The Growing Commercial Security Business Industry

Several factors impact the value of commercial security companies ranging from recurring monthly revenue (RMR) to earnings before interest, taxes, and depreciation. But one aspect of assessing this value that AFS includes in our business valuations is the security industry’s overall health and outlook.

A recent report from The Insight Partners finds that in terms of revenue, the Commercial Security System Market was estimated to be worth $129.87 billion in 2022 and is likely to reach $465.01 billion by 2030, growing at a compound annual growth rate of 12.3 percent from 2022 to 2030. That’s a good sign that the companies we work with at AFS are on the rise and can expect higher profitability and value in the next decade.

New Technology is Gaining Traction

As businesses continue to focus on digital and physical safety concerns, they are investing more money to safeguard their assets, personnel, and client base. Companies are reacting to an increase in incidents such as thefts, vandalism, and cyberattacks and that’s driving firms to seek a wide range of comprehensive, integrated security solutions. This is driving growth in most sectors of the commercial security market.

A significant part of this investment trend is going into new technology including developments in artificial intelligence, machine learning, and cloud computing. AI and machine learning algorithms have proven effective in analyzing video footage to detect and identify suspicious behaviors. Face recognition technology can also reliably identify individuals and enable quick secure access to restricted areas.

This new technology is also influencing companies to integrate their building management and security systems, often through cloud computing. This combination of systems creates a platform for centralized monitoring and control, which boosts productivity and effectiveness. Market experts anticipate this trend will continue as companies see the overall benefits of implementing integrated security strategies.

The Fire Protection Market is Booming

According to a report from Grand View Research, the North American fire protection systems market size was valued at $27.87 billion in 2022 and is anticipated to grow at a compound annual growth rate of 3.6 percent from 2023 to 2030.

The report found that the commercial segment commanded the market with more than 45 percent of revenue share in 2022. The growth is based on insurance companies requiring commercial building contractors to install fire safety equipment to reduce the risk of fire damage. This has created demand for fire safety equipment and systems as businesses work to meet insurance requirements and minimize their risk of financial losses due to fire.

Another catalyst sparking growth in the fire protection sector in North America is the significant increase in construction projects (see more details below). This has boosted the installation of fire protection systems in new commercial buildings and the heavy demand has been a key driver of the market.

The Construction Sector is Rapidly Expanding

The U.S. construction sector is growing at a steady pace to keep up with the demand for housing and commercial buildings. According to GlobalData’s U.S. Construction Market Report, the U.S. construction market is projected to achieve an average annual growth rate of three percent from 2024-2027. The growth is based on investments in the energy, transportation, housing, and manufacturing sectors.

Commercial security firms are well-positioned to provide security measures designed to deter theft and vandalism of expensive construction equipment, tools, and materials. Closely monitoring access to building sites is also a priority. These measures help construction firms cut financial losses related to crime and ensure projects stay on schedule and on budget.

What’s Putting the Brakes on Potential Growth?

Change doesn’t always come easy for companies and that includes investment in commercial security. There are plenty of challenges for firms related to high initial investment, data security and privacy concerns, integration with legacy systems, and costs associated with upkeep and maintenance just to name a few reasons that are roadblocks to security-related update decisions

While some businesses are reluctant to upgrade and integrate security systems, advancements in technology, regulatory obligations, and the eventual impact on their bottom line will inevitably drive them to implement changes. This will ultimately create growth for commercial security companies as these firms commit to modernizing their systems.

Work with Rory to Learn How Security Industry Growth Impacts the Value of Your Company

When security firms formulate long-term strategies to take advantage of industry outlooks, it’s important to understand how investments in specific areas of their business can potentially boost profits and increase overall value if a sale is being considered.

Rory leverages his decades of experience in the alarm, security, and integration space to help his clients position their companies proactively in the right market sectors. He also provides valuable guidance on all aspects of mergers, acquisitions, and financing.  If you’re planning to expand your business or are ready to sell, contact Rory today to learn how AFS can help you meet your personal and financial goals.