The way in which security firms generate income is often the direct result of the varied services they render. And those are plentiful. So, it isn’t difficult to say how do security companies make money. Whether that be guard and patrol services, including bodyguard, guard dog, parking security, and security guard services. Many of them will even provide advanced special operations services if the client demands it.
Typically, private security companies work with both corporate and commercial clients with valuable assets to protect. That may include guarding valuable information, physical property, or individuals within the organization. Other times, security firms are hired to protect high-profile clientele, celebrities, or political figures.
Likewise, the cost of these services is highly dependent on the level of security provided. Most companies have a range of prices depending on the services they’re offering. Standard unarmed protection is a lot more affordable than armed security, or special or high-risk event guarding. Most companies charge more the greater the number of security personnel on-site for a job.
Private Security: A Profitable Industry
As of last year, the private security industry’s estimated worth came in at over USD220 billion globally. The five largest companies in the world hold USD1 billion in revenues from manned guard services alone.
Securitas, G4S, Allied Universal Security Services, and Prosegur are four of the major players in the contract security industry. Due to their sheer size, these leaders are establishing new models and trends in the services they provide. In fact, Securitas is leading the pack with an estimated yearly revenue of USD11.7 billion. Talk about how do security companies make money!
Still, the broadening of the security industry’s responsibilities, together with a reduction in police numbers, saw an increase in growth over the past few years. And there are no signs of it slowing down.
Furthermore, the steady growth of the industry isn’t being enjoyed only by the likes of Securitas and Allied Universal. Smaller security firms still benefit, especially when operating in specific niches.
Ways Security Companies Generate Income
A company may operate in manned guarding, close personal protection, or CCTV policing. Alternatively, they can specialize in door supervision, cash and valuable in transit, while some are proficient in security guarding and key holding. Whatever the services they provide, here are some of the most profitable avenues for generating income.
Hourly Charges
The services of most armed and unarmed guards are requested on a short basis, as opposed to multi-year contract deals. This is great for many startups, as they can charge clients at hourly rates. However, establishing monthly, semi-annual, or annual contracts is an ideal scenario.
Specialization
Specific niche services move far beyond just monitoring and surveillance care. Close protection bodyguards, event security, or mobile patrolling – these specialized services are one secret money-making strategy for most top security firms. Having a team of professional officers who are specialized in a particular niche brings huge contracts for firms.
Multi-year Sign-offs
Annual and perennial contract sign-offs are usually reserved for well-established companies and businesses. Most top organizations are too occupied or too large to take care of their in-house security concerns. Thus, security firms sign contract deals with them to ensure smooth sailing when it comes to their security hiring, control, and maintenance processes. In many cases, they do this for an agreed number of years.
Analysis, Advice, and Recommendations
Highly reputable security companies leverage their influence, and expertise to get clients. They do this by offering security measures, advice and recommendations to clients on their security needs, including strategies, manpower, and gadgets. Furthermore, the security company needs first to be familiar with things like the psychology of fear and working with the most precious principals, i.e., children of clients.
Outsourcing Services
Most security companies establish connections amongst each other. In this way, they’re able to outsource services and labor to one another, where one is lacking and in need of help. This can be particularly helpful when traveling to distant corners of the planet, including some parts of Indonesia, Africa, etc.
A local company is much better equipped to collaborate with local authorities. In fact, it can create action plans that consider relevant security issues. For instance, energy blackouts may be a common occurrence in some African nations. On the other hand, rioting is more prevalent in certain Indonesian provinces.
Now that we have given you a walk-through on how do security companies make money, let’s explore maximizing profits.
Increasing Profitability
The average profit margin for a security firm is anywhere between 30 and 40 percent off of the operators they supply. From just one security officer, a company will generate roughly USD40,000 to 60,000 per year. As such, if you hire five security guards starting out, your revenue for the first year may amount to USD300,000.
However, after fees and deductions, the actual take-home profits fall to 7 to 15 percent. In fact, your net profits will vary based on insurance fees, labor costs, overtime, payroll taxes, and other regulatory costs that eat up a major portion of the gross income.
That’s why it’s important to look at how to maximize numbers and margins. For example, offering specialized services in event management, or bodyguard protection, or catered services for politicians helps diversify your brand from other competitors. Not to mention, closing in higher-paying clients allows you to charge higher fees and thus, bring in more revenue.
After all, with a good reputation and little competition, securing large corporate and commercial clients becomes easier. This ideal clientele signs multi-year service contracts and brings about stable long-term income for the business.
Now, it’s not uncommon for both security buyers and companies to prioritize revenue over consideration for results and risk exposure. Keeping overheads as low as possible is vital to running a profitable company. But the focus should never be on securing a contract without regard for results or the officers providing the service.
The Takeaway
The biggest takeaway when considering how do security companies make money is to understand that they need to be sustainable, period! Of course, this means making money and providing for their management and field staff. Otherwise, what is the point of them being around in the first place?
Without profit, no business will provide you with good service. Certainly, there are always margins for negotiation – handling bulk bookings and large orders – earning less per head but making more overall.
Finally, many protection firms seem to be at odds with each other. In fact, this originates in hardline competitiveness and, sometimes, unethical behavior by some.
Whatever the case, the question of how do security companies make money has a lot to do with their expertise and less with the money-making process. All clients look for good service. In fact, most clients aren’t too interested in how much they need to pay to ensure peace of mind for themselves, their family, business, or entourage.
