Security Guard Company Valuation
29 valuation methods · 43 industries · Results in under 10 minutes
In short
A security guard company is valued on its earnings. A smaller owner-run firm is valued on a blend that includes seller's discretionary earnings, and a larger one on a discounted cash flow, comparable companies, precedent transactions and a bottom-up view. The spread between bill rates and wages drives the earnings.
Who this is for
Owners of contract security guard and patrol companies serving commercial, residential, industrial and event clients, preparing to sell, bring in a partner or plan succession, and buyers who need contract margins read against wage rates.
How is a security guard company valued?
For a smaller owner-run firm, VA blends seller's discretionary earnings, EBITDA plus the owner's pay, times a multiple drawn from small-business transaction data, with a discounted cash flow, comparable companies, precedent transactions and a bottom-up view of the firm's own economics. A larger firm is valued on the last four alone. Earnings are taken after the add-backs you confirm, and an asset floor keeps the result above what the company's own assets would recover. This tool is informational only. Output is driven by your inputs and does not constitute a formal appraisal or certified valuation.
What drives the value of a security guard company?
- Contracts: their length, renewal history and how bill rates rise with wages
- The spread between bill rates and guard wages, contract by contract
- Customer concentration, and how long the largest clients have stayed
- Guard turnover, overtime and the cost of recruiting and training
- State licenses for the company and its guards, and the insurance claims history
- Supervisors and account managers who run the contracts without the owner
What lowers the value of a security guard company?
- Fixed bill rates that cannot rise with wages
- High guard turnover and unbilled overtime
- One client making up much of the revenue
- Licenses or insurance tied to the owner
How much is a security guard company worth? A worked example
A guard company, by discounted cash flow
Take a security guard company with $8 M of revenue and an 8% EBITDA margin, or $640 K of EBITDA. Assume revenue grows 4% a year for five years, capital spending and depreciation each run at 1% of revenue, working capital takes 12% of each year's added revenue and tax is 25%. Cash flows are discounted at 18%, the lowest rate VA uses for a company this size, with 2.5% growth after year five. VA's discounted cash flow gives about $2.68 M before debt, or 4.2× EBITDA. If wages rise and the margin falls to 6%, it comes to about $1.84 M. In a full report for a company this size, precedent transactions carry the most weight.
Illustrative figures from VA's discounted cash flow alone, on the assumptions stated. A full report blends it with the industry's other methods, such as comparable companies and precedent transactions.
Value your security guard company in under 10 minutes
- 1.Upload your financial statements, or type the figures in.
- 2.Confirm the add-backs and the industry details the model asks for.
- 3.Get a valuation range, the methods behind it and a PDF memorandum.
Which numbers matter most?
Normalized EBITDA
EBITDA after the add-backs you confirm. Comparable companies and precedent transactions apply their multiples to it, and the discounted cash flow starts from it.
Bill rate spread
The difference between what clients pay per hour and what guards cost. It sets the margin, and buyers check it contract by contract.
Guard turnover
The share of guards who leave in a year. High turnover raises recruiting, training and overtime costs.
Overtime share
Overtime hours as a share of all hours worked. Unbilled overtime eats into the margin.
Contract renewal history
The share of contracts that renewed at the end of their term. Buyers read it as the best sign the earnings will hold.
What do you need to value a security guard company?
- Profit and loss statements and balance sheets, ideally for the last three years
- Figures for the current year to date
- A list of add-backs: the owner's pay and perks, and any one-off costs
- Loan and lease balances
- A list of contracts with bill rates, terms and renewal dates
- Guard wages, overtime and turnover for the last year
- Company licenses and your insurance claims history
Example scenarios
Bill rates that keep up with wages
Two companies bill the same. One has contracts that raise bill rates when wages rise; the other signed fixed rates. When wages go up, the first keeps its margin and the second loses it. The worked example shows what a lower margin does to the discounted cash flow.
Contracts that follow the account manager
A company's largest contracts were won, and are kept, by one account manager. A buyer checks whether those relationships would stay, and may ask for part of the price to depend on it.
Further reading
Business Valuation Methods Explained: DCF vs. Comps vs. Precedent Transactions
The five business valuation methods professionals actually use (DCF, comparable companies, precedent transactions, SDE/EBITDA multiples, and asset-based), when each wins, and how they combine into one defensible number.
WACC Explained: Why Your Discount Rate Can Make or Break a Valuation
WACC is one of the most misunderstood terms in business valuation. Here's what it is, why it matters, and how it directly affects what your business is worth.
DCF Analysis Explained for Private Companies
A clear, practical guide to discounted cash flow analysis for private companies. Learn the five key steps, how to estimate WACC without public market data, terminal value approaches, and common pitfalls to avoid.
Frequently asked questions
How is a security guard company valued?
On its earnings. A smaller owner-run firm is valued on a blend that includes seller's discretionary earnings; a larger one on a discounted cash flow, comparable companies, precedent transactions and a bottom-up view of its economics.
Why does the spread between bill rates and wages matter so much?
Guard companies earn a thin margin on each hour billed, so a small change in wages or rates moves earnings a lot, and the value moves with them. Buyers check whether contracts let rates rise with wages.
Do licenses and insurance transfer to a buyer?
Company licenses and insurance are often tied to the owner or the company, and a buyer checks them early. Guards' own licenses stay with the guards.
Does guard turnover lower the value?
It lowers earnings through recruiting, training and overtime costs, and the model values earnings. Buyers also read low turnover as a sign the contracts will be served well after the sale.
What if I pay myself less than a manager would cost?
Then your earnings overstate what a buyer who hires a manager would keep, and a buyer will deduct the difference. Set your pay at a manager's salary when you review the adjustments, so the result reflects what a buyer would pay.
Is this a certified appraisal?
No. This is an informational estimate. A bank loan, a partner buyout or an estate matter may require a certified business appraisal, which this does not replace.
Terms used on this page
- Normalized EBITDA
- EBITDA after add-backs, so it shows what the business earns in a normal year under a new owner.
- Add-backs
- Costs added back to reported earnings because a new owner would not bear them: personal expenses run through the business, one-off costs, or owner pay above what the role would cost to fill.
- Discounted cash flow (DCF)
- A valuation that projects the cash a business will generate over the coming years and discounts it to today at a rate that reflects the risk of receiving it.
- Discount rate
- The yearly return a buyer requires for the risk of owning the business. A higher rate lowers what future cash is worth today.
- Comparable companies
- A method that values a business at the multiples of earnings or revenue at which similar companies are valued.
- Precedent transactions
- A method that values a business at the multiples paid in past sales of similar companies.
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Last reviewed September 26, 2026 against VA's valuation models.