SECURITY CONTRACTOR NET PROFIT MARGIN.
Healthy security system contractors run 10–15% net margin at $1M–$5M and 11–17% at $5M–$12M when divisions are properly separated. The single biggest compressor is service division overhead bleeding into installation bids — which inflates the installation overhead rate by 4–7 points and makes the installation division appear unprofitable when it may not be.
Net margin for security contractors depends almost entirely on whether installation and service/RMR run as separate P&Ls. When they share a single overhead pool, service overhead inflates installation bids, installation revenue subsidizes service overhead, and neither division's true profitability is visible. A contractor doing $2.8M combined might be running 12% installation net margin and 34% service net margin that look like 22% blended — two completely different businesses requiring different management decisions.
SECURITY NET PROFIT BENCHMARKS — WHERE YOU SHOULD BE.
| METRIC | INDUSTRY LOW | SPM TARGET | STRONG | NOTES |
|---|---|---|---|---|
| Net Profit Margin | 4–7% | 10–15% | 15–20% | Division separation is the primary driver — blended books compress both |
| Gross Margin (Installation) | 18–24% | 28–36% | 33–40% | Gross margin understated when service overhead bleeds into installation overhead pool |
| Overhead Rate | 16–22% | 12–17% | 9–13% | Above-benchmark overhead almost always includes service division costs in installation OH |
| Days Sales Outstanding | 50–70 days | 35–50 days | 28–38 days | Installation DSO improves with milestone billing; service improves with billing automation |
| Working Capital Ratio | 1.1–1.3x | 1.5–2.0x | 2.0x+ | Low WCR in security typically from installation division funding its own cash gap |
WHAT DRIVES NET PROFIT IN SECURITY WORK.
Service Division Overhead in the Installation P&L Inflates Both Overhead and Bid Rates
A security contractor with $380K in service overhead — dispatch staff, service vehicles, on-call response — running through a shared overhead pool with installation is bidding new construction 4–7 points above the actual installation cost structure. Competitors who separate correctly have a lower installation overhead rate and price more competitively at the same actual margin. The security contractor loses bids they should win and never knows the rate was wrong.
Separate Division P&Ls, System-Type Job Costing, and RMR Profitability Tracking
Top-performing security contractors run separate P&Ls for installation and service. Installation overhead reflects what it actually costs to win and execute installation work — not shared with service dispatch, vehicle fleet, or warranty response. RMR profitability is tracked by account so renewal pricing reflects actual service call frequency. System-type job costing shows which scope type carries the best margin.
Three Corrections That Move the Number
First: estimate your service division overhead — dispatch staff time, service vehicle costs, warranty response labor — and pull that number out of the shared overhead pool. See what happens to your installation overhead rate. Second: calculate actual RMR margin by account including service call frequency. Third: pull your last three installation contracts and see which system type ran over on labor. Those three items explain most below-benchmark net margin in security.
FREQUENTLY ASKED.
FLAT MONTHLY FEE. NO SURPRISES.
Two tiers based on trailing 12-month revenue. No hourly billing. No payroll. No add-ons.
| Revenue | Core Financial | Executive Financial |
|---|---|---|
| Under $1M | $1,900/mo | $2,900/mo |
| $1M–$3M | $2,600/mo | $3,600/mo |
| $4M–$6M | $3,800/mo | $5,500/mo |
| $7M–$9M | $5,100/mo | $6,900/mo |
| $10M–$12M | $6,100/mo | $8,500/mo |
| $13M+ | Quoted | Quoted |
ControlQore billed separately at ~$100/month per $1M in revenue. SPM does not handle payroll.
