Start a home security business by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your home security business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a home security business?
Startup costs vary widely depending on the business model you choose. Buying a franchise can cost between $68,000 and $110,000 for a Signal88 Franchise. AmeriCop franchise fees range between $50,000 and $64,000.
If you want to sell to law enforcement, landlords, and businesses, then Background Screeners of America might be the best way to go. The startup costs going this route are less than $20,000.
To start your own independent company may cost less than this, but you will be competing in a highly competitive industry with established players. Most customers want to do business with companies that sell and service hardware as well as provide the monitoring service.
What are the ongoing expenses for a home security business?
Typical expenses for this business are low as far as product is concerned. A one-person alarm business can be started for between $10,000 and $50,000.
This is because the business is primarily a service-oriented business.
The primary expenses are vehicles for the installers, the hardware, and (if you run a monitoring service) phone lines and customer support staff. Once you start staffing a business, costs rise sharply:
- Vehicles: $20,000 to $30,000 per vehicle.
- Labor costs: $200,000+ per year for a small company.
- Overhead: $10,000 to $20,000 for equipment, office supplies, and other related costs.
Who is the target market?
A good client is usually one that has a lot to protect. These are usually upper middle class families with small children. Security companies find it difficult to profit outside of this niche, meaning poorer neighborhoods are not good candidates for services, even though they may benefit from having a security system.
How does a home security business make money?
There are two models for this business: independent and franchised. An independent security company may charge whatever they wish for services (whatever the market will bear) while a franchise operation may dictate minimum and maximum charges for services.
However, average installation costs range between $600 and $1,200. Some companies advertise “free” equipment and then charge a higher monthly service fee to make up for it.
According to A Secure Life, the monthly costs for monitoring range from $10 on the low end to $100 for premium services.
How much can you charge customers?
A typical client pays an upfront installation cost of between $600 and $1,000. Ongoing monthly maintenance costs range from $10 up to $100 for premium services.
How much profit can a home security business make?
Independent alarm businesses can bring in between $100,000 and $1,000,000 in revenue. However, one-person companies typically average between $50,000 and $60,000 per year.
How can you make your business more profitable?
Generating more profit from an alarm company usually involves offering supplemental services like alarm monitoring and premium services like email and text message alerts, remote access and control, 24/7 monitoring for intrusion, fire, environmental hazard, and life safety.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your home security business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
In most states, it is necessary to obtain a security installer license. Here is a list of necessary requirements, state by state.
In addition, certain state permits and licenses may be needed to operate a home security services business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
States also typically require you to be at least 18 years old and undergo a criminal background check. Some states, like California, also require you to adhere to strict rules and regulations under their Alarm Company Act.
Seller’s Permits/Resale Certificates
Most states require retail businesses to obtain a seller’s permit. A seller’s permit allows states to record and collect taxes from goods (and sometimes service) sales.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Home security services businesses may also wish to look into applying for a resale certificates, which allows retailers to purchase goods intended for resale without paying sales tax.
In addition, certain local licensing or regulatory requirements may apply. For more information:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Home security businesses should consider requiring clients to sign a service agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example service agreement.
Recommended: Rocket Lawyer makes it easy to create a professional service agreement for your home security business when you sign up for their premium membership. For $39.95 per month, members receive access to hundreds of legal agreements and on call attorneys to get complimentary legal advice.
STEP 7: Get Business Insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a home security business
Most security companies start by word of mouth. Contact your friends and family to see if they’d like a security system installed. Once you’ve exhausted your “inner circle,” make a list of “friends of friends” and go talk to them. At some point, you’ll need to go door-to-door to make sales. Unlike many industries, the security alarm industry relies heavily on word-of-mouth because security is a very personal matter.
Customers tend to trust companies that have been recommended to them.
How to keep customers coming back
To differentiate yourself from other businesses, offer more value for the money. The security business is highly competitive. It’s unlikely you’ll be able to compete on price.
Most security and monitoring companies find new clients through referral marketing. A company might ask for existing customers’ email addresses to follow up with promotions and referral incentives. Outside of that, companies typically try a variety of marketing strategies that complement referral marketing, like social media marketing and email or newsletter initiatives.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Home Security Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is ideal for people who want to work flexible hours but can also work odd hours. You must have a special interest in home and personal security, understand how various security systems can be defeated, and how to install systems so that they resist detection by criminals. This business can only be run by those with high ethical standards, as strict licensing is required, and for the obvious fact that the security business exposes a home or business’s vulnerabilities.
What happens during a typical day at a home security business?
Key day-to-day activities include monitoring customer accounts, installing new systems for clients, handling incoming service calls, and reducing attrition. In the home security business, it’s much cheaper to save a client account than it is to find a new one. So, a lot of time and money is spent on loss retention. A typical day may include several installation and service calls and multiple security-related calls.
What are some skills and experiences that will help you build a successful home security business?
Sales experience is helpful when first starting out. However, this is definitely something that can be learned on the job.
Basic experience setting up electronics and related IT skills are a must, as you will need to be able to quickly and efficiently install home security systems.
What is the growth potential for a home security business?
According to a recent IBIS World’s Security Alarm Services market research report, average annual growth in this industry is 4.3%. Smaller companies typically focus on installation and outsource the monitoring service. As the business grows, a company may bring the monitoring side of the business in-house.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
How and when to build a team
Hiring employees makes sense when your business is large enough to support it. Some of the typical roles you’ll want to fill first are sales and installer positions as this is primarily how your business’s revenues will grow to support more staff. After that, accounting and bookkeeping roles should be filled.
Typical salaries for these positions vary according to region, but salesmen usually make between $30,000 and $100,000, depending on how good they are. Since salesmen usually work partially or wholly on commission, out of pocket labor costs are lower than with other industries. Installers typically make $50,000 per year.