SECURITY SYSTEM JOBS LOOK PROFITABLE. THE COST CODES SAY OTHERWISE.
Security System subcontractors run out of cash for reasons specific to how the work is built and billed, on jobs that are making money. The three that cost the most in this trade are below, taken from security system contractor research. Most sit at 75 to 90 days from finishing work to holding the money, and 45 days is achievable.
Cash and profit are measured on different clocks. Your profit and loss records revenue when you invoice and costs when you incur them, while the bank account only knows what cleared. Labour goes out weekly and collects 45 to 90 days later, minus retention. That distance is what a growing, profitable security system company funds out of pocket, and it widens as you grow. The specific things that widen it in this trade are what the rest of this page is about.
WHERE IT LEAKS OUT.
Integrators typically run 60 to 75 percent one-time installation revenue against 25 to 40 percent service contracts; installs pay big and slow on construction terms (retainage, pay apps, the 56-day industry wait), monitoring pays small and fast on subscription terms. The divisional split that fire protection (ITM), telecom (maintenance), and paving (crack seal) each need, security needs most, because the valuation market literally prices the divisions separately.
The install side lives in the same pay-app, retainage, and closeout world as every sub on this site.
WHAT MOVES MARGIN IN THIS TRADE.
The Unpriced Asset
RMR is a balance-sheet asset with a multiple attached: monitoring books trade at 28x to 60x monthly recurring revenue, and a 40-percent RMR mix nearly doubles what a dollar of EBITDA sells for. An integrator who can't state the RMR mix and attrition rate is running a company whose value is being set by someone else's spreadsheet.
The Billing Illusion
"RMR contracts are billing, but nobody can tell you which ones are profitable." Monitoring costs, truck rolls, and platform fees erode accounts silently; per-contract P&L is the only lens that sees it.
The Divided House
Install revenue rides construction terms; monitoring rides subscription terms; the market values them on different multiples. One blended P&L hides which business funds which and misprices both, at exit and every month before it. (cfos-job-profitability-system) ---
DAYS SALES OUTSTANDING.
Ninety days is weak, 45 is the target, 30 is strong. Nothing else moves cash faster.
| Position | Days | What it means |
|---|---|---|
| Weak | 90 days | Roughly three months of work funded out of your own pocket. |
| Target | 45 days | Achievable on the days you control: submission timing, complete documentation, follow up in week two. |
| Strong | 30 days | Requires discipline every month, and it's the cheapest capital available to you. |
Moving from 90 days to 45 frees roughly annual revenue divided by 365, times 45 days. At $4M that's about $493,000. At $8M it's about $986,000. That money doesn't come from a bank and it costs no interest, which is why we work the cycle before discussing financing anything.
SECURITY SYSTEM BENCHMARKS.
Security System subcontractors at $1M to $5M net 6 percent, against a CFOS target of 10 percent, set at 10 percent before taxes or 3.5 points better than your trade's average at your revenue, whichever is higher. Working capital should sit at 13 percent of annual revenue, and the monthly close should finish by day 10 so the numbers can still change a decision.
FREQUENTLY ASKED.
