Security companies often earn between 15% to 20% gross profit and around 10% EBITDA, according to the Perry Whitepaper.

Want to increase your profits? Let’s explore the key factors behind successful security companies and strategies that can help boost your bottom line.

Read on to learn: 

• Profit margins for small, medium, and large security companies
• Factors influencing profitability
• Common profitability challenges 
• Strategies to increase profitability 
• How security management tools can help you increase profits

Let’s get started by answering this guide’s central question.

Are security companies profitable? 

Profitability in the security industry varies widely by company size, operational efficiency, and service offerings. Larger security firms generally experience higher margins due to economies of scale and the ability to invest in technology, which often brings in higher returns. 

According to the U.S. Contract Security Market White Paper (September 2024), gross profit margins in the industry typically break down as follows:

• Small security companies (under $10 million in revenue) usually have gross profit margins averaging around 16%, as these firms face higher operational costs per unit and limited economies of scale.
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• Regional companies (with $10 million to $100 million in revenue) tend to achieve slightly better margins, averaging about 17%, thanks to some scale benefits and reduced non-billable overtime costs.
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• National and international companies (over $100 million in revenue) often see gross profit margins above 18%, with industry leaders like Allied Universal and Securitas reaching up to 19-23%, largely due to significant technology investments.

Plus, the future looks bright for the physical security industry. According to the latest security services report by MarketResearch.com, the global market for physical security is expected to grow from $123.9 billion in 2023 to $174.9 billion by 2030.

Key factors influencing the profitability of security companies

Now we know that security companies are profitable. But since it’s such a wide range, let’s look at the individual factors that influence profitability: 

Key factor 1: Growing costs 

Starting a security company requires careful financial planning. According to the latest security startup costs, initial costs can range from a modest $40,000 for smaller operations to a substantial $500,000 or more for larger ventures. 

Beyond start-up expenses, ongoing operational costs add up quickly and are rising.  variable can help companies better manage their finances as they grow.

Let's dive into these costs  and share some figures to clue you in:

• Employee wages salaries and benefits: This Includes wages, health insurance, retirement contributions, and other benefits for security guards and administrative staff. The average security guard salary in the US is $34,580 annually, plus benefits.

• Hiring and training costs: These are expenses related to recruiting, background checks, training programs, and certifications for security guards — budget around $20,350 to $72,490 per guard annually, contingent on experience and location.
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• Insurance scaling with workforce: General liability and workers’ compensation insurance Insurance costs increase with the number of employees and the level of services provided. Armed guards, for example, require additional coverage, pushing premiums higher as the workforce grows.
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• Equipment purchases and upgrades: Costs for uniforms, two-way radios, flashlights, patrol vehicles, and body cameras vary based on contract needs. Smaller firms might spend around $1,800 initially, while companies with more complex operations may invest up to $50,000 in equipment.

• Operational costs: This point covers office rent, utilities, communication expenses, vehicle maintenance and fuel, and other expenses. Office rent alone can range from $500 per month in smaller towns to over $100,000 annually in major cities like New York (considering an average of $14,800 annually in office costs per employee).
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• Marketing and client acquisition costs: These are variable expenses for maintaining brand presence and attracting new clients. Digital marketing, networking events, and other strategies can range from a few hundred to tens of thousands of dollars annually.

• Business registration and licensing fees: This includes costs associated with forming your legal business entity (e.g., LLC) and getting any required security licenses specific to your location and services. Depending on your location and the services offered, this could range from a few hundred to several thousand dollars.

For info on start-up costs for security companies, read the full guide. 

Key factor 2: Pricing strategies and revenue streams

The way you price your services and the range of revenue streams you tap into can make or break your profitability. Let’s take a closer look: 

Pricing strategies 

Hourly rates, fixed contracts, and tiered service packages are all common pricing models in the security industry. Here’s a quick breakdown of each of them:

• Hourly rates offer flexibility, particularly for short-term or event-based security needs. 
• Fixed contracts provide stability and predictable income, especially for long-term clients like businesses or residential communities. 
• Tiered service packages allow you to cater to a wider range of clients with varying budgets and security requirements. 

The key is to strike a balance between competitive pricing and ensuring healthy profit margins.

Revenue streams

Diversifying your revenue streams is crucial for financial resilience. Besides core services like on-site security and mobile patrols, consider offering additional revenue-generating options such as alarm monitoring, security consultations, and training programs. 

These value-added services make your service offering more appealing to customers while also contributing to a healthier bottom line.

Key factor 3: Market demand and competition

The level of demand for security services and the intensity of competition in your target market directly impact your profitability. Let’s analyze the scope of that impact: 

Market demand 

Thoroughly research the demand for security services in your area and the specific sectors you intend to serve. Factors such as crime rates, economic conditions, and industry-specific risks can influence demand. 

Remember that high-demand areas with a thriving business environment typically offer greater opportunities for growth and profitability.

Competition 

The security industry can be highly competitive, particularly in densely populated urban areas. A saturated market can lead to price wars and slimmer profit margins. 

Differentiating your company through specialized services, exceptional customer service, or innovative technology solutions can help you stand out and command premium pricing.

Key factor 4: Efficient management and cost control

As security companies grow and take on more contracts, many think they’ll need a bigger back-office team to handle the extra scheduling, payroll, and billing work. Fortunately, with smart management practices, this expense can often be avoided.

Automated scheduling tools help companies keep shifts covered and notify supervisors if issues arise, like missed check-ins or open posts. Built-in payroll and billing systems also simplify these tasks, saving time and reducing the chance of errors. 

By incorporating these tools into their arsenal, companies can focus on client needs and growing contracts without expanding their administrative team. Through effective management, they can achieve results similar to those of larger firms without the added overhead. 

Pro tip: Embrace the right tech to boost your operational efficiency and reduce overhead costs. Security management platforms like Belfry can automate time-consuming tasks such as scheduling, payroll, and reporting so your staff can focus on core security functions and client support. 

Common profitability challenges and how to overcome them

Even with the best strategies in place, security companies face a unique set of challenges that can impact their bottom line. Let's explore some common hurdles and how to overcome them:

High turnover rates

The security industry is notorious for high employee turnover, which can be a major drain on resources and profitability. The constant need to recruit, train, and equip new personnel can lead to significant expenses and operational disruptions.

Solutions

• Competitive compensation and benefits: Offer attractive wages and benefits packages to attract and retain top talent. Consider performance-based bonuses or incentives to reward loyalty and dedication.
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• Boost employee engagement: Foster a positive work environment where employees feel valued and appreciated. Provide opportunities for growth and development through ongoing training and mentorship programs.
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• Efficient onboarding and training: Simplify your onboarding and training processes to get new hires up to speed quickly and efficiently. Use platforms like Belfry to centralize training materials and track employee progress.

Regulatory compliance

Managing regulations and licensing can be challenging for security companies. Non-compliance can result in hefty fines, reputational damage, and even loss of operating licenses.

For example, in California, security companies must obtain a Private Patrol Operator (PPO) license. This license requires a background check, insurance coverage of at least $1 million, and passing an exam covering the Private Security Services Act. 

In Texas, security companies must register with the Department of Public Safety, and security guards are required to obtain the appropriate license, such as Level 2, 3, or 4, depending on their responsibilities​.

Solutions

• Stay informed: Keep abreast of the latest regulations and licensing requirements in your area. Regularly review your policies and procedures to make sure they align with industry standards.
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• Invest in compliance tools: Leverage tech like Belfry to manage compliance documentation, track employee certifications, and automate reporting processes.
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• Seek expert guidance: Consult with legal and compliance experts to check if your company is always operating within the boundaries of the law.

Client acquisition and retention

For security companies, it’s important to build strong relationships with clients to secure long-term contracts and recurring business. This can be challenging, as the competition is tough, and clients expect top-quality service.

Solutions

• Focused outreach: Build a clear message that shows potential clients what makes your security services stand out. Use targeted marketing to reach the right people and focus on what makes your company reliable and experienced.
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• Responsive customer service: Make sure clients feel taken care of by providing quick, helpful communication and solving problems before they become bigger issues. Consistently show clients that their safety is your top priority.
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• Leverage the right tech for value: Use a platform like Belfry to improve client satisfaction with features like a client portal for real-time reports, automated scheduling, and the compliance tracking functionality we mentioned before.
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• Offer more than security: Go beyond just providing security guards. Offer services like risk assessments, security planning, and training programs. These extra services can help you stand out and offer more value to your clients.

How security companies can increase profitability

Let’s now explore some practical strategies that can boost your profit margins:

Strategy 1: Diversify the services you offer

Think beyond just providing security guards. Consider branching out into areas like surveillance system installation and monitoring, access control systems, security consultations, and even specialized training programs. 

By catering to various needs, you can become a one-stop shop for your clients’ security requirements, increasing your value proposition and revenue potential.

Here are two hypothetical scenarios to show you how this would play out:

• Example 1: A security company primarily focused on event security could expand its offerings to include mobile patrols for businesses or residential communities during off-peak hours. 
• Example 2: A company specializing in on-site security guards could also offer security audits and risk assessments to help clients identify and mitigate potential vulnerabilities.

Strategy 2: Invest in technology and software solutions

By embracing technology, you can free up valuable time and resources for your staff to focus on core security tasks. Plus, the data-driven insights provided by such software can help you spot areas for improvement and make better decisions to improve your operations further.

Implementing security management software like Belfry can drastically reduce manual work, automate various processes, and lower your operational costs. We’re talking simpler scheduling, automated payroll, and easy report generation, all at your fingertips.

Strategy 3: Boost customer retention and satisfaction

Retaining existing customers is vital for long-term profitability. Happy clients provide repeat business and also act as brand advocates, referring you to their network.

Focus on building strong relationships with your clients through open communication, proactive problem-solving, and personalized service. Gather feedback regularly and address any concerns promptly to make sure they’re always delighted with your service.

Tools like Belfry’s client portal give clients real-time access to reports and make communication easier with your support team.

Strategy 4: Optimize how you manage your workforce 

Make sure your guards are adequately trained and equipped to handle various situations. Implement efficient scheduling practices to avoid overstaffing or understaffing. 

You should also consider cross-training your personnel to handle multiple roles, providing flexibility and reducing the need for additional hires.

Belfry's workforce management features can streamline these processes, helping you guarantee your team is deployed effectively. Our platform helps you minimize labor costs and maximize productivity.

Discover how Belfry can help your security company be more profitable

Now you know that security companies are profitable, and we've explored the factors influencing their profitability. It’s time to take your business to the next level using Belfry’s security management platform. 

With Belfry’s all-in-one platform, you can optimize your operations to unlock maximum profit potential while delivering top-notch security services. 

Here's how Belfry helps boost your bottom line:

• Efficient scheduling and payroll: Automate your scheduling and payroll processes. With Belfry, you can ensure accurate time tracking, simpler shift management, and compliant payroll processing, even for government contracts. 
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• Data-driven insights: Gain real-time visibility into your operations with Belfry's analytics. Monitor officer activity, track incident reports, and identify areas for improvement to optimize resource allocation and enhance efficiency.
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• Client transparency and satisfaction: Strengthen client relationships with Belfry's client portal. Provide real-time access to patrol data, incident reports, and custom reports. 
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• Better accountability: Equip your security officers with Belfry's mobile app, featuring guided NFC-based tours and geofencing capabilities. This boosts accountability, improves training, and helps make sure officers are where they need to be.
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• Streamline back-office operations: Free up your back-office staff to focus on strategic initiatives and client relationships. Belfry automates routine tasks, allowing your team to operate more efficiently. 

Schedule a free demo of Belfry.