Security & low voltage
Security Monitoring Pricing Calculator
Prices monitoring as a provider, where retention is worth more than acquisition.
Result
Overhead and margin are taken as shares of the selling price, which is why the cost is divided rather than multiplied. Adding 15% to cost does not produce a 15% margin. Gross profit is what is left after the cost of doing the job. Overhead comes out of that: the building, the office wages, the vans, insurance, software and advertising. A healthy gross margin still loses money if overhead is larger.
Get a Free Business AuditHow the calculation works
Recurring monthly revenue against the cost to deliver it, with the acquisition cost amortised over the expected customer life. Monitoring is a subscription business, so the economics turn on three numbers: what it costs to win a customer including any equipment subsidy and installation, what the monthly margin is after the central station cost, and how long the customer stays. The third dominates, because a long-lived account repays acquisition many times and a short one never does.
What moves the number
- Customer acquisition cost including equipment subsidy and installation.
- Monthly margin after central station and communication costs.
- Average customer life, which determines whether acquisition pays back.
- Attrition rate, which is the single most important operating number.
Where this one goes wrong
Attrition is the number that decides whether this business works. Subsidising equipment and installation to win an account is a bet on the customer staying long enough to repay it, and a few points of extra attrition can turn a profitable book into a loss-making one without the monthly price changing at all. That makes service quality, false alarm reduction and handling moves properly worth more than they look, because each prevents a cancellation. Recurring monthly revenue is also what gives these businesses their value on sale, which is another reason retention beats volume.
Before you quote
- Track attrition as the primary operating metric.
- Amortise acquisition cost over realistic customer life, not a hoped-for one.
- Treat false alarm reduction as retention work rather than service work.
Questions
About this calculator
What matters most in monitoring economics?
Attrition. Subsidising equipment and installation is a bet on the customer staying long enough to repay it, so a few extra points of cancellation can turn a profitable account base into a loss-making one with no change in pricing. Retention is worth more than acquisition.
How long does a monitoring account take to pay back?
It depends entirely on the acquisition cost, including any equipment subsidy and the installation. Amortising that over a realistic customer life rather than an optimistic one is what tells you whether a given offer is sustainable, and the answer is often longer than the contract term.
Why do monitoring companies care about false alarms?
Because they cause cancellations. A customer facing municipal fees and repeated disruption from their own system cancels, and that lost recurring revenue exceeds the cost of having configured the system properly. Reducing false alarms is retention work rather than a service courtesy.
The formula
price = direct cost / (1 - overhead% - margin%)
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Please keep the attribution line. It is the only thing we ask in return.
How to use this calculator
- Labour cost ($). Burdened: wages plus tax, insurance and the vehicle, not the hourly wage.
- Materials cost ($). Enter your own figure; the page starts at $900.
- Other direct costs ($). Permits, disposal, equipment hire, subcontractors.
- Overhead rate (%). Overhead as a share of revenue. Work it out from last year's accounts.
- Target net margin (%). Enter your own figure; the page starts at 15%.
The result updates as you type, so you can try a figure, see what it does to price to quote, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Labour cost | $760 |
| Materials cost | $900 |
| Other direct costs | $0 |
| Overhead rate | 22% |
| Target net margin | 15% |
What comes out
| Result | Value |
|---|---|
| Price to quote main result | $2,635 |
| Direct cost | $1,660 |
| Overhead recovered | $579.68 |
| Net profit | $395.24 |
| Gross margin | 37.0% |
| Markup on direct cost | 58.7% |
Quote $2,635 to cover $1,660 of direct cost, recover $579.68 of overhead and leave $395.24 of net profit. That is a 58.7% markup on cost.
How sensitive the answer is
Holding everything else steady and changing only labour cost, this is what happens to price to quote. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Labour cost ($) | Price to quote |
|---|---|
| $380 | $2,032 |
| $570 | $2,333 |
| $760 example above | $2,635 |
| $1,140 | $3,238 |
| $1,520 | $3,841 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Labour cost ($)
- Burdened: wages plus tax, insurance and the vehicle, not the hourly wage.
- Materials cost ($)
- A money amount, starting at $900.
- Other direct costs ($)
- Permits, disposal, equipment hire, subcontractors.
- Overhead rate (%)
- Overhead as a share of revenue. Work it out from last year's accounts.
- Target net margin (%)
- A percentage, between 0 and 80, starting at 15%.
What the results tell you
| Result | What it is |
|---|---|
| Price to quote | The headline result. A money figure. |
| Direct cost | A money figure. |
| Overhead recovered | A money figure. |
| Net profit | A money figure. |
| Gross margin | A percentage. |
| Markup on direct cost | A percentage. |
Estimating is the easy part
The jobs you never hear about cost more than the ones you mis-measure. BDEVY builds the marketing, systems and automation that bring them in.