Evidence-led valuations for security businesses where licences, labour and liability drive value.

A security company valuation in Australia turns on contract quality, state licensing standing and wage-compliance history — not a generic industry multiple. Prismi values manned guarding, mobile patrol and electronic monitoring businesses using capitalisation of maintainable earnings, segmented by revenue type, adjusted for contract concentration, Security Services Industry Award exposure and licence transferability, and concludes at the most supportable position within an evidence-led range.

When a security company needs a formal valuation

A security company typically needs a formal valuation for a sale of the business or a contract book, a shareholder or partnership exit, small business CGT concession claims under Division 152 ITAA 1997, restructures under Subdivision 328-G, related-party dealings where Division 7A ITAA 1936 is in play, family law property matters, and bid support for an acquirer. Broker rules of thumb are particularly unreliable in this sector because two firms with identical revenue can hold very different value — one with long-tenure contracts, clean licensing and compliant payroll, the other with a re-tender cliff, probity issues and an underpayment exposure the earnings quietly capitalise. The valuation has to test those differences, not average over them.

State licensing: the business cannot trade without it, and it does not always transfer

A security business cannot operate without a state licence, and whether that licence transfers on sale depends on transaction structure — in an asset sale the buyer generally needs its own business licence before contracts can be novated, while in a share sale the licence usually stays with the entity subject to change-of-control probity checks. Every state and territory licenses the private security industry separately, typically requiring a business-level licence (a master licence and individual operative licences under the NSW Security Industry Act 1997, with equivalent classes in other jurisdictions). A disqualifying matter attaching to an incoming director can put a share-sale licence at risk even though the entity itself is unchanged. Multi-state operators must hold licences in each jurisdiction; recognition between states is only partial. The working file records every licence held, its class, conditions, expiry and any disciplinary history. Licensing law is jurisdiction-specific and changes: confirm the position with the relevant regulator or a lawyer. Prismi prepares independent valuations only and does not provide legal advice.

Guarding, patrols and monitoring are different businesses with different multiples

Manned guarding is labour-intensive and thin-margin, won on price at tender, with value driven almost entirely by contract tenure and rostering efficiency — it attracts the most conservative capitalisation rates in the sector. Mobile patrols carry better margins where route density is good, with a vehicle fleet on the balance sheet that needs separate assessment. Electronic monitoring and alarm response generate recurring monthly revenue (RMR) with low churn and materially higher margins; monitoring books are typically assessed on a recurring-revenue basis with churn analysis, cross-checked against capitalised earnings, and support the strongest positions in the sector. A blended operator should be segmented in the earnings analysis rather than priced on a single blended multiple — the revenue mix is often the single largest driver of where the supportable range sits.

Security Services Industry Award compliance and sham-contracting exposure

Guarding labour is almost always covered by the Security Services Industry Award 2020, with penalty rates, shift loadings, broken-shift provisions, minimum engagement periods and overtime that make payroll error easy and expensive. The diligence test is a reconciliation of rostered hours against payroll at the correct award classifications. Underpayment creates a contingent liability — back-pay, superannuation guarantee charge, interest and penalties — that must be provisioned or reflected in the risk adjustment. Sham contracting is the sector's other recurring exposure: guards engaged as subcontractors who are in substance employees, engaging the misrepresentation provisions in s 357 of the Fair Work Act 2009, with flow-on superannuation and payroll tax consequences. A valuation that capitalises earnings built on non-compliant labour rates overstates maintainable earnings. Prismi normalises labour cost to compliant rates before capitalising, and documents the workings in the working file, which is retained for 10 years. This analysis informs the valuation; it is not employment law or tax advice.

Contract concentration and tender renewal risk

Government, retail-portfolio and venue contracts frequently dominate a security firm's revenue, and most were won at competitive tender with defined expiry dates. The maintainable earnings assessment should map revenue by counterparty and by expiry, weigh historical renewal rates, and read the contracts — termination-for-convenience clauses, KPI and abatement regimes, and price-review mechanics all affect how much of current earnings a willing buyer would pay for, which is the Spencer v Commonwealth standard the report applies. A firm approaching re-tender on its largest contract is not worth the same as the identical firm that renewed last quarter. Event security adds seasonality and single-event concentration. Where concentration is high, the report says so plainly and the supportable range reflects it — that candour is what makes the position defensible if the number is later challenged.

What the valuation file should contain

A defensible security company valuation is built on documentary evidence, not assumption — the working file assembles licensing, contract, payroll and insurance records so every adjustment can be traced back to a source.

• ·Business (master) licences for each state of operation, plus a sample of individual operative licences — class, conditions, expiry and any disciplinary history
• ·Contract register: counterparty, commencement and expiry, renewal options, termination and abatement clauses, and historical renewal outcomes
• ·Three to five years of financial statements with labour cost workings mapped to Security Services Industry Award classifications
• ·Payroll and roster samples sufficient to test award compliance, and all subcontractor agreements for sham-contracting review
• ·Public liability certificates of currency, five years of claims history, deductibles and premium movement; workers compensation claims experience and premium loading
• ·For monitoring operations: the RMR schedule, connection counts, churn history and monitoring-centre certification or grading
• ·Fleet and equipment schedules for patrol operations, with finance arrangements

Which Prismi tier fits a security business

Essential (from $1,495 + GST, 10–14 business days) suits smaller single-owner patrol or guarding operations needing an indicative position. Comprehensive (from $3,995 + GST, 15–25 business days) is the usual fit for a sale, partnership exit or Division 152 position — it carries the segmented earnings analysis and contract review this sector requires. The Defensible Valuation File (from $8,995 + GST, 25–35 business days) suits contested exits, multi-state operators and matters with realistic prospect of ATO review — it is documented so the position is defensible if reviewed, prepared with the ATO's market valuation guidance, IVS 104 and APES 225 in mind. The Valuation Range & Scenario Review (from $12,995 + GST, 30–45 business days) suits adviser-led matters where renewal outcomes on major contracts need to be modelled as scenarios. Retrospective dates are +$495 per historical date; additional entities +$750 each. Fees are fixed at engagement and never contingent on the outcome; every report is senior-reviewer signed and carries an independence statement. If an engagement requires us to hit a predetermined number, we will say so and decline the engagement on those terms.