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 21-22 workers, and generates $4-5 million annually.
- The security systems services industry consists of about 5,700 firms that employ about 123,000 workers and generate about $27 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 Monitronics (Brinks Home Security). Large companies may be vertically-integrated and have international operations.
- Estimated US household penetration of alarm systems is 50%.
- The industry includes national and regional chains, franchises, and independent operators.
Industry Forecast
Security System Services Industry Growth
Recent Developments
Mar 15, 2024 - Industry Sales Growth Softens
- The security systems services industry is expected to experience slower sales growth in 2024 after a softening of demand in 2023 and some solid gains in the years following the onset of the pandemic. The industry’s year-over-year sales fell to -3.5 in 2020 before rising to 1% in 2021 and 11.6% in 2022, according to Inforum and the Interindustry Economic Research Fund, Inc. In 2023, sales growth fell to 6.3% and is expected to fall further to 3.8% in 2024 before rising an average of 5.5% per year between 2025 and 2027, according to Inforum and the Interindustry Economic Research Fund, Inc.
- With the supply chain disruptions and most other pandemic-era headwinds behind them, security dealers and integrators are looking forward to more typical business challenges this year, according to the 2024 SDM Industry Forecast Study. When asked about their outlook for 2024 revenue, 58% of security dealer and integrator respondents said they thought revenue would increase, while 35% believe sales will stay the same and 7% think revenue will decline. Among specific areas of the security industry, respondents were most confident about video surveillance, monitoring, access control, fire alarm/emergency communications, and intruder alarms. When asked about their top business challenges for 2024, the top reply was increasing sales (ranked the highest by 41% of respondents), followed by finding/retaining employees (35%), controlling costs (30%), generating recurring revenue (30%), and protecting profit margins (28%).
- The rate of US business applications, a key demand indicator for security systems services, decreased in February 2023 compared to the prior month, according to the US Census Bureau. All US regions posted weaker applications, with declines led by the Northeast with a drop of 5.2%, followed by the West (-4.6%), the Midwest (-1.7%), and the South (-1.3%). Of the 20 major industry sectors tracked by the Census Bureau, eight posted growth in February, led by agriculture (+13.9%), healthcare and social assistance (+1.7%), management of companies (+1.1%), administrative and support (+0.6%), and transportation and warehousing (+0.6%). Industries that notched the largest drops in February business applications included retail trade (-13%), mining (-7.3%), manufacturing (-5.7%), accommodation and food services (-3%), and arts and entertainment (-2.4%).
- US retailers increasingly report that theft is contributing to higher “shrink,” which is hurting profitability, according to The Wall Street Journal. Shrink is a retail industry term for the difference between inventory on the books and inventory that’s on hand. Theft is only one contributor to shrink in addition to lost or damaged items or inaccurate record keeping. According to a recent investment bank William Blair analysis, US retailers experienced $142 billion in inventory shrink in 2023, up 25% from 2022. Shrink in 2023 was about 2% of total retail sales, the highest level since 2015. Analysts say they need more data to help curtail shrink, including how companies are reacting to it, if those efforts have been successful, and the costs of shrink control efforts. However, companies often don’t calculate shrink in the same way and are sometimes cagey about disclosing financial details related to shrink.
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