A Look into the Money behind Security companies.
As the owner of a security company I believe, as many do, that transparency is paramount to running a reputable business. This article specifically looks at the door and event security side of the market as well as factoring in low-level security guarding contracts also.
I tell many people I come across how ‘smoke and mirrors’ other people can be, but actually it’s pretty straightforward. The industry is riddled with rogue traders and their barely thought-out attempts at puzzling together their own firm. Let me lay it out for you so you can be the judge based on my experience having run 3 companies (one of my own and area manager of two others). I have also worked privately for several organisations as a front line operative.
The best thing about my experience and those I closely socialise with is we will openly admit we’ve got it wrong sometimes and that we have, admittedly and unintentionally, found ourselves on both sides of the fence. From working with rogue operators, to pricing and competing for jobs wrongly, we’ve experienced just what happens when you make these mistakes. One thing is certain though, we all now collectively avoid the quote wars, otherwise known as ‘how low can you go!’
There are always margins for negotiation upon bulk bookings or big orders. You can earn less per head but overall make more with big orders. For instance, you could negotiate say £1.00 per hour less with your security personnel in exchange for the benefit of giving them a guarantee of more hours. We’re talking event and casual work specifically here and I am fully aware how other companies with no moral fibre can renege on these promises but operating this way can create jobs and lead to a win-win situation all round if done properly. However, I’ve also learned never to get beaten down so low that I don’t make anything from the job myself.
Clients need to understand, that as a company, you need to make a profit, otherwise, what is the point in picking up the phone to them in the first place? Without profit, trust me, you cannot provide a good service. For the most part, clients that need a certain level of safety at their events and establishments understand this, chances are that they’re experienced and understand how it works.
Let’s look at the numbers.
Sam from ‘Bluemilk Enterprises’ needs one of your event security for 5 hours and is quoted £14.00 per hour. Now, unless you’re doing the job yourself, the company should look to earn no more than £20.00 to £25.00 total from the job. This would be an appropriate amount for a job of this nature if, like me, you’re paying a good going rate to your team.
I had a realisation, a few years back, that no matter what size or length a booking was for a job, it would usually create the same amount of work for me. Typically, each booking would require a back and forth of around 12 emails with the client, spread out before and after the event, with an average of three phone calls. From discussing the event itself to chasing invoices, where necessary, e-mails would typically require about 2-3minutes each and roughly the same for a phone call. Of course, these are not all done at once, far from it, this gets stretched out over a month or even longer. Clients usually book two weeks before an event and I allow 14 days to a first time customer for payment. It’s an arrangement built on trust, though the accounting departments of big companies tend to get in the way of this.
Now, consider, that all this work might net you a profit of £20.00! Alone it’s just not worth it, especially if you are charging less! Admittedly, this is a mistake I made many times in the beginning. Now, let me show you a way in which it is worth it.
In another example.
Callum manages Brick Disco and can pay £13.50 per hour for each security operator. He needs 2 security operators on Thursdays & Sundays for 6 hours each and he needs 3 security each Friday & Saturday, again for six hours each. He needs this every week. This new client has just created 10 bookings for you a week!
10 x 6 = 60 hours x 3.5 = £210.00 per week (average security factored at £10.00ph). For someone this could be a full-time job organising these guys, and even better if they themselves worked the at the brickdisco, however, I would not advise them working their own job – more about that later!
You might look at this and think “yes, I’ve made it, money in the bank each week!” but here’s why, much like before, this isn’t a good deal just on its own. The biggest benefit of this job is not the money, but the regular bookings. Let me explain why.
Let’s say you do two shifts yourself at Brickdisco and earn £330.00 from this job per week. If you count solely on this job as income, I can guarantee you, maybe not this month, maybe not this year but any experienced security owner will tell you at some point or another you are likely to lose most of your jobs. To have longevity in your jobs requires talent, customer service and remaining on hand at all time, but not in their face.
Personally, this is one of many reasons I do not make a habit of working my own jobs, it is a short-term solution, and if you’re good at what you do, you’ll rarely have time because you’ll be too busy organising the security for future events.
So you’ve got your £330.00 a week. Let’s stick with this and imagine you have a few holidays paying double rate and few extra bookings from the venue on top. Within a calendar year you’ll want a few weeks off work, so let’s say £330.00 x 52 weeks in the year = £17,160 per year before deductions.
Now, let’s talk about deductions.
There are many. Not to mention the big one, tax! As my accountant once told me “you cannot make money without paying tax”. Don’t ever do cash jobs in this industry, another subject I could go more into detail with, in another article. Any profit you earn is taxed, after your personal allowance, and the consequences of not paying tax are not worth the gains. You will have to factor in £1200 a year for insurance, as it’s doubtful that this is something Brick Disco will cover themselves, and they would not consider using you without it. It’s likely that you’ll have some form of irregularity in the term of ‘staff’ meaning you won’t be covered by their company insurance policy. In this scenario, you can offer one other person four days work a week, and they themselves will need time off at some stage. Your two weekend staff, may not want just weekend work and could go elsewhere to look for better offers, so you need to consider the cost of recruitment. Advertising for staff is a cost that should be taken seriously with money spent wisely. If you want to become accredited you can deduct many more man hours than money, though the paperwork adds up, as well as the SIA’s subscription cost. This is all if you just want to still keep the one job.
All-in-all, even the ‘good contracts’ are only worth a crust if you have several of them.
How a security company actually makes money.
It’s important to remain streamlined. When I started, if I didn’t get a booking, I didn’t spend any money. I advertised by emailing companies, I only got insurance after landing my first client to reduce the cost of start-up. Paperwork was created in my spare time and done by myself, incurring only minor costs for stationary.
The other main take away when considering how much do security companies make, is to know whether they consistently have work coming in. I keep overheads very low which is essential for running a profitable security company. I make sure all the bases are covered and my insurance is up to date, but I avoid using any admin staff by doing it myself. I will only use supervising staff if I have more than 7 people working at one time. Fortunately, most of the jobs I run these days do have that amount or more, otherwise, this is another function I would perform myself.
What it all boils down to.
Security companies should not look at any one job and think “this is a big earner” they would be better off by viewing it as simply a ‘slice of the whole pie’. Having a good week is great, having a good month is better, but in order to survive security companies need a good year, one after another. Like many small-to-medium sized companies, you may suffer fewer bookings in January and February, the quiet months, as well as a dip in October. I only look at what they call the bottom line, the good weeks vs the bad weeks. The Year to date figure on my accounting is the main figure. I put my basic salary in which is far from exciting though it gives me a job which I’m thankful for and then I can see if I am minus or plus. To put it in basic terms, security companies make roughly 30% – 40% off of each operator it supplies, however only about 7% – 15% is what they actually take home after the deductions.
(Based on small to medium business studies and research in the event security staffing industry).
by James Johns
Savysec Security Services