How much is your Security and alarm company worth?

Value starts with transferable earnings—not revenue alone.

Recurring account economics and retention often matter alongside SDE or EBITDA. The correct method depends on contract ownership, monitoring costs, and service obligations.

How buyers may approach the valuation

Recurring account economics and retention often matter alongside SDE or EBITDA. The correct method depends on contract ownership, monitoring costs, and service obligations.

Monitoring, managed access, video, service agreements, installation, and project work should be separated.

Why size and operating maturity change the method

A small owner-operator may attract an individual buyer who expects to work in the company and considers total owner benefit. As the company develops independent management, deeper financial reporting, and more earnings, the likely buyer pool can change. That shift may make adjusted EBITDA, replacement management, financing capacity, and formal working-capital targets more important.

Size does not automatically produce a premium. Buyers test whether added revenue brings stronger margins, diversification, management, systems, and cash conversion. Uncontrolled growth can add risk instead.

The transaction-level valuation focus

The central asset is supportable recurring monthly revenue after attrition, monitoring cost, service labor, bad debt, and contract limitations. Buyers will examine cohort retention, contract assignment, installation economics, dealer or monitoring relationships, licensing, cybersecurity, and the seller’s role in commercial accounts.

Compare two Security and alarm company businesses with the same reported earnings. One can demonstrate owned recurring monitoring contracts and low subscriber attrition; the other faces accounts pledged or sold and high attrition. The arithmetic starting point may match, but the durability of earnings, replacement cost, buyer pool, financing, and deal structure may not.

Industry-specific normalization worksheet

Each item should tie to monthly financial statements and a dated supporting schedule. A normalization can increase or decrease earnings.

1. Reconcile monthly revenue and gross profit across the operating streams described here: Monitoring, managed access, video, service agreements, installation, and project work should be separated.
2. Price necessary owner replacement and management against the actual duties implied by this valuation lens: Recurring account economics and retention often matter alongside SDE or EBITDA. The correct method depends on contract ownership, monitoring costs, and service obligations.
3. Separate operating assets, excess assets, real estate, debt, and near-term replacement needs. Subscriber contracts, installed base data, software, inventory, vehicles, tools, and monitoring/dealer agreements require careful ownership review.
4. Model cash conversion and the normal balance-sheet level required at closing. Deferred installation revenue, prepaid monitoring, inventory, commissions, and service obligations should be reconciled.

Factors that can support a stronger result

• Owned recurring monitoring contracts
• Low subscriber attrition
• Transferable dealer and monitoring relationships
• Licensed technical team

These factors matter when they are measurable. Prepare contracts, operating reports, retention data, job or customer profitability, staff records, and a clear explanation of how each strength continues after the owner leaves.

Factors that can lower value or change deal terms

• Accounts pledged or sold
• High attrition
• Obsolete installed technology
• Owner is sole license holder

A risk can affect the normalized earnings base, the multiple, the buyer pool, the transition period, or the amount paid at closing. Do not hide a material issue; quantify it and present a credible mitigation plan.

Industry-specific buyer diligence

A buyer of a Security and alarm company is likely to examine:

• Can management reconcile recurring monthly revenue waterfall to monthly financial statements, source systems, and a dated supporting schedule?
• Can management reconcile contract term and attrition to monthly financial statements, source systems, and a dated supporting schedule?
• Can management reconcile monitoring cost to monthly financial statements, source systems, and a dated supporting schedule?
• Can management reconcile service and false-alarm obligations to monthly financial statements, source systems, and a dated supporting schedule?

Owner dependence and management

List the seller’s actual weekly duties, approvals, customer relationships, technical work, and credentials. Identify who can assume each responsibility, whether that person intends to stay, and the market cost of any missing role.

Customer and revenue quality

Monitoring, managed access, video, service agreements, installation, and project work should be separated. Review customer and channel concentration using both revenue and gross profit, then show contract terms, retention, cancellations, and pricing history.

Equipment, inventory, real estate, and working capital

Subscriber contracts, installed base data, software, inventory, vehicles, tools, and monitoring/dealer agreements require careful ownership review.

Deferred installation revenue, prepaid monitoring, inventory, commissions, and service obligations should be reconciled.

Do not assume that applying an earnings multiple answers what happens to cash, debt, ordinary working capital, owned real estate, excess assets, or near-term capital expenditures.

Licenses, contracts, and transferability

Alarm, low-voltage, electrical, background-check, and local registration requirements can affect both technicians and the entity.

Review change-of-control, assignment, consent, territory, exclusivity, and termination provisions in important agreements. A valuable relationship may not transfer automatically.

Documents for a preliminary review

Begin with reconciled tax returns, annual and monthly financial statements, a supportable add-back schedule, payroll, debt, and customer concentration. For this industry, add:

• Subscriber contract export
• RMR bridge and attrition report
• Monitoring and dealer agreements
• License and technician schedule

Example valuation calculation

The arithmetic begins only after the earnings measure is reconciled. A transparent preliminary calculation can be written as:

Without a public comparable range stored for this industry, the next step is to identify relevant sold transactions or perform a manual market and income review. The site intentionally stops before inserting an invented multiple.

Steps to improve value before a sale

1. Confirm account ownership. Document the baseline, assign responsibility, and measure the result in monthly operating records.
2. Reduce attrition. Document the baseline, assign responsibility, and measure the result in monthly operating records.
3. Renew contracts. Document the baseline, assign responsibility, and measure the result in monthly operating records.
4. Document installation and service standards. Document the baseline, assign responsibility, and measure the result in monthly operating records.

Evidence to preserve

• Confirm account ownership; preserve before-and-after evidence so a buyer can verify that the change survives the owner.
• Reduce attrition; preserve before-and-after evidence so a buyer can verify that the change survives the owner.
• Renew contracts; preserve before-and-after evidence so a buyer can verify that the change survives the owner.
• Document installation and service standards; preserve before-and-after evidence so a buyer can verify that the change survives the owner.

Start early enough for changes to appear in retention, margin, staff stability, contracts, and financial statements. Buyers place more weight on demonstrated results than on a plan created immediately before market.

Frequently asked questions

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