Security & low voltage
Security System Pricing Calculator
Prices security work from cost upward, where the hardware margin is thin and the monitoring is not.
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
Direct cost divided by one minus overhead and margin together. Security has an unusual margin structure: hardware has published prices a customer can look up, so the markup it will bear is limited, while the recurring monitoring revenue carries a high margin and compounds. That pushes the business model toward pricing installation competitively and holding the monitoring, which is why so many providers subsidise equipment to win the recurring contract.
What moves the number
- Hardware margin, which is capped by publicly available pricing.
- Whether recurring monitoring revenue is part of the offer.
- Licensing and insurance, since alarm work is licensed in many states.
- Labour, which is the defensible margin on the installation side.
Where this one goes wrong
Do not price hardware as though the customer cannot look it up, because they can, and a large markup on a camera with a published price invites exactly that comparison. The defensible value is the design, the cable installation, the programming and the ongoing service. The larger strategic point is recurring revenue: a business doing installations only is selling a one-off each time, while one holding monitoring builds a book that has value in itself. Licensing is also worth getting right, since alarm and low-voltage installation requires a licence in many states and working without one is both a penalty and an insurance problem.
Before you quote
- Check your hardware markup against published prices.
- Price design, cabling and programming as the real value.
- Confirm alarm and low-voltage licensing requirements in your state.
Questions
About this calculator
Where is the margin in security work?
In design, cabling, programming and especially recurring monitoring, rather than in hardware. Equipment has published prices a customer can find, which limits what a markup can carry. Monitoring revenue carries high margin and compounds, which is why providers subsidise equipment to win it.
Does security installation need a licence?
In many states yes, for alarm and low-voltage installation, with its own requirements and sometimes bonding. Working without one is a penalty and can void insurance cover on a claim. The requirements are state-level and worth confirming rather than assuming a general contractor licence covers it.
Should I subsidise equipment to win monitoring?
It is the standard model and it is a finance decision rather than a discount. It only works if customers stay long enough to repay the subsidy, which makes attrition the number that determines whether the strategy is profitable. Done without tracking that, it is a way to lose money steadily.
The formula
price = direct cost / (1 - overhead% - margin%)
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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.