What a buyer of a security firm checks
- Share of revenue under recurring contracts versus one time projects
- Renewal history for your managed services clients
- Which staff hold the certifications and clearances clients rely on
- Whether the founder still leads every big client relationship
- How much work comes through federal primes or agencies
Recurring revenue gets the better price
Buyers split your revenue into two piles. Managed services, monitoring and retainers that renew each year sit in one. Assessments, penetration tests and incident work that end when the report is delivered sit in the other.
The first pile is worth more because a buyer can count on it after closing. If most of your revenue is project work, show how often the same clients come back. A steady pattern of repeat engagements reads almost like a contract.
Bring renewal rates for the last three years, average client tenure and any clients you lost and why. A buyer will ask, and a clear answer builds trust.
The team is most of what is for sale
A security firm has few hard assets. What a buyer gets is the staff, their skills and the client trust they have earned. Certifications belong to the people who hold them, so a buyer wants to know who holds what and how likely each person is to stay.
Expect questions about pay against the market, retention plans and how many people a client would notice leaving. Keep the sale confidential until it is close to final; telling staff early can cause departures and a buyer can still walk.
If the founder is the firm
In many smaller firms, the founder still scopes every deal and sits in every client meeting. Buyers discount for that, because the relationships may not follow a new owner.
A year or two of handing client work to a senior lead can change that. Buyers pay for a firm that runs when the owner takes a vacation.
Federal work brings its own checks
If you work on government contracts, the questions on our federal contractor page apply too. Contracts may need novation in an asset sale. Set aside work can be affected when size is recertified after the deal.
A cleared company has to report a change of ownership to the government's security office for review. Your attorney will tell you how that fits the timeline.
Concentration and contracts
If two or three clients make up more than about 15 to 20% of revenue, buyers often lower their price or add an earnout tied to keeping those clients.
Look at whether a large account is really several separate buying units; that can look less risky once explained.
Buyers also read your client agreements. They look for terms that let a client cancel on a change of ownership, and for liability limits on your security work.
How the numbers come together
Smaller firms are usually priced on owner cash flow, larger ones on EBITDA after a market salary for every role. The valuation guide explains how those are figured and what buyers add back.
For a quiet first read on what your firm might sell for, use the request form or call (202) 555-0174.