The questions that security guard companies ask most, especially the new ones, is “How do I go about pricing my services?” Many times, they ask “Is X dollars per hour too much?” I always respond with the same answer which is “It depends”. So here is how you figure out your billing rate for your security guard service.

As you know, not properly pricing your services correctly is one of the quickest ways to find yourself out of business. Either because 1) You’re pricing your services too far above of the “Normal” pricing range that buyers are expecting and no one will sign a contract with you; or 2) You are not charging enough and you are losing money on your contract…or what security guard company owners call “Paying the customer to work their site”.

The method that most companies start out with is what I’ll call simple markup pricing. With simple markup pricing what companies do is take how much they are paying their security officers and mark that number up X percent. So if they are paying their security officers $15 per hour, they might mark that number up 50% and have a billing rate of $22.50. The problem with that pricing methodology is that you’re doing nothing but GUESSING what your price should be. And if that’s the method that you’re using, right now you are probably 20% confident in how you price your contracts or what your competitors pricing is.

So let’s talk about the proper way to price your contract, and that is using Cost-plus pricing. Cost plus pricing is a pricing method where a fixed percentage is added on top of the cost to produce one unit of a product– the resulting number is the selling price of the product. In your case that product is one hour of security guard service. So what are the costs to produce 1 hour of security service?

To calculate your billing rate you have to take into account everything that goes into putting a security officer on site for an hour. Those things include:

⦁ Officer Pay Rate
⦁ Training Wages
⦁ Holiday Wages
⦁ Vacation pay
⦁ FICA Tax
⦁ FUTA tax
⦁ Etc…

Literally, everything that goes into putting that officer on site. There are a lot of calculations that go into determining your billing rate, but ultimately, you are trying to determine what each one of those costs are per hour. Once you have those costs, you add them up to get your total direct expenses. And once you have your total direct expenses, you can tack on your profit margin on top of that number to get a billing rate that makes sense.

Let’s look at a couple of simple examples that will get you started. So let’s start with a wage rate of $15.00. To that wage rate let’s add your FICA Tax which is at the time of recording 7.65%.

7.65% of $15 dollars is $1.15. So your billing rate is now your wage rate of $15 and Fica Tax of $1.15 which is $16.15. Next let’s add in your State Unemployment Tax which we will say is 2.5%. 2.5% of 15 is $0.38. Now your billing rate is $16.53. That process goes on and on for all of your insurance, taxes, etc. If you don’t know what those numbers are, you can contact your CPA and your insurance company to get those numbers. Next you’ll want to do the same for your direct expenses like uniforms, security guard management software, cell phones, etc.

After all those calculations, let’s just say $16.66 is your fully loaded cost for your billing rate. Once you have that cost, you’ll then add your profit margin to that number. Generally speaking, although there are some outliers, in the security industry profit margins range from mid-single digits up to low double digits. Once you add your profit margin, you now have a fully burdened billing rate that you can be confident in.

There are A LOT more elements that go into pricing your services like turnover, depreciation, unbillable overtime, etc. We won’t go into those but OfficerBilling.com will take care of those for you.

In summary

You should not be using simple markup pricing because:

1. You could be pricing your services too far outside of the “Normal” pricing range that buyers are expecting and no one will sign a contract with you; or
2. You are not charging enough and you are losing money on your contracts
The correct pricing method for security guard service is Cost Plus Pricing.
Cost plus pricing is a pricing method where a fixed percentage is added on top of the cost of one hour of security guard service.


Lastly, if you have questions or comments, please leave them below because I try to respond to all comments and questions that I get. Happy hunting and stay safe.

About the Author

Courtney Sparkman

Founder of OfficerBilling.com and OfficerApps software suite

With 15 years of experience in operations and business development, Courtney is a trusted voice in the security industry. He is a renowned author, speaker, and YouTube creator dedicated to helping security guard companies thrive. His career began as a co-founder at Cequr Security and later as Director of Business Development at Diamond Detective Services. Currently, he holds a private security contractor license, a degree in Agricultural Economics, and a Master’s in Emergency Management from the University of Chicago. ​​