How to Start a Security Guard Business
If you’ve ever worked as a security guard, you already have the foundation for a business you can build. Starting a security guard business can help you launch a career that you’re in charge of, and it can put you in the position to employ many others, too. While the security guard industry isn’t without risk, it can be financially rewarding and is often a source of stable, recurring jobs.
Security guard businesses contract with clients in need of their services. There are plenty of different needs for security guards, and these businesses may choose to specialize in one or more areas like site security, retail security, loss prevention, event security, gate guarding, and bodyguarding.
A security guard business offers a client convenience and peace of mind. By providing guards who are already trained, experienced, and knowledgeable, these businesses take some responsibility off the client. Security guards may be armed or unarmed, depending on the security guard business and the client’s requirements, and services can generally be tailored to the client’s specific needs. Some security contracts are ongoing, while others may be short-term contracts designed to accommodate an event or change requiring additional coverage.
Before starting your own security company, consider the type of security that you want to provide. This is an ideal time to do some market research and identify any unmet needs in the local area that your business could fill. It might be tempting to offer many different services to appeal to many different clients, but this strategy can backfire if you’re not truly equipped to fulfill each service type. Instead, focus on one main service and consider expanding into another area once your business is successful.
The nature of a security guard business means that you’ll be dealing with lots of paperwork, permits, and licenses. Be prepared to perform thorough research into your local requirements before starting your business. This industry can be risky, and your business could potentially be sued for damages if an incident involving one of your guards occurs. Be prepared to thoroughly research and evaluate your insurance policies to ensure that you’re fully covered and protected.
According to IBIS World, the security services industry experienced 2.7% growth from 2014 to 2019. That growth was partially due to the increased popularity of security services in both corporate and government settings. That growth is predicted to continue from 2019 to 2024, driven by increased corporate profits and increased construction in the residential, public, and commercial industries. More security will be needed to guard these projects, and increased industrial and manufacturing activity will also require more security.
As of 2019, the security industry was a $39 billion industry. A total of 15,280 businesses employed 853,682 people. Certain companies, including G4S PLC, Allied Universal, Securitas AB, and The Brink’s Company, hold significant shares of the market. However, there are still plenty of opportunities for smaller, privately-owned security guard businesses.
The security guard industry is evolving as new trends and technology emerge. According to Trackforce Valiant, evolving technology gives security guard businesses many ways to advance and enhance their services. While smaller businesses can’t adopt all of the cutting-edge technology that’s available, drones, facial recognition, and apps that support tasks like incident reporting are all potential considerations.
High turnover rates and low degrees of employee retention were an issue for security guard businesses in 2019, and they’ll likely continue to be an issue in 2020 and beyond. Low unemployment rates and guards being able to get competitive wages at employers like Home Depot and Walmart have made it difficult for smaller businesses to attract and retain quality talent. To address this issue, businesses can focus on improving their profit margins so that they’re able to offer higher wages. Focusing on benefits like health savings accounts, raises, and promotions can also improve employee retention.
Clients have also begun to expect more from the security guard businesses that they work with. Clients increasingly require that guards are trained and certified and that they’re also aware of the client’s conduct expectations. This means that security guard businesses need to stay on top of certification and training requirements, carefully tracking certification expiration dates and ensuring that all guards keep their training and certifications up-to-date.
The market for a security guard business will depend on the business’ specialization. Some businesses focus on specific industries, like construction and renovation, and will market to builders and property owners planning construction projects. Other businesses may focus on providing security to retail spaces, and they’ll market to the business owners of retail operations.
Checklist for Starting a Security Guard Business
If you’re thinking about starting your own security guard business, there are a few things you should keep in mind. Here is a checklist of the essentials to get started.
Step 1: Write your Business Plan
After coming up with the idea, the next step in starting your business should be to write a clothing line business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Form a Business Entity
A business entity (also referred to as a business structure) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business entity is best for a security guard business, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is that the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 3: Choose a Business Name
Finding the perfect business name can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.
Step 4: Select your Location
While not required to start, an office space can serve as the business’ central hub and helps to create a professional impression. Rental costs will depend on the size and location of the space, as well as what amenities are available.
Related: Choosing a business location
Step 5: Register for Business Licenses and Permits
Private Security Companies are heavily regulated and will require licensing, typically at both the state and local level. At a minimum, most security businesses will need to complete certification, such as the Private Patrol Operator License or Qualified Manager License, which involves fingerprinting, a background check, and training. For companies offering armed guards, further requirements may apply.
Most state licenses require a high school diploma and experience as a law enforcement officer. Also, individuals with a felony record or any misdemeanors within the last 5-10 years are typically ineligible to apply.
In addition to the licenses and certificates required of the guards themselves, a security guard business will need to register for general business permits. These permits and licenses can vary based on the state and town where the business is located and may include a local business license, tax permit, and Employer Identification Number, among others.
Step 6: Find Financing
While many people may start a smaller operation without outside funding, it may be difficult to get funding due to a lack of physical assets. In order to get a loan, the borrower(s) will need to have good credit and be able to personally invest 15-25% towards the total start-up costs.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
A security business will need to market to build up an initial base of clients and bring in new clients and expand the business. Common marketing activities include online advertising, social media marketing, direct mail marketing, and even potential clients.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a security guard business. A few of these include:
– General liability insurance helps to protect the business if anyone is ever injured due to the business’ work.
– Commercial auto insurance can help cover expenses that may result from a business vehicle being involved in an accident.
– A surety bond may be required in some states to ensure that the business will comply with all state rules and regulations and cover any financial damages caused by the company.
The cost to insure a security guard business will vary depending on factors like the value of a business’ equipment and supplies and whether guards are armed or not. To get the most accurate idea of what insurance will cost, request quotes from multiple providers. When comparing the quotes, look beyond how the premiums compare and consider all of the valuables, like coverage limits, exclusions, and deductibles.
Step 10: Hire Employees
A security guard business will need to hire employees from the start. According to ZipRecruiter, security guards earn an average of $13 per hour, though that pay rate can range from $8.41 to $18.99.
Besides including employee salaries in the budget, a business will need to account for other expenses, like overtime, paid time off, health insurance contributions, and worker’s comp insurance.
Related: Hiring your first employee
Step 11: Set up an Accounting System
Setting up an accounting system for your security guard business is critical to the long-term success of your business.
Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a security guard business?
It will cost a minimum of $10,000 to start a small security guard business, assuming that the business doesn’t need to purchase patrol vehicles. If vehicles are needed, plan to have much larger startup costs.
Some common startup costs for a security guard business include:
– Equipment like radios and flashlights
– Uniforms and gear
– Office furniture and supplies
– Website development
– Patrol vehicles
How much can a security guard business owner make?
A security guard business’ profits will depend on many factors like the number of years the business has been operating, the number of guards on staff, the business’ rates, and the business’ expenses. According to Thumbtack, security guard rates range from $15 to $25 per hour, with armed guards costing $3 to $5 more per hour. Event security can cost from $15 to $100 per hour. With a full schedule and multiple employees, a business can earn an annual profit of $50,000 and up.
What skills are needed to run a security guard business?
Starting a security guard business doesn’t require a business degree, but certain skills and experiences are valuable in starting and running this business.
Security guard experience. A business owner who has previously worked as a security guard will have an understanding of the challenges of the industry. This experience may also result in connections and a network that can be helpful when starting a new business.
Physical fitness. Working as a security guard requires spending plenty of time on your feet. This can be a demanding job, so physical fitness is an advantage.
Attention to detail and awareness. A business owner will need to take care of details, like assignments and invoicing, daily. When on the job, attention to detail and awareness are important qualities for any security guard.
Security guard training and license. Some states require security guards to receive formal training and be licensed. Colleges, career centers, and state-approved programs generally offer this training. Most programs require that applicants have a clean criminal record.
Firearms training and license. If a security guard will be armed, they will need to take a firearms training course and become licensed. Requirements vary from state to state.
Ability to stay calm under pressure. Security guards may encounter tense situations and will need to stay calm and think clearly under pressure.
Management experience. Previous experience in hiring, training, and managing staff will be helpful when building a security guard business and expanding with new employees.
Are there grants to start a security guard business?
It’s extremely rare to find a grant to start a security guard business. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov, and you can check on your state’s economic development office to see if they have any grants available.
What is the NAICS code for a security guard business?
The NAICS code for a security guard business is 561612.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?