How Security & Alarm Systems Businesses Are Valued
Security and alarm businesses are valued on Seller's Discretionary Earnings (SDE) or EBITDA, but the real driver is Recurring Monthly Revenue (RMR) from monitoring contracts. Alarm companies are often valued as a multiple of their monthly monitoring revenue rather than earnings alone. Buyers pay premium multiples because monitoring contracts are sticky, predictable, and create high switching costs for customers.
SDE = Net Profit + Owner’s Salary + Owner Benefits + Discretionary Expenses
They then multiply your SDE by an industry-specific multiple derived from comparable transactions. For Security & Alarm Systems businesses, that multiple currently ranges from 3x to 5.5x.
Quick Example
A Security & Alarm Systems business with $300K in SDE at a 4.5x multiple would have an estimated value of $1.35M. At the full range of 3x–5.5x, the estimated value is $900K–$1.65M.
Current Security & Alarm Systems Multiples
Security and alarm is one of the most actively consolidated service verticals. Large platforms (ADT, Securitas, regional integrators) and PE groups are aggressively acquiring monitoring accounts, driving multiples above most comparable service businesses.
| Revenue Range | Typical SDE Multiple | What This Means |
|---|---|---|
| Under $1M | 2.5x – 3.5x | Small monitoring base, install-focused |
| $1M – $3M | 3.0x – 4.5x | Strong RMR base, commercial accounts |
| $3M – $10M | 3.5x – 5.5x | Large monitoring base, integration services, management |
| $10M+ | 5x–9x EBITDA | Integrators with monitoring and managed services |
Want to understand how these multiples work and what EBITDA vs. SDE means for your business? Read our full guide: How Service Businesses Are Valued.
What Drives Your Number Up (or Down)
Two Security & Alarm Systems businesses with the same revenue can be worth very different amounts. Here are the factors that separate high-multiple from low-multiple businesses:
Drives Multiple Up
- Strong RMR base — high percentage of revenue from monthly monitoring contracts
- Low attrition rate — customer churn below 10% annually
- Commercial and managed accounts — higher-value accounts with access control, video, and integration
- Multi-year contracts — 3–5 year monitoring agreements with auto-renewal
- Integration capabilities — access control, video surveillance, and network infrastructure
Drives Multiple Down
- Install-only, no monitoring — project revenue with no recurring component
- High attrition rate — customer churn above 15% erodes the monitoring base
- Residential-only, basic systems — commodity monitoring with price competition from DIY
- Owner is the lead technician — all installations and service depend on one person
- Third-party monitoring dependency — no control over the monitoring center relationship
If you’re not sure where you stand on these factors, our Exit Readiness Assessment scores you across all of them in about 3 minutes.
Frequently Asked Questions
What is the average security/alarm business worth?
Security and alarm businesses typically sell for 3.0x to 5.5x their Seller's Discretionary Earnings (SDE). For a business with $300K in SDE, that translates to an estimated value of $900K to $1.65M. Companies with strong RMR bases, low attrition, and commercial integration capabilities trade at the higher end. Monitoring accounts are also often valued as a multiple of monthly recurring revenue.
What SDE multiples do alarm companies trade at?
Based on recent transaction data, security and alarm businesses trade at SDE multiples of 3.0x to 5.5x. Larger companies valued on EBITDA trade at 5x to 9x. The recurring nature of monitoring revenue and active PE consolidation drive premium multiples in this space.
How can I increase the value of my alarm business before selling?
Maximize your RMR base by converting install-only customers to monitoring agreements, reduce attrition below 10%, move customers to multi-year contracts, build commercial integration capabilities (access control, video), and reduce your personal involvement in installations and service.
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