Security Business Valuation Benchmarks

Business owners, prospective buyers, and industry investors rely on a diverse set of financial benchmarks to assess the value of a business. We have compiled data from current BizBuySell listings and sold businesses to provide insight into the business for sale market and important benchmarks for pricing and evaluating security companies relative to industry standards.

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Highlights of Security Businesses Sold on BizBuySell

Security companies listed and sold on BizBuySell offer a variety of services that help protect individuals, businesses, and property from potential threats. They offer a range of services, including the provision of armed and unarmed security guards, installation of surveillance systems and security cameras, door and window monitoring devices, and security monitoring services. Companies in this industry typically cater to clients across various sectors, such as residential properties, commercial buildings, government facilities, and event venues.

Security Business Transaction Trends

The median sale price of security businesses generally ebbs and flows as larger companies try to time their exits around favorable financial conditions. 2022 and 2023 saw growth in sales of larger companies, however, 2024 saw more smaller companies exiting at higher valuations, which may signal increased demand for acquisitions of security businesses.

Security Business Valuation Multiples

Valuation, or pricing, multiples are financial tools that allow for comparisons between businesses that have different levels of sales and financial performance. They represent the sales price of a business relative to its revenue or earnings, and given enough individual business sales data, they represent what the market is willing to pay for a business given its revenue and earnings.

Valuation Trends

Business values and associated multiples fluctuate over time, influenced by a variety of macroeconomic factors such as interest rates, inflation, consumer spending, and overall economic conditions. Business valuations of security businesses have generally been increasing since the Covid-19 pandemic, despite financing pressure caused by increasing interest rates.

Earnings Multiples

Earnings multiples represent the value of a business relative to its owner’s discretionary earnings or "cash flow". Arguably the most important valuation metric - as seller's discretionary earnings will often dictate how much a buyer is able to borrow to finance the business acquisition - business valuations tend to hinge on the earnings multiple.

Revenue Multiples

Revenue multiples represent the value of a business relative to its overall sales or revenue. In conjunction with an earnings analysis, revenue multiples are commonly used to value a business based on its overall sales.

How to Interpret These Multiples

Recent Listings vs. Sold Businesses

We calculate and provide valuation multiples from two sources: Current and recent listings of security companies for sale, and our database of "comparable" security businesses sold on BizBuySell. Multiples based on listing data are always higher due to owners setting asking prices above what their businesses might typically sell for. This occurs either intentionally as a negotiation strategy, or incidentally due to business owners’ common tendency to overvalue their own businesses.

Multiples based on comparable businesses - "comps" in business broker parlance - are much more useful as they represent the prices at which businesses ultimately get sold. Business brokers and valuation professionals will always turn to local comps when pricing businesses for sale or evaluating businesses for acquisition. We provide both sets of data at the national level to offer general context.

Quartiles, Median, and Average

No two businesses are identical, and as such, valuation multiples exist in a range. We have carved out four common values within this range: Lower quartile represents the value under which the lowest 25% of valuation multiples fell. Upper quartile represents the value above which the highest 25% of multiples fell. Median is the middle of the range, and average is the mean of the set. Mean is almost always higher than the median, driven by a minority of high volume, high value businesses sold at multiples above the upper quartile.

Businesses with consistent financial performance, above average revenue and earnings, demonstrable growth potential, low owner involvement, unique competitive advantages, and a seller willing to finance will command a multiple at or above the upper quartile. Lower volume businesses with thin profit margins, full-time owner involvement, and many direct competitors will trade at or below the lower quartile. Most businesses will fall somewhere in the middle.

Based on this data, half of security businesses are valued and sold between 1.92 and 3.28 times their annual seller discretionary earnings, with 25% of well-managed, larger security businesses trading above this range, and 25% of the smaller, less desirable ones trading below.

Financial Benchmarks

To determine how a business compares in terms of sales volume and financial performance relative to industry peers, it’s necessary to have some insight into industry standards. "Benchmarking" describes the practice of comparing a business’s financial performance to typical industry standards to determine where a business falls relative to other businesses in the same industry. These benchmarks can help guide business owners and investors towards appropriate valuation multiples from the range above.

To that end, we have aggregated financial ranges useful for comparing a given security company to the broader market.

Security Business Revenue and Earnings Trends

Median revenue and earnings of security companies sold on BizBuySell had been increasing consistently, until 2024, when sales were made up of more smaller businesses. However, profit margins of these smaller businesses we substantially higher than previous years, rising to 36% from the previous years' average of around 26%.

Earnings Ranges

Discretionary earnings (used interchangeably with the terms "cash flow" and seller's discretionary earnings or SDE) is often the crux of business valuations, so it is important to benchmark it relative to other similar businesses traded on the business for sale market. Below you will find discretionary earnings ranges of security companies sold over the past five years and those recently listed for sale.

Revenue Ranges

Revenue volume plays a large role in business valuation, as it measures the size of the potential income opportunity for new ownership. It's not uncommon for buyers to select an earnings multiple range based on overall revenue volume. The table below includes revenue ranges of security companies sold over the past five years and those recently listed for sale.

How Revenue and Earnings Level Affects Business Values

Obviously, higher levels of earnings lead to higher valuations, even given the same multiple. However, valuation multiples also tend to rise with business sales volume. Security businesses that generate higher sales (and maintain benchmark profit margins) tend to sell for earnings multiples on the higher end. So, a security company generating over $1.7MM in revenue may command an earnings multiple of 3.3 or higher, while a smaller business with sales below $460k may trade below 1.9 times its discretionary earnings.

This tendency for higher sales volumes to fetch higher valuation multiples is largely driven by the economics of business acquisition financing. Businesses with greater revenue and earnings give buyers more cushion to cover debt service obligations and still have enough left over to pay the new owner a reasonable income.

Service Sector Comparisons

For a more complete understanding of the market and valuation standards, consider comparisons within the broader service sector when benchmarking security companies. The chart and table below include key metrics from sales of common service businesses sold on BizBuySell.

Security businesses, on average, fall right around the middle of the pack in terms of valuation compared to other popular service businesses. Given their above average revenue volume, one would expect slightly higher earnings multiples, so it's likely these businesses are slightly discounted compared. Some qualities that might contribute include a high level of labor, potential licensing needs, and relatively low barriers to entry.

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