
Commonly, Alarm Accounts are strictly valued at a multiple of Recurring Monthly Revenue (RMR). Full security businesses may be valued by RMR, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), a combination of both, or other financial data.
For Legacy Security Consulting’s security company valuation calculator, we provided explanations of the required questions. These reflect various aspects of financial performance and market position, mainly to do with revenue sources, business sales, growth rates, and profit margins. We use these to calculate your company’s valuation without using any Artificial Intelligence or AI tools. The questions are detailed below:
For the first question, you’ll need to select the applicable category of the security alarm industry that relates to the business. There is a variety of options, such as traditional security service, fire protection, or central station monitoring services. Choose Other and type in your company’s primary category if the exact industry associated with the business isn’t available as an option.
This step involves the multiplier that the calculator uses to generate the final alarm company valuation and can vary depending on the specific sector industry in which the business operates.
For example, a home security systems business with $50,000 in Recurring Monthly Revenue or profits will be valued less than a fire alarm company with the same sales or profits. This is because the fair value of fire alarm companies is currently higher due to security industry factors like private equity, attrition rates, and growth prospects.
The second question requires you to use a slider from 0 to 100 percent. Move it to the percentage of your alarm business base that are residential accounts. If you are unsure of your commercial-residential split, leave the slider at 50 percent.
In the third question, you’ll type in your current number of accounts. Keep in mind, the number of accounts is not crucial for valuing a security alarm company so a rough estimate is okay to use.
The fourth and fifth questions involve alarm service contracts. Select Yes if more than three-quarters of your customers have signed a customer contract with your security company. If less than three-quarters, select No. If you choose No, you’ll be taken right to question six. Otherwise, you must select all that your contracts contain. The three selections are:
Evergreen Clause (Automatic Renewal): The Evergreen Clause is a provision that automatically renews the agreement at the end of the term unless the customer cancels within a specified notice period. Having this is crucial to the value of your alarm contract.
Limit of Liability: A clause, capping the company’s financial responsibility, limiting damages to a set amount. While important for your business, having this in your contract isn’t as important to the value of your business as the other clauses.
Assignability or Transferability Clause: A section determining whether the company can assign the contract to another provider and whether or not the customer can or cannot assign the contract to another party. Very important to have this, otherwise your alarm company cannot, in most cases, be sold
If you have none of the above in your customer contract, select Next.
Questions seven through nine require you to answer simple questions about the best practices of your company. These questions include:
Do You Own Your 800 Receiver Lines? – If you’re unsure, select No.
Do you own or lease your office(s)? – If your company owns any real estate, select Own. If not, select Lease or Home Office, depending on your situation.
In What Area/States Do You Currently Operate? – Write in the state or states you currently operate in (e.g. New York) in the United States. If you’re a nationwide, global, or a territorial alarm company, write the region (e.g. Nationwide, Canada, Midwest)
The tenth question involves the slider again, this time from 0 to 50 percent. Move it to the current attrition rate of your alarm business. Attrition rate (customer retention rate) is the measure of how many customers you lose per year. The industry average hovers around 10 percent, with some sectors of the security industry having less or more. If you’re attrition is less than 5 percent, move the slider to 0.
The last question requires you to enter your current recurring monthly revenue (RMR). Recurring Monthly Revenue is the predictable monthly income a security company earns from customer contracts, usually involving monitoring. Buyers like RMR because they view it as a consistent revenue stream with growth potential.
After you’ve entered your RMR, enter your contact information, such as phone number and email, so we’re able to send you your results.
Our alarm company valuation calculator will provide you with your results sent to the entered email address. The email will show you the current market value range of your security business.
After reviewing the email, we suggest that you speak to one of our experienced business brokers to assess the true value of your company. We’ll send an NDA to protect your business and then assess the true value using our professional valuation process. We’ll assess financial health and your company’s ability to sustain a healthy bottom line. We have decades of experience in the security industry and know exactly what potential buyers are looking for.
We easily sift through financial metrics in your balance sheet, income statement, cash flow statement, capital structure, and other documents to find your value drivers, the book value and market approach of your assets, and other insights to maximize value. We’ll present you with our professional valuation and suggest a business plan if you plan to wait on selling. If you’re looking to sell soon, we’ll design a strategy specifically for your security company to get the most from potential buyers, private equity groups, and other third parties.
For some security alarm businesses, market trends and risk forecasts may vary and influence valuations.
An alarm company or security company valuation is a system with the goal of giving the complete financial value of your security solutions or alarm systems company. This involves processing financial data, business operations, profitability, expenses, and growth trajectory.
The purpose of using an Alarm Company Valuation calculator, or getting a professional opinion from one of our experienced alarm company brokers, usually involves a desire to sell your security company. Our brokers at Legacy would love to help you with every step of that process. Please call today to get a professional valuation, even if it’s just to get an idea of what your business could be worth.
There are countless factors that need to be taken into account when valuing an alarm business. Including, but not limited to:
Recurring Monthly Revenue (RMR)
EBITDA
Security Industry Niche
Signed Customer Contracts
Net profit
Growth Rate
Real Estate
Business Assets
Location
Account Base
A business valuation is considered helpful to multiple types of business owners, such as:
Alarm Company Owners asking how much is my alarm company worth
Security Business Owners curious about their value
Security Industry Buyers
To any one or more of these groups, a business valuation will help their goals be met. If you started or inherited your security business and are thinking about selling, a security company valuation is the perfect place to start. Start with our Free Alarm Company Valuation tool above. It is helpful to establish your market value and see how much you may gain from a sale.
From there, consult with one of our industry experts to assess your true value for free and without obligation. We will then be able to help put your desires into action, whether you want to sell yesterday or you’re waiting a few years and only want to see your current value.
Knowing your alarm company’s valuation is the first step in the selling process. Without it, you won’t know how to plan your exit strategy. Thankfully, we’ve made it easy with our Free Alarm Company Valuation above. Simply answer a few questions, and you’ll get the current market value for your security business.
Some factors that may increase or decrease your business value include customer contracts, the amount of Recurring Monthly Revenue (RMR), attrition rate, market volatility, interest rates, and much more. However, we’ve seen many ways to strategically increase value despite common liabilities like a high attrition rate or lack of a written contract.
The simplest way to calculate your alarm company value yourself is to follow the RMR based calculation model. Which involves multiplying your Recurring Monthly Revenue by the security industry market multiple. If you’re not able to find the multiple for your market, either contact one of Legacy’s experienced brokers to get the current rates, or use our Free Quiz above to find your true value in minutes.
Security alarm company multiples fluctuate often and vary from niche to niche or by commercial / residential split. To find the exact value of your alarm company, complete our Free Alarm Company Valuation above or speak to a consultant to get current industry insights. If you’re a buyer, contact us to discuss current values and your acquisition strategy, free of charge.
The first step in selling your alarm company is to know how much it’s worth. While you could attempt this yourself with a formula, you’ll often calculate incorrect financial metrics. Using our Alarm Company Valuation tool will instantly get you the present value of your alarm company. Once you’ve received your estimated market value, you’re in a great position to speak to one of Legacy Security Consulting’s expert brokers to get you an accurate business valuation, assessment, and sale strategy. Utilizing either our alarm company valuation calculator or our broker’s industry insight will ultimately help you make an important business plan and decisions for you and your loved ones.
