Security System Services

Industry Profile Report

Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters

Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.

Call Preparation Call Prep Questions, Industry Terms, and Weblinks.

Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.

Industry Profile Excerpts

Industry Overview

The 5,700 security systems service providers in the US design, sell, install, service, and monitor security alarm systems. Companies may install stand-alone systems or offer monitoring services. Customers include residential, commercial, educational, governmental, and industrial accounts.

Customer Attrition

Failure to retain customers is costly, as companies typically incur acquisition expenses and depend on payments over the term of a contract to recoup costs.

Technology Integration

Advances in technology help drive popularity for integrated security systems that combine multiple features, such as video surveillance, intruder detection, alarm systems, and home control.

Industry size & Structure

The average security systems services provider operates out of a single location, employs 25-26 workers, and generates $4.5 million annually.

    • The security systems services industry consists of about 5,700 firms that employ about 146,600 workers and generate about $26 billion annually.
    • The industry is concentrated at the top and fragmented at the bottom. The top four firms account for 34% of industry revenue. The top 50 firms account for 58% of industry revenue.
    • Large companies include Apollo Global (ADT) and Ascent Capital Group (Brinks). Large companies may be vertically-integrated and have international operations.
    • Estimated US household penetration of alarm systems is 18-19%.
    • The industry includes national and regional chains, franchises, and independent operators.
                                    Industry Forecast
                                    Security System Services Industry Growth
                                    Source: Vertical IQ and Inforum

                                    Recent Developments

                                    Nov 10, 2022 - US Home Sales Drop
                                    • New single-family home sales, a demand driver for security system services, decreased 10.9% month over month and declined 17.6% year over year in September 2022, according to the US Department of Commerce. On a year-to-date basis, new home sales were down 14.3% in the first nine months of 2022 compared to the same period in 2021. According to Freddie Mac, on November 3, 2022, the US weekly average rate on a 30-year fixed mortgage was 6.95%. A year ago, the rate was just over 3%. Industry watchers expect new home sales to remain weak as the Fed uses interest rate hikes to bring down inflation.
                                    • More businesses reported their sales and profits fell in the third quarter, according to the latest Business Conditions Survey released in October by the National Association for Business Economics (NABE). The Net Rising Index (NRI) for sales – the percentage of respondents reporting rising sales minus the percentage reporting sales declines – dropped to eight in the third quarter, marking the lowest NRI sales reading since mid-2000. The NRI reading for profit margins fell to -10. About 31% of respondents cited higher interest rates as their biggest downside risk, followed by increased cost pressures with 16%. More than half of those surveyed felt there was a more-than-even probability of entering a recession in the next 12 months; 11% believed the US economy is currently in recession. A weaker economy could prompt companies to postpone security upgrades.
                                    • The rate of US business formations, a key demand indicator for security systems, increased by 1.2% in October 2022 compared to the prior month, according to the US Census Bureau. The West posted the strongest growth in October business formations with a rise of 2.5%, followed by the Midwest and the South, which each saw an increase of 1.6%. Business formations in the Northeast declined by 2.5%. Of the 20 major industry sectors tracked by the Census Bureau, all but five posted growth in business formations in October, led by mining (up 8.4%), arts and entertainment (+7.7%), accommodation and food services (+3.2), transportation and warehousing (+3.1%), manufacturing (+2%), education services (+1.9%), and wholesale trade (+1.9%). Categories that posted declines in business formations in October were utilities (down 3.1%), finance and insurance (-2.5%), agriculture (-1.2%), and management of companies (-0.7).
                                    • To address the ongoing shortage of qualified workers, the Security Industry Association (SIA) is creating an apprenticeship program, according to Security Systems News. Launching in June 2023, the program will run as a one-year pilot initiative, and the SIA will develop the curriculum and connect job applicants with security systems firms offering paid internships. The program will include 2,000 hours of on-the-job training and 100-plus hours of technical instruction. The SIA aims to build a scalable apprenticeship program that security integrators nationwide can use. Key areas of instruction will include security systems installation, device networking and configuration, cybersecurity, and project management.
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