Commercial Security Integrator, 2007 Idaho Multi-State Operator

$7.5M

Revenue

$850K

SDE

Subscribe Free

Read the full deal writeup

Get Free Access

Already a member? Sign in

Full Editorial Writeup

This is an established commercial security integrator founded in 2007 that designs, installs, services, and monitors integrated security systems for sophisticated commercial and institutional customers across a multi-state footprint. The company runs out of multiple leased locations with 41 people (37 full-time, 2 part-time, 2 contractors) and generates $7.5M in revenue with $850K in cash flow, an 11% owner-earnings margin that is typical for an install-heavy integrator where project work dominates the top line.

The real story here is the client base, not the margin. Average customer tenure exceeds ten years, the company holds multi-year contracts with strategic accounts running through the next five years, and it counts two of the largest organizations in their respective industries among its customers. Approximately 15% of revenue is recurring through monitoring and service agreements, which is a modest but genuine annuity layer under a book of unusually sticky institutional relationships.

The business has posted double-digit revenue growth for three consecutive years, driven by expanding account relationships and steady demand for integrated security. The seller is a retiring shareholder running a structured process with LOIs requested and evaluated on value, certainty of close, and transition terms, positioning the deal for a PE-backed platform or an experienced operator who can professionalize the recurring revenue mix and scale the proven playbook into new geographies.

Why we like it

Earnings quality is anchored by exceptional customer stickiness, with average tenure over ten years and multi-year contracts extending five years out. When a security integrator holds two of the largest players in their respective industries as named accounts, the revenue base is far more defensible than the 11% margin alone would suggest.
The moat is relationship and switching-cost driven, not price driven. Ripping out an installed, integrated, multi-location security system and re-training staff is painful and risky for institutional buyers, which is exactly why customers stay a decade plus and why there is meaningful revenue visibility from contracted strategic relationships.
Commercial security is a genuinely recession-resistant service because institutions do not cut life-safety, access control, and monitoring when budgets tighten. Three straight years of double-digit growth show the category tailwind of continued demand for integrated security solutions is real, not a one-time bump.
The setup is ideal operator economics for a buyer who can grow the recurring layer. At only 15% recurring revenue today, there is a clear path to shift the mix toward monitoring and service agreements, which would both smooth cash flow and lift the eventual exit multiple on this same install base.

How to improve it

Attack the recurring revenue mix immediately. At 15% recurring on $7.5M, every installed system is an underpriced annuity, so bundle mandatory service and monitoring contracts into new installs and retroactively convert legacy accounts to managed plans with auto-renew terms.
Reprice and tier the service agreements on the decade-plus loyal base. Customers who have stayed over ten years are not leaving over a modest annual increase, and even a 5 to 10% lift on monitoring and service contracts flows almost entirely to cash flow.
Formalize contract renewal mechanics on the strategic accounts. The multi-year contracts run five years out, so build a renewal and expansion playbook now to lock extensions early and cross-sell additional sites to the two marquee national customers before any competitor sniffs the window.
Tighten project-level gross margin discipline on the install side. An 11% owner-earnings margin on install-heavy revenue is thin, so audit job costing, labor utilization across the 37 field staff, and material procurement to find the points of margin leakage that are normal in a founder-run integrator.
Build a true sales engine beyond founder relationships. Much of the decade-long tenure likely traces to the retiring shareholder, so document the sales process, hire or formalize account managers, and de-risk the key-man dependency before the seller's non-concurrent support period ends.
Pursue a tuck-in roll-up of smaller regional integrators. The multi-state footprint and institutional reputation make this a credible platform, and absorbing sub-scale competitors adds recurring monitoring accounts cheaply while leveraging existing overhead and the two anchor customer references.
Standardize systems and reporting across the multiple leased locations. Install unified dispatch, ticketing, and recurring-billing software so a new owner has real-time visibility into service margins and monitoring churn rather than location-by-location spreadsheets.

Diligence notes

Verify the composition and durability of the $850K cash flow and confirm how much is true owner earnings versus add-backs. With an install-heavy $7.5M top line, understand how much of recent double-digit growth came from one-time project wins versus repeatable, contracted work.
Pull the actual contracts on the two marquee national accounts and the five-year strategic agreements. Check termination clauses, renewal terms, pricing, concentration as a percent of revenue, and whether those relationships transfer cleanly on a change of control.
Quantify customer concentration precisely. The named reliance on two of the largest organizations in their industries is a strength and a risk, so model what the business looks like if either account is lost and confirm no single customer exceeds a dangerous share of revenue or profit.
Scrutinize the recurring revenue quality and churn. Separate genuine recurring monitoring and service contracts from project revenue mislabeled as recurring, and get monthly recurring revenue, attrition rates, and gross retention over the last three years.
Assess key-man risk tied to the retiring shareholder. Determine which relationships, technical knowledge, and sales activity sit with the seller, and structure earnout, escrow, or extended transition support given the non-concurrent 365-day commitment to protect against post-close account flight.
Review labor and licensing exposure across the multi-state footprint. Confirm alarm and integrator licensing, technician certifications, the status of the 2 contractors versus employees, and any state-specific monitoring or bonding requirements that a new owner must maintain.

Source

Originally listed on BizBuySell. View original listing →