Monitoring Income: The Most Underwritten Revenue in the Sector

Installation earns once, monitoring earns every month

An installation is a sale. It is won, delivered, invoiced, and then it is over, and next year the same engineers have to go and find another one. A monitoring contract is a different object entirely. It was won once and it produces income every month afterwards with no further selling, until somebody cancels it or the site closes.

Buyers know this and price accordingly. Project and installation revenue is treated as earnings that depend on a sales function, a pipeline and a market, all of which could behave differently under new ownership. Contracted monitoring and maintenance income is treated as something much closer to an annuity, discounted for attrition and for whatever the contract terms actually permit.

The practical consequence is that the recurring share of revenue is the first number I look for in a security business, and usually the first number an acquirer asks for. A firm at fifteen per cent recurring and a firm at sixty per cent recurring are not the same business with different mixes. They are different asset classes sharing a trade.

There is a second reason the mix matters, and it is about who can buy you rather than what you earn. A buyer acquiring installation capability is buying a team and a pipeline, which it could arguably build itself given time and patience. A buyer acquiring a monitoring base is buying something it cannot build at all without going out and winning every account one at a time. That difference is what puts competition into a sale.

Installation revenue is a sales function. Monitoring revenue is an asset, and it is priced like one.

How an acquirer actually models a monitoring base

The common approach values the recurring base on its monthly revenue rather than on annual profit, because attrition, average contract value and the cost to serve are all easier to see that way. In the US, monitoring books are generally discussed as a multiple of monthly recurring revenue, the monthly figure times a set number, and that figure sits well above anything that would look sensible applied to installation earnings.

The rest of the business is then valued separately on adjusted earnings, and the two are added. That is why mixed firms get priced line by line rather than as a single number, and why an owner presenting one blended multiple of EBITDA (profit before interest, tax, and the write-down of equipment, vehicles and other assets) is inviting the buyer to apply the lower of the two logics across everything.

Attrition is the variable that moves the recurring number most. A base losing three per cent of its accounts a year and a base losing twelve per cent look identical in a turnover figure and are worth substantially different money, because the buyer is pricing the tail as much as the current month. If you cannot say what your attrition rate is, the buyer will assume a cautious one on your behalf. Site closures, business failures and the occasional client deciding to self-monitor are unavoidable. Accounts lost because a service visit was missed or a price rise landed badly are not, and a buyer reading a churn schedule can usually tell the two apart.

Business Asset Disposal Relief, the reduced tax rate on the gain when an owner sells a business they work in, was 14% in the 2025/26 tax year and has been 18% since Apr 2026, which is worth knowing when a deal timetable is set. It is not a reason to structure a business differently, and it is a much smaller number than the gap between a well-evidenced recurring base and a poorly evidenced one.

What makes a recurring base believable in diligence

A schedule. Not a figure in a management pack, a schedule: every monitored account, contract start date, term, notice period, monthly charge, last price increase, signalling method, and whether the paperwork is signed. Owners who can produce that in one file are treated differently from owners who produce a spreadsheet built the week before.

Then the things the schedule implies. Whether accounts are contracted or rolling month to month, because a rolling base is worth less than a contracted one carrying the same revenue. Whether price increases have ever been applied, because a base not uplifted in six years has an obvious lever in it and a buyer will take the credit for pulling it. Whether the alarm receiving centre connection is yours, subcontracted, or in somebody else's name entirely.

The last piece is the maintenance side, which owners often treat as an afterthought and buyers do not. A monitored account with a current maintenance agreement, serviced on schedule and documented, is a different proposition from a monitored account nobody has visited in four years. The first is recurring revenue with an engineer attached. The second is a signalling connection waiting for somebody to ask whether the system still works.

None of this is difficult work. It is administrative work nobody does until there is a reason, and the reason usually arrives at the worst possible moment. Keeping the schedule current from now on costs an hour a month and is the highest return piece of preparation available to the owner of a monitored book.

In the years before a sale, Martin Dugan helps owners win more of the recurring, contracted work buyers pay for.