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IBISWorld Procurement Report: 62559584 Security Guard Services
This report was provided to John Jenkins (2125729732) by IBISWorld on 21 June 2017 in accordance with their license agreement with IBISWorld
Roshan Sathyanarayana May 2017
About this Report This report is intended to assist buyers of security guard services. Vendors in this market provide security guards to patrol a company’s facilities and grounds and control access to company property. Guards serve as a deterrent for crimes and trespassers, as well as record and report suspicious activities. Their access-control duties may involve personnel screening, visitor processing, package screening, traffic control and vehicle inspection. Security guards are usually dedicated to a particular facility, although mobile patrol units can be used to serve multiple locations and clients. Security guard services can include bodyguard services, but they exclude investigative or detective services and guard dog rental.
Table of Contents 2 At a Glance 11 Total Cost of Ownership 19 Switching Cost 11 Product Specialization 3 Executive Summary 11 Related Goods 20 Purchasing Process 12 Substitute Goods 20 Buying Basics 4 Price Environment 13 Regulation 20 Buying Lead Time 4 Price Fundamentals 14 Quality Control 20 Selection Process 4 Benchmark Price 20 Buying-Decision Scorecard 5 Pricing Model 15 Supply Chain & Vendors 21 Key RFP Elements 6 Price Drivers 15 Supply Chain Dynamics 6 Input Cost Drivers 15 Supply Chain Risk 23 Negotiation Questions 6 External Demand Drivers 16 Geographic Locations 8 Recent Price Trend 16 Imports 24 Buyer Power Score Components 9 Price Forecast 16 Competitive Environment 16 Market Share Concentration 25 Jargon & Glossary 10 Product Characteristics 17 Vendor Company Types 10 Product Life Cycle 19 Market Profitability
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Recent Price Market Characteristics
Demand for security guard services has been Availability of Market Share Product Switching Substitutes Concentration Specialization Costs increasing as government consumption and the number of businesses have risen, thereby 1.7% enabling suppliers to raise prices. MEDIUM MEDIUM HIGH MEDIUM
2014-2017
Forecast Price Market Risk
Prices for security guard services are Recent Demand Recent Price Vendor Supply Driver Volatility Volatility Financial Risk Chain Risk forecast to increase in the three years to 2020. This growth stems will stem from 0.9% continued rising demand due to increased value of nonresidential construction and LOW LOW LOW LOW government investment. 2017-2020
Growth percentages represent annualized data.
Buyer Power Score Key Price Drivers Major Vendors Overhead costs – administrative Allied Universal 15-20% 3.8 services G4S PLC 5-10% See p. 24 for details. Average wages – security services Securitas AB 5-10% Value of private nonresidential Covenant Services Benchmark Price construction Worldwide LLC 5-10% Number of businesses US Security Associates Inc. <5% Government consumption and $21.76 investment per hour per guard
Vendor Cost Benchmarks
5.2% 64.1% 9.2% 21.5% Profit Wages Purchases Overhead
Arrow indicates trend during the past year and next year.
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Supplier Power Buyer Power Buyer Power 1 5 Score 3.6 Price Trend 3.8 2.5 Market Structure 5 5.0 Market Risk
The IBISWorld Buyer Power Score is signifying low buyer power and 5 a weighted score based on a number meaning high buyer power. The more of quantitative and qualitative power a buyer has the greater criteria associated with buying a leverage they have to get lower prices product or service. The score is and better contract terms. For more calculated between 1 and 5, with 1 information see page 24.
The security guard service market has a market. Suppliers rely primarily on Executive buyer power score of 3.8 out of 5. This employees to provide their services, and score indicates that buyers have a slight although obtaining skilled security Summary advantage over suppliers during price guards is vital to suppliers’ operations, negotiations. The primary reasons the risk of labor shortages or wage spikes driving this advantage are stable prices is low. Consequently, price spikes or and a low level of vendor financial risk. In service problems resulting from supply the three years to 2017, increasing chain issues are unlikely. demand for security guard services has Other factors, however, detract from been pushing prices up at a moderate buyer power. High specialization in the pace, hurting buyer power. However, marketplace limits buyer power. It can be from 2017 to 2020, prices are forecast to difficult for buyers to locate services rise at a slower pace as the crime rate providers that supply sufficiently continues its forecast decline, slowing qualified guards to monitor high-risk growth in demand. Despite increasing premises due to the geographically prices, price volatility has been low is fragmented nature of the market. forecast to remain low during the next Additionally, large-scale buyers incur three years. As a result, buyers can better moderate costs when switching providers budget for their procurement of security if they require highly specialized security guard services. guard services Because many buyers tend Buyers benefit from low bankruptcy to have contracts in place when acquiring risk among suppliers, which limits the specialized services, switching costs rise likelihood that a supplier will go out of if buyers must terminate a contract business and thus ensures the continued early.. Consequently, high specialization availability of security guard services. and medium switching costs detract from Supply chain risk is also low in the buyer power.
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Price Producer Price Index - Price of Security Three-year Guard Services vs. Sector 4 Summary Price Trend 1.7%
3
Three-year 2 0.9%
Price Forecast % Change 1
0 Year 09 11 13 15 17 19 21 Factor is a threat to buyer Price of Security Guard Services Factor should be investigated Price of Administrative Services Factor is not a threat to buyer SOURCE: IBISWorld
Price Average Price $21.76 per hour per guard
Fundamentals Price Range WIDE: $10 to $100 per hour per guard
Key Pricing Factors Degree of guard training Number of guards Length of contract Range of services Geographic location
Benchmark Price guards are expensive to train, so The average price for security guard suppliers must charge more for their services in 2017 is $21.76 per hour per services to cover the additional cost. security guard; however, the hourly price The number of guards impacts the per guard can range widely from $10 to price as well. Suppliers typically lower the $100 depending on the number of guards amount buyers pay per guard per hour if needed, their degree of training, the they hire multiple guards at a time. In length of the service contract, the type of addition, buyers that require security service desired and the geographic guards for a longer period of time can location of the supplier. sign a longer contract to negotiate lower Inexpensive guards work for observe- hourly rates. However, suppliers that and-report agencies and are not trained offer a range of security guard services to act in high-risk situations. These can charge more because it is more guards typically cost $12 to $30 per hour convenient for buyers to satisfy all their to hire, while an armed security guard security guard needs from the same typically costs $15 to $40 per hour. supplier. Moreover, suppliers that provide Specialized guards are trained to detain a wider range of security guard types people and work effectively in high-threat must provide a wider range of training situations. Consequently, these guards programs as well, which increases their command higher prices. Highly skilled overhead costs and boosts their prices.
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Price Environment
Price Geographic location also has a Geographic Pricing significant effect on market prices. Buyers Difference Fundamentals in high-demand areas such as from continued Washington, DC, which is home to a Average National variety of federal buildings that require Price Average ($) ($) security guard services, will pay City substantially more than the benchmark Atlanta, GA 21.95 0.19 price for security guard services. In Boston, MA 22.73 0.97 addition, areas like New York City and San Charlotte, NC 18.50 -3.26 Francisco, which are densely populated Chicago, IL 23.40 1.64 urban areas with a significant number of Cincinnati, OH 18.66 3.10 construction projects, also have rates that Cleveland, OH 23.66 1.90 are well above the national average. In Dallas-Fort Worth, TX 20.94 -0.82 contrast, buyers in rural and low-demand Denver, CO 24.21 2.45 urban areas will pay lower prices. Detroit, MI 18.48 -3.28 Houston, TX 23.96 2.20 Pricing Model Las Vegas. NV 19.54 -2.22 Suppliers of security guard services Los Angeles, CA 26.23 4.47 typically use a fixed price model. The Miami, FL 15.23 -6.53 security business standard is to provide a Minneapolis, MN 22.77 1.01 wage range for officers in vendor bids, New York, NY 24.77 3.01 including the monthly and yearly price of Philadelphia, PA 18.37 -3.31 the total contract. Because guards’ wages Phoenix, AZ 23.36 1.60 are transparent, the buyer has an Portland, OR 24.12 2.36 immediate glimpse at the bidder’s San Diego, CA 23.62 1.86 valuation of its employees. The contract’s San Francisco, CA 24.36 2.61 markup over the guards’ wages contains San Jose, CA 25.06 3.31 further information about the provider’s Seattle, WA 26.12 4.36 business model, investment in its guards Tampa, FL 14.68 -7.08 and customer service; this information Washington, DC 29.84 8.08
can be elicited through the RFP process, SOURCE: IBISWorld and US Census Bureau (see the Purchasing Process chapter of this report). Buyers can expect the grounds should already possess a high markup, determined by dividing the total level of understanding of the work yearly contract price by the guards’ demanded at the facility. Therefore, yearly base wage, to be roughly between continuity with a service provider from 10.0% and 45.0%. year to year is preferable if the service The majority of guard service meets expectations. contracts last for one year and usually While fixed price models are the contain automatic renewal clauses. standard in the security guard service Multiyear contracts that provide slight business, some suppliers also negotiate discounts can sometimes be negotiated, under time and materials agreements to but buyers generally leave their options cater to buyers that have sporadic open and sign for a single year. This security guard service needs, such as practice is common because the cost of companies that retain security services switching providers typically only for large company parties. Under such consists of the opportunity cost of arrangements, buyers are charged on an repeating the RFP process. That said, a hourly basis for guards. Suppliers firm with experience on a company’s typically charge higher hourly rates than
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Price Environment
Price the benchmark price rate under the time and materials model since a steady Fundamentals source of revenue from the deal is not continued guaranteed.
Price driver volatility in the security Average wages – security services: Price Drivers guard service market has been low in the Wages are the highest cost for security three years to 2017. Although the value of guard firms, accounting for about 64.1% private nonresidential construction has of the average vendor’s revenue. Average Price Driver shifted frequently throughout the period, wages for security services have remained Volatility Level LOW other external demand drivers, such as flat during the three years to 2020. the number of businesses, have not been IBISWorld projects that average wages volatile. Furthermore, input costs, will remain mostly flat in the three years including overhead and wages, have been to 2020, growing slightly at an estimated very stable during the past three years. average annual rate of 0.1%. Stagnant Therefore, the volatility of private average wages have resulted in stable nonresidential construction has been wages as a share of revenue. As a result, offset by the stability of the market’s stability in wages does not have an effect other price drivers, leading to overall low on security guard service prices. driver volatility. Low volatility from other price drivers has helped maintain External Demand Drivers stability in the market price for security Value of private nonresidential guard services. construction: The value of private nonresidential construction includes Input Cost Drivers expenditure on structures, such as office Overhead costs – administrative buildings, hospitals and factories. Many of services: Key costs for security guard these structures require security services, providers include overhead costs such as which are more easily justified as liability insurance and professional construction activity increases. association fees. Security guards are Nonresidential construction activity has exposed to numerous occupational been decreasing at an estimated average hazards, so suppliers must purchase annual rate of 1.2% in the three years to insurance to limit their liability in the 2017. Nonetheless, the real estate market event an employee is injured. Suppliers is well known for its boom- and- bust also invest in accreditation by cycles, resulting in a high level of volatility professional associations. In the three and, as such in, the value of private years to 2017, overhead costs for nonresidential construction exhibits a administrative services have been rising high level of volatility. This driver is at an estimated average annual rate of forecast to grow at an annualized rate of 1.2%. Growth in these overhead costs is 3.9% in the three years to 2020 due to an forecast to continue in the three years to increase in spending on healthcare 2020 at an average annual rate of 1.8%. facilities. Rising nonresidential As these costs continue to rise, suppliers construction activity contributes to higher will pass a portion of their higher costs to demand and prices for security guard buyers in the form of higher prices. services which decreases buyer power.
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Price Environment
Number of businesses: Because Price Drivers Overhead Costs - Administrative Services businesses comprise the bulk of the buyer continued market for security guard services, 2.5 growth in the number of businesses spurs demand for security guards and 2.0 encourages the price of guard services to go up. Since 2014, the number of 1.5 businesses has been expanding at an 1.0
estimated annualized rate of 1.5%. Easy % Change lending standards are responsible for the 0.5 growth in new businesses. Growth is forecast to continue at an average annual 0.0 rate of 0.8% from 2017 to 2020. The Year 09 11 13 15 17 19 21 resulting boost in demand for security services will empower suppliers with SOURCE: IBISWorld greater price control. security guard services. From 2017 to Government consumption and 2020, government expenditure is investment: Government clients are forecast to grow at an annualized rate of responsible for a substantial chunk of 2.5%, increasing demand for security security firms’ revenue. Due to guard services and allowing service increasing tax receipts, government providers to raise their prices. expenditure has been increasing from 2014 to 2017 at an estimated annualized Crime rate: The crime rate represents rate of 1.3%, which has put upward the total reported violent and property pressure on demand and prices for crimes per 100,000 people. Actual and
Price Driver Statistics Average Wages Value of Private Government Crime Rate - Security Nonresidential Number of Consumption (Crimes per Services Change Construction Change Businesses Change & Investment Change 100,000 Change ($) (%) ($b) (%) (Million) (%) ($b) (%) people) (%) 2007 26,124.41 -3.66 509.00 12.70 7.71 1.40 2,914.40 1.60 3,748.20 -2.00 2008 25,682.85 -1.69 540.20 6.10 7.60 -1.30 2,994.80 2.80 3,673.20 -2.00 2009 25,811.02 0.49 438.20 -18.90 7.43 -2.20 3,089.10 3.10 3,473.20 -5.40 2010 26,612.29 3.10 366.30 -16.40 7.40 -0.50 3,091.40 0.10 3,350.40 -3.50 2011 26,703.49 0.34 374.70 2.30 7.35 -0.60 2,997.40 -3.00 3,292.50 -1.70 2012 26,728.69 0.09 423.10 12.90 7.43 1.10 2,941.60 -1.90 3,255.80 -1.10 2013 25,725.28 -3.75 428.80 1.30 7.49 0.80 2,857.60 -2.90 3,102.70 -4.70 2014 25,627.08 -0.38 472.90 10.30 7.56 1.00 2,833.00 -0.90 2,935.70 -5.40 2015 25,667.23 0.15 452.10 -4.40 7.76 2.70 2,883.70 1.80 2,859.60 -2.60 2016 25,635.20 -0.12 438.40 -3.00 7.83 0.80 2,907.30 0.80 2,772.83 -3.00 2017 25,658.38 0.09 456.37 4.10 7.90 0.90 2,944.16 1.30 2,680.07 -3.30 2018 25,683.67 0.09 474.02 3.90 7.97 0.90 3,006.07 2.10 2,583.71 -3.60 2019 25,713.37 0.11 492.90 4.00 8.03 0.80 3,090.83 2.80 2,485.02 -3.80 2020 25,703.05 -0.04 512.25 3.90 8.09 0.80 3,168.42 2.50 2,384.67 -4.00 2021 25,738.16 0.13 532.50 4.00 8.16 0.80 3,242.91 2.40 2,283.03 -4.30
SOURCE: IBISWorld
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Price Environment
Price Drivers perceived increases in crime and Proportion of terrorism often lead to more security Vendor Average Revenue continued guard service upgrades, renewals and Cost Structure (%) new contracts so that businesses can Profi t 5.2 protect against both property and Wages 64.1 violent crime. In the three years to 2017, Purchases 9.2 the crime rate has decreased at an Overhead 21.5 estimated annualized rate of 3.0%. In Insurance & 4.8 the three years to 2020, the crime rate is Administrative Fees projected to decline at an annualized Insurance 1.2 rate of 3.8%. Although a declining crime Marketing 1.2 rate, in and of itself, places downward Other 14.3 pressure on demand, strong growth in Total 100.0
other demand drivers will counteract SOURCE: IBISWorld this decline, resulting in an increase in aggregate market demand. Higher services places upward pressure on price overall demand for security guard to the detriment of buyers.
The average price of security guard customers can still source multiple Recent Price services has been increasing at an services from them and still save money. estimated annualized rate of 1.7% from In addition, their customers are Trend 2014 to 2017, primarily due to increased inherently less sensitive to price changes Three-Year Average demand. Among demand drivers, because top buyers have diversified government consumption and the revenue streams and tend to operate with Annual Price Trend: number of businesses have both been large security budgets. Small operators 1.7% growing with the broader economy have, however, also been able to raise during the past three years. However, prices in response to demand increases, demand growth has been mitigated by thus limiting buyer negotiation power Price falling nonresidential construction across the board. Volatility LOW activity and crime rate. Despite these Fortunately, price volatility has been drivers falling, demand overall has been low in the three years to 2017, making it rising. Higher aggregate demand has, in easy for buyers to forecast prices and turn, enabled suppliers to raise prices for budget for security guard services. Steady security guard services. increases in demand and stable input Large providers of security guard costs have prevented any drastic price services have been raising their prices at fluctuations from occurring. Although a faster rate than the market average and buyers procure services on a case-by-case have thus benefited the most from basis and cannot always anticipate how growing demand for services. These many security guards are needed, buyers vendors’ diversified service offerings give that anticipate a need for the services in them more room to implement price the next three years should consider increases without risking a significant entering long-term contracts to lock in loss of business because their larger prices before they rise further.
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Price Environment
During the three years to 2020, demand Security Guard Services - Benchmark Price Price Forecast for security guard services will increase as economic growth continues. Growing 23.0 demand, in conjunction with increasing 22.5 Three-Year Average market share concentration, is expected Annual Price to result in prices growing at a rate of 22.0 Forecast: 0.9% per year on average through 2020. 21.5 The rising value of nonresidential 21.0 0.9% construction will be the primary driver of 20.5 market demand and price growth during the period. As construction activity $ per hour guard 20.0 rebounds, more buyers will demand 19.5 security guards to patrol their new Year 09 11 13 15 17 19 21 facilities. Such buyers are typically willing to pay more for services because the SOURCE: IBISWorld construction of buildings requires a significant investment and owners have a price growth during this period. In substantial interest in protecting their August 2016, two of the largest vendors property. Additionally, the anticipated in the market, AlliedBarton Security growth in government spending will Services LLC and Universal Services of contribute to rising security guard service America Inc., finalized their merger demand and prices. Buyers that benefit agreement to become a single entity. This from government investment and merger greatly increases market share previously delayed procuring services are concentration and will reduce price- expected to increase their demand for based competition in the three years to these services as government funding 2020. With less competition, large firms rises. The number of businesses is also will be able to charge buyers higher forecast to rise in the three years to 2020, prices. As such, prices will continue to thereby driving up demand for security increase in the three years to 2020, which services. These factors will counteract a decreases buyer power. decline in the crime rate, allowing for an Fortunately for buyers, market prices increase in aggregate demand for security are projected to remain stable in the next guard services. Rising demand will permit three years, and flat inputs costs will suppliers to raise prices during this period. prevent drastic price swings. Low price Increasing market share volatility will allow buyers to budget for concentration, triggered by mergers and security guard services with more acquisitions, will help increase the rate of certainty.
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Security guard services are in the Product mature phase of the product life cycle. i e c e t e Maturity Guard services are well established, and Life Cycle the market is nearly saturated. In the three years to 2017, sales have been steadily growing thanks to growth in ro t demand due to the rising number of
businesses, and increased government ntro ction spending. Sales will continue to steadily
grow in the three years to 2020 as the olume t rit ec ine economy continues to expand and businesses seek out ways to protect Sales V against theft and vandalism. Current Time merger and acquisition activity is also indicative of the market being in the the life cycle because services are fully mature phase of the product life cycle. developed and have established Buyers benefit from the mature phase of distribution methods.
Life Cycle Factor Security Guard Services Characteristics
Price Trend Prices have been rising slowly due to increasing corporate demand. Higher government spending and a growing number of businesses are projected to continue supporting demand and price growth in the three years to 2020. Increasing market share concentration created by mergers and acquisitions activity will also exert an upward pressure on price during this period.
Product Change Basic security guard services are well established and have not historically been subject to much change. With the exception of the wider array of equipment available for guards, services are used for basically the same purpose as they have been for hundreds of years: to deter crime and control access to grounds and facilities. Cameras and control centers have improved guard services over the past several decades. Over the past three years, there has been a growth in the amount of technological assistance provided to guards and guard services are often combined with remote monitoring systems.
Distribution Scope Security guard services have a wide distribution scope with many national and local vendors for buyers to choose from. Despite strong M&A activity among major national vendors, which has enabled them to control an increasing portion of the market, there is still significant fragmentation. This high fragmentation will benefit buyers because they have an expanded array of vendors to leverage.
Marketing Trends Marketing is a minimal cost for suppliers because the service is well established and the largest vendors in every geographic segment are often well known in the area. Customers approach vendors and base decisions on vendor bids and responses to RFPs as well as their reputation and range of services. Winning government and national contracts is a source of prestige for security guard service providers, and these contracts can benefit a firm’s image. Small providers market themselves through local channels; brochures and sales calls to property managers of buildings, shopping centers and residential developments.
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Product Characteristics
Assuming that the security guard provider people required. Suppliers can charge Total Cost of is properly insured and licensed, which higher prices if services are requested on should be determined through the RFP high-demand days such as weekends or Ownership process, there are no hidden fees or holidays. The total cost of ownership will additional long-term costs of ownership also increase with added features like Total Cost of associated with outsourcing security guard mobile patrol services or armed guard Ownership LOW duties. A contract is for a definite period of services because of the additional training time, and it specifies the price of service involved. Additionally, the buyer must during the period. consider insurance costs. Although the However, there are few costs that the supplier often covers such costs, buyers can buyer must be aware of prior to procuring choose to purchase insurance as well to services., and can vary based on when provide additional coverage in the case of service is requested and the number of an incident.
The level of product specialization is high, specialties range from basic observe-and- Product and a guard service provider should report guarding to armed guarding for possess experience working with a facility high-threat situations. Training for Specialization or industry similar to that of the buyer’s security guards varies by the type of firm. Most large firms have security guards security guard needed. More skilled Product specialized in specific industries or security guards are paid more per hour Specialization HIGH situations. The service supplier and the because their training costs more and they security guards should demonstrate a solid typically have more experience. Therefore, understanding of a buyer’s work because buyers have less negotiation power when services are customizable. Providers’ procuring more specialized services.
Larger security guard service providers provide them with an advantage in terms Related offer a range of services that they may of efficiency when it comes to providing upsell to buyers, which can then reduce the following add-on services. Depending Goods buyers’ overall costs. A security guard on the service, buyers may be able to provider’s knowledge of a client’s negotiate additional discounts by facilities, personnel and operations may bundling.
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Product Characteristics
Related Goods continued
Related Goods Description
Consulting & Investigative services are largely used to investigate accidents, arson, employee check fraud and Investigative Services other white-collar crime. Because background screening is such a critical part of the recruitment process for security guard firms, many investigative divisions can perform employee screens for clients. Providers that offer consulting services may can advise clients on safety issues and help them design security programs.
Armored Vehicles Armored vehicles collect, count and deliver cash from financial institutions, casinos and retailers Services (particularly those dealing in precious metals and stones). They also provide document transfers, including canceled checks, and secure safes for clients, such as convenience stores and gas stations. A subcomponent of the armored vehicle segment is the servicing of ATMs, which has largely been outsourced by banks.
Remote Security Remote monitoring provides alerts in the case of a security breach on the buyer’s property. Monitoring Services Monitoring is generally conducted in a remote facility operated by the supplier where video cameras and alarm systems are monitored. These services, offered by many security guard providers, are often used in conjunction with security guard services and can reduce buyers’ costs by allowing for a facility to be secured with less labor.
The availability of substitutes is medium in lower security risk environments. In-house Substitute this market. Substitute products for guards that are not contracted through security guard services include remote companies dedicated to guard services are Goods security monitoring services, guard dogs also substitutes, although most guards are and security fences; however, these not employed in this manner. A medium Availability of substitutes do not offer the combination of availability of substitutes bolsters buyer MEDIUM Substitutes responsiveness and rational decision- power by providing buyers with other less making ability that security guards costly options that they can leverage possess. Therefore, these substitutes may during negotiations with suppliers to only be suitable for buyers operating in achieve price breaks.
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Product Characteristics
Substitute Goods continued
Substitutes Description
Remote Security While buyers often obtain security monitoring services in conjunction with security guard services, Monitoring Services monitoring services can be obtained without guard services. Such an option is less expensive and is priced on a subscription basis rather than on an hourly basis. Although security monitoring services pick up intruders and notify authorities, response time is far slower than manned services. Therefore, this option may not be suitable for some buyers.
Guard Dogs Guard dogs are trained to alert individuals of a threat within a facility. The presence of guard dogs may also deter criminals from entering a property. However, they lack the capability to apprehend an intruder.
Security Fences Barbed wire or other types of security fences can be erected around a buyer’s premises to deter break-ins. Erecting a security fence is a one-time expense that has a lower yearly total cost of ownership than procuring security guard services. However, security fences can provide inadequate protection against determined intruders.
In-House Guards Instead of outsourcing security guard services, some buyers hire security guards internally and add them to the company payroll. On one hand, by hiring in-house guards, buyers are not subject to the labor mark-up costs factored in suppliers’ rates. On the other hand, buyers will have to pay for guard benefits, security equipment, training, and other overhead costs. These ancillary costs often make hiring an in-house guard more expensive than obtaining the services of a security guard servicemarket supplier.
Regulatory change in the three years to especially for armed guards. A moderate Regulation 2017 has been medium. State agencies rate of regulatory change complicates the grant the licenses that are required to purchasing process. Buyers must make operate private security guard sure suppliers are complying with the Regulatory businesses, and many require specific current regulations in the state in which MEDIUM Change licenses for guards. If guard licenses are they are operating. At the same time, more required, states generally perform stringent screening and hiring regulations background checks and may require benefit buyers by providing more guards to complete a series of training assurance that the guards sent to their courses. For example, most states facility will be well-trained and competent. require employees to complete a specific Some states have lax regulations amount of training in the first months of concerning the qualifications of security employment and ongoing training after guards. Hence, it is important for that. Many states also require guards to buyers to ensure that their potential have a criminal background check. In providers have screened their 2016, California passed a law requiring employees and provided them with more stringent training and screening in-house training even if the law does requirements, such as mental health not require it. Retaining the services of examinations, for armed security guards. a supplier that employs poorly trained Other states are looking into tightening guards can jeopardize the security of training and screening requirements, the buyer.
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Product Characteristics
Key Quality Factors Employee screening Quality Guard training Control Low turnover Quality control over security guard services have under the law; their legal and is largely left to firms themselves. Because ethical obligations; how to work and regulation is not consistent across the collaborate with law enforcement; public country (see the Regulation section of this relations; and observation and report), no market-wide quality standards documentation. In addition, armed exist. As a result, firms vary in their hiring, guards should receive extensive weapons training and performance standards. training and legal instruction. Guards Buyers should gather information about that receive quality training will be more the screening process and training regimen effective on the job. that potential providers put their guards Low turnover also impacts the quality through. Buyers should ensure that their of the supplier and the security guards. supplier conducts thorough background Suppliers with lower turnover rates checks on the guards that they hire. This typically have better management aspect is a significant one in the selection practices and understand the needs of the process because security guards can have a market more clearly. Such suppliers also major influence on public safety. tend to offer extensive training and Buyers should carefully examine the benefits to encourage guards to continue training that security guards are provided working for them. Guards that have been in order to assess quality. Higher-quality working for the same supplier for an firms will provide guards with a higher extended period of time prove that they level of training. Ideally, guards should are reliable, have a clean record and have receive training about what powers they extensive experience.
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Supply Chain Risk for other labor-based services have Supply Chain Security guard service providers face a increased in the past due to unionization. number of upstream supply chain risks, In this market, however, labor risks are Dynamics but the potential costs associated with generally low and wage shocks that could these risks do not threaten the continuity impact prices are unlikely because Supply of business. As a result, the level of unionization is not common in this Chain Risk LOW supply chain risk for security services is market.Primary buyers include low. Security guard service providers educational institutions, hospitals and purchase uniforms, weapons, weapon healthcare facilities, commercial and Average and security licenses, as well as invest in industrial building managers, retail Vendor Risk LOW commercial real estate leases, establishments and government agencies. background checks and insurance. The Government agencies are among the prices of these inputs are generally stable biggest buyers of security guard services. and they are widely available. Municipal government agencies tend to Labor costs comprise the bulk of be risky because their budgets tend to input costs for security guard companies. fluctuate year over year. Nonetheless, Securing well-trained and highly given the wide variety of buyers, the qualified staff is vital for market overall downstream supply risk is low providers. Some security guards unionize because declines in one buyer sector through security-only unions. However, could be offset by growth in another. only about 8.0% of private security Overall, both upstream suppliers and officers in the United States are downstream buyers exhibit an overall low unionized, according to the Service likelihood of supply chain disruptions. Employees International Union. Prices Consequently, buyers have reasonable
2nd Tier Suppliers 1st Tier Suppliers Vendor Key Buyers
Textiles Educational Manufacturers Uniform Institutions Wholesalers
Hospitals & Weapons Healthcare Manufacturers Facilities Weapons Retailers Commercial & State Security Guard Industrial Governments Services Building Managers State Security Licensing Government Agencies Public Record Retail Agencies Establishments High risk Background Medium risk Credit Bureaus & Check Government Ratings Agencies Companies Low risk Agencies
SOURCE: IBISWORLD
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Supply Chain & Vendors
Supply Chain assurance that they will not experience states, as there is more business activity disruptions in the supply of security in such areas and therefore more buyers Dynamics guard services. demanding services. In addition, continued suppliers are likely to locate to areas with Geographic Locations large and cheap labor forces. The Two of the largest guard service Southeast, West and Mid-Atlantic regions providers, Securitas AB and G4S PLC, are have the largest concentrations of based abroad and have offices across the suppliers. In regions with few suppliers, globe, including in the United States. buyers lose negotiation power since they Other large guard service providers have have fewer suppliers to compare and use offices throughout the country. Offices as leverage; this factor allows suppliers to are generally concentrated in densely increase prices, and such buyers may populated regions of the country, need to use a larger supplier that meaning that buyers in major provides services on a national scale. metropolitan areas have the lowest supply risk due to the multitude of firms Imports that can compete for their business. There are no imports of security guard The five states with the largest services due to the service-based nature concentration of security guard services of the market; however, two of the largest include California, Florida, Texas, New security guard service providers are York and Illinois. These states account headquartered in Europe and have made for about 45.1% of all establishments. significant acquisitions of US companies. Security services are provided on site, If buyers require security guard services either through guards dedicated to a for facilities located abroad, they may be particular facility or through mobile units able to negotiate more favorable deals by that may serve several clients. Although using the international suppliers, there are buyers in every region that are especially if they these buyers use the likely to require services, suppliers same suppliers for services within the gravitate toward the more populous United States as well.
Market Share Concentration increasing in the three years to 2017 due Competitive In 2017, the top four security guard to mergers and acquisitions, resulting in service providers have a combined the average firm in this market having Environment market share of 40% to 50% of the grown in size. In August 2016, two major market’s revenue, which indicates a players, AlliedBarton Security Services Market Share medium level of market share LLC and Universal Services of America, MEDIUM Concentration concentration. Overall, about 9,630 merged to form Allied Universal, which companies provide security guard now commands the largest US market services in the United States. Together share out of any security guard services they employ about 695,382 people. The firm. Allied Universal has continued its majority of the market’s companies consolidation of the market in 2017, employ fewer than 20 people and operate acquiring Yale Enforcement Service’s locally; however, businesses that employ security division as well. The fewer than 20 people individually control geographically fragmented nature of the a low share of market revenue. market helps mitigate the effects that Although competition is still robust, increasing market share concentration market share concentration has been has on competition. Over 70.0% of the
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Supply Chain & Vendors
Competitive market is comprised of firms with fewer service required and the size and than 50 people, while 6.0% of all geographic scope of the buying Environment enterprises in the market have more than company’s operations. Buyers have more continued 1,000 employees. This trend of growing leverage with smaller locally based market share concentration is expected companies, but when buying for multiple to continue over the next three years as facilities across different regions, mergers and acquisitions continue. purchasing power goes further with a Increasing market share concentration large supplier. Although buyers can detracts from buyer power by giving sometimes negotiate multiyear contracts buyers fewer large national security firms that offer slight discounts, buyers from which to choose. With less typically leave their options open and competition, large firms will be better sign for a single year. This practice is able to charge buyers higher prices. common because the cost of switching providers is not particularly high. Vendor Company Types The estimated 9,630 firms that offer Large vendors: Large vendors are security guard services in the United security firms that generate more than States range in size and specialty. Some $500 million in yearly revenue and operate larger suppliers offer diversified services, at a national scale. Five companies meet such as investigative services and these criteria and are considered large armored vehicle services, in addition to vendors. These top suppliers have grown guard services. Other firms operate solely through extensive mergers and as government contractors or derive a acquisitions, bolstering their market large portion of their business from shares. Large vendors have divisions or government contracts. The decision to subsidiaries that specialize in nearly all contract with one company over another branches of security guarding, including is typically based on the type of guard government contract specialists. US
Vendor Statistics - Security Guard Services US Product Market Share Total Market Share Performance Revenue Profit Margin Financial (%) (3-yr trend) ($m)1 (%) Risk Level2 Allied Universal 15-20 Increasing 2,000-5,000 N/A N/A G4S PLC 5-10 Increasing 10,778 5.1 Low Securitas AB 5-10 Increasing 9,798 5.1 Low Covenant Services 5-10 Steady 100-250 N/A N/A Worldwide LLC US Security <5 Increasing 1,000-2,000 N/A N/A Associates Inc. Akal Security Inc. <5 Increasing 250-500 N/A N/A Inter-Con Security <5 Increasing 500-1,000 N/A N/A Systems Inc. Metropolitan <5 Steady 250-500 N/A N/A Security Inc. SOS Security LLC <5 Increasing 100-250 N/A N/A Whelan Security Co. <5 Steady 100-250 N/A N/A 1: Revenue refers to the latest fi nancial year for which data is available. Private company revenue is expressed as a range. 2: Financial Risk Level is based on the Altman Z-Score, which uses a formula to predict a company’s risk of bankruptcy. See Glossary for more details.
SOURCE: IBISWorld
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Supply Chain & Vendors
Competitive government-focused subsidiaries of large large firms because they do not have as firms include Securitas’ Pinkerton much name recognition and because they Environment Government Services and G4S’s All Star cannot offer the same range of services or continued International.Large service providers are cover the same geographic areas as large well suited for national or international firms. They also serve a market segment companies with locations nationwide that that is more price-sensitive than that of may require different services at each. large companies. Government contract Furthermore, national and international security firms are the exception, serving a firms offer centralized invoicing, which can market that is less price-sensitive than facilitate easier payment and accounting most. Medium-size suppliers are very operations. These companies try not to responsive to customer needs because of compete primarily on the basis of price, their proximity to buyers’ offices and but rather through service content and because each customer represents a larger quality. Due to their brand-name share of their business. As a result, recognition and national capabilities, large medium-size vendors are a good choice vendors often command higher prices than for buyers that desire security services in medium-size and small vendors. The only one geographic region. management strength of these companies at the local level varies, though, as can the Small vendors: There are about 9,575 consistency of service across regions. small vendors that operate in the market, Buyers from large firms must ensure that all of which generate less than $20 these major providers can offer them ready million in revenue. Small suppliers access to account managers with decision- underbid larger, more-recognized security making authority. A lack of access can be firms because the customer segment they problematic, and ineffective security serve is especially sensitive to price and policies need to be remedied quickly. usually only requires basic unarmed service. These suppliers can operate at Medium-size vendors: Medium-size lower costs because they do not have to vendors are vendors that have $20 million license or equip armed guards. to $500 million in annual revenue, and Additionally, they only operate a small about 50 medium-size vendors exist in the number of offices, usually within a single market. Although still large in comparison geographic region. Small suppliers are to the bulk of firms serving the market, well equipped to offer security services to medium-size vendors mostly include large localized businesses like single-location regional firms and national firms that offices, bars and nightclubs. Small specialize in particular segments of vendors are also an appealing option for security guard services, such as larger buyers that only desire a small government contracting (e.g. Akal) and amount of security personnel for a special unarmed service. Medium-size suppliers event (e.g. a company party). They can generally bid lower for contracts than also offer bodyguard services.
Supplier Diversity Ownership This Market Overall Sector Overall Economy Category (%) (%) (%) Women 20.0 20.7 19.4 Minority 24.0 14.9 17.5 Veteran 18.9 7.1 7.5 Ownership is defi ned as owning at least 51 percent of a fi rm, which is the defi nition used by the Small Business Administration for government procurement programs. SOURCE: IBISWorld and US Census Bureau
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Supply Chain & Vendors
Competitive Supplier diversity: Minority-, women- market compared to only 7.5% in the and veteran-owned businesses are more broader economy. However, women- Environment common in the security guard services owned businesses are only slightly more continued market than in the economy. Minority- common in this market (20.0%) than in the owned businesses comprise 24.0% of broader economy (19.4%). Nonetheless, companies in this market compared to there are many opportunities in the 17.5% of companies in the economy. security services market for buyers that Similarly, veteran-owned businesses need to fulfill supplier diversity represent 18.9% of all businesses in this requirements.
The average profit margin for suppliers in one contract. However, the vast majority of Market the market is medium at about 5.2% of security guard firms cannot compete in total revenue in 2017. During the three this way. Consequently, profit margins are Profitability years to 2017, the average profit margin of typically higher for larger players, which suppliers has remained stable as wage costs have fewer direct competitors. Buyers may have remained mostly flat. Marketplace have some additional negotiation power Profit Level MEDIUM competition, even accounting for a recent with larger players because they tend to increase in market share concentration, has have higher profit margins and therefore prevented suppliers from raising prices more leeway with prices. enough to increase profit margins. Security guard service suppliers have Profit Trend STABLE Medium profit margins limit buyers’ low financial risk and can typically honor negotiation power because suppliers long-term contracts, which ensure cannot reduce prices much before continuous service availability for buyers. suffering losses. Some large players can Because financial information is not afford to compete on the basis of service readily available for private companies, content and quality instead of price buyers should ask for such data to because their buyers are less price sensitive compare the financial health of buyers or because these suppliers can companies and make better-informed provide a broader range of services under decisions when selecting a vendor.
The cost of switching providers is Time section of this report). In addition, Switching medium, but it can fluctuate depending add-on services may increase switching on the level of security guard costs; for example, a proprietary Costs specialization. Most contracts can be electronic monitoring system operated by terminated by either party with 30 to 90 a specific provider’s guards may need to Switching days of written notice with no financial be replaced when switching providers. MEDIUM Costs penalty. Although new guards will need Furthermore, buyers with lengthy to be trained to serve the buyer’s facility, training protocols may incur some the provider incurs these costs, not the switching costs in the form of lost time. buyer’s firm. The opportunity cost of Although the price of training is generally finding a new provider can represent a borne by the supplier, buyers may spend considerable burden, however, and this a significant amount of time unprotected opportunity cost increases with buying while new employees are trained on the lead time (discussed in the Buying Lead new facility.
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Buying Lead Time Although suppliers train security guards, Buying Basics Buying lead time is usually moderate and the buyer might need to provide further considerably shorter than the duration of instruction on any expectations or most contracts, which gives buyers the requirements during the security guard’s Buying opportunity to evaluate and switch shift. In addition, the security guard must MEDIUM Lead Time suppliers more easily. The lead time, understand the buyer’s business, become which is the time between RFP familiar with the building and learn to publication and contract signing, for identify anyone that should not be in the procuring security guard services ranges building or on the premises. from one to three months. For a large government entity, however, Selection Process procurement lead times are typically Security guard services are generally longer and can range from just less than obtained under a negotiated buyer- six months to more than a year. Various supplier relationship. This kind of procedures cause government relationship is common in markets where procurement to last longer than a services are not vital to the buyer’s commercial buyer’s. For example, some operations but the continued supply of cities require public hearings for the service is subject to some risk. proposed high-value contracts. Most Generally, most businesses would be able buyers would like to reduce lead time to to continue operating if security guard the shortest possible duration, but services were to become temporarily because vendor competition is based on unavailable. Numerous substitutes for the quality of service as well as price, security guard services exist, including evaluations take some time. security monitoring services, guard dogs The purchasing process begins when and security cameras. the buyer addresses the business’ need While thousands of suppliers operate for security guard services. The buyer in the market, the security market is then drafts an RFP to explain to subject to some risk due to moderate potential vendors the types of services switching costs. Buyers often enter into that are required and the desired terms long-term contracts with suppliers. of the contract. The lead time usually Terminating a contract prematurely can increases with the number of vendors come with large financial penalties. that respond to the RFP. Once the buyer Moreover, it will take a new supplier selects a supplier, the security guards are some time to learn and adapt to the sent to the buyer’s facility. The buying buyer’s facilities. Accordingly, once lead time then ends when the security engaged in a contract, buyers should guards are integrated into the buyer’s invest extensive resources in order to operations. maintain a strong relationship with their The acquisition process of identifying security guard provider. and selecting a supplier can be time consuming, especially if the buyer has Buying-Decision Scorecard multiple suppliers to select from in a The Buying-Decision Scorecard outlines region. The buyer must take the time to the key criteria a buyer should consider understand the supplier’s business, when purchasing this good or service. determine whether the desired services When weighing the importance of each are offered and then negotiate an factor, we assume that a buyer has appropriate price for the contract period. narrowed down potential suppliers to Then the buyer must become familiar with those that meet the technical and price the security guards assigned to the facility. criteria specified in the RFP. The criteria
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Purchasing Process
Buying Basics and weights assigned below can be used as guidelines to help further differentiate continued already qualified vendors.
Buying-Decision Scorecard Factor Weight Description (%) Technical Factors 80.0 Qualifications of 25.0 Buyers should heavily weigh the qualifications of personnel to protect against Personnel undertrained guards and high turnover rates. Account managers must demonstrate that they are accessible and responsive. They must communicate effectively with guards and enact immediate staffing or procedural changes if necessary. Quality of Service 30.0 In addition to being the first responders to threatening situations, security guards are often the source of visitors’ first impressions. A buyer must ensure that a provider’s guards represent the interests and culture of the buyer’s company. Interviewing the existing and past clients of a provider’s firm gives a buyer insight into a provider’s service and relationship management. Annual Training 15.0 Regular training enables guards to perform their duties more effectively. It also & Weapons protects against costly or dangerous mistakes made by a guard at a buyer’s facility. Proficiency Corporate 10.0 Buyers should consider the other companies a provider serves when making their Experience decision. A provider with high-profile clients may have especially strong service, though high-profile clients can detract from the attention given to a smaller firm. Also, buyers should make sure their industry is represented among a provider’s clients. Cost 20.0 Price 20.0 Price is usually outweighed by technical considerations in choosing a guard provider. Prices for this service are not volatile, and buyers should investigate large price increases to existing contracts. Total 100.0
Specific information to impart to and exterior of buildings, armed guards, Key RFP suppliers in the RFP includes: visitor and employee identification • The criteria used to evaluate verification and other specific tasks as Elements vendors’ bids required) • The desired contract term and • Specific consequences if guards do termination requirements not fully perform their duties • The number of weekly hours needed • The required equipment from from security guards suppliers (e.g. uniforms, watch systems, • The scope of services (e.g. entry weapons and vehicles), and be specific and access control, patrolling interior about the types and quantities
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Purchasing Process
• The security personnel turnover Key RFP Specific information to gather from suppliers in the RFP includes: rates during the past three years and Elements • The company cost structure, initiatives the vendor has implemented to continued including costs for liability insurance, promote employee retention workers’ compensation, unemployment • The vendor’s invoicing frequency, insurance, medical insurance and procedures and, if applicable, whether corporate overhead centralized billing is available • Proof of the vendor’s automobile • Descriptions of training programs liability insurance and excess umbrella officers go through and the types of insurance, including terrorism coverage licenses they hold • Proof of licenses to do business in all • Whether guards hold the licenses areas covered by the RFP and permits necessary to comply with all • Any pending litigation federal, state and local requirements • The management structure as it • The vendor’s transition plan for relates to the buyer’s account, including implementing security services should all account support personnel, their they be awarded the contract and ensure functions and their responsibilities that specific tasks and time frames are • Resumes or biographical discussed information about management, the • At least three client references whose potential account manager and the facilities are comparable in industry, size security guards and scope to the buyer’s company • How security officers are recruited, • The pricing information, which including the criteria applicants must should include base wages by post and meet before being hired and the methods rank and should explain how billing rates used for applicant background screening are to be quoted
Standard Elements in an RFP Overview & Scope This tells the vendor about your company, why your company needs this product and what you hope to achieve from its purchase. Deadlines for steps in the procurement process should be clearly defined in the section. Vendor Qualification This section details the features a winning company must possess, such financial size, scope of work completed or geographical reach. This section will also explain the criteria used in evaluating the bid and its relative importance in your scorecard. This section might disqualify some companies, such as suppliers to your competitors. Technical This section details the technical and functional specifications of the product you want. The more Specifications detail provided, the shorter the procurement cycle since all vendors are bidding to the same, exact specifications. Further, if all needs are specified there is less chance of additional costs will surface down the road. This section will also look at service level agreement needs. Financial Factors This section is where vendor quotes prices for the product or service being supplied. This section should specify cost breakdowns, billing frequency (with specific dates, time periods), billing methods (mode of payment, including currency) and taxes. Legal Framework This section should reference the legal jurisdiction in the event of a dispute, methods for arbitration and contract termination mechanisms. Nondisclosure agreements are also part of this section, as are escrow agreements (mainly in the event of shared proprietary knowledge).
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Issue Questions Management Structure & • How many accounts does each manager serve? Implementation of Service: Suppliers • Is my account manager able to make significant changes to my service if I should have well-managed operations and am unsatisfied? should give buyers an idea of the attention • What is your transition plan for implementing security services at my their account will receive. company? • Am I able to get immediate assistance from an account manager if decisions need to be made? • Are you available 24 hours a day, seven days a week?
Industry Experience: A supplier’s niche • How well do you know my company’s industry and the types of facilities I will help determine whether the provider is need to have guarded? a good fit for the buyer’s company. • What other clients have you served in my industry and were you able to retain them over multiple contracts? • Who are your competitors and how does your experience in my firm’s industry compare to theirs? • How will ordering multiple services from your firm improve my costs and quality of service?
Employee Screening & Retention: • What methods are used for applicant background screening? Screening is a highly important part of the • What qualifications must security personnel have before being hired? recruitment process for security guards. In • How often are guards drug screened, and for what drugs? addition, employees who are thoroughly • What measures do you put into place to improve your retention rate? screened may have higher retention rates. Employee Training: Proper training is • What pre-assignment and orientation training do guards go through? critically important for security guards • What on-the-job, facility-specific or industry-specific training do guards go because their duties influence public through? safety and the safety of the assets of a • How is training delivered (e.g. classroom, books and videos in the field)? buyer’s company. • How do you measure the success of your training program? • What are the qualifications and years of service of the guards that will serve my facility? • What happens when a guard does not show up on-site? How am I notified and how quickly do you provide a substitute?
Retention of Accounts: A supplier’s • What is your client retention rate? retention of accounts serves as an • Why do clients choose not to renew with your company? indicator of attrition rates, wages, • How do you win clients from other security guard providers? Do you offer performance and client satisfaction. multiyear discounts or early renewal discounts? • How many of your clients take advantage of these discounts?
Employee Turnover: Employee turnover • How long do employees stay with your firm? is high for security guard service • How do you expect staff turnover to affect service at my company? companies, so low rates of turnover can • What personal development or continuing education programs does your indicate positive employee-employer company offer employees? relationships as well as a more • What promotional opportunities are available for officers? experienced workforce. • Are any of your guards unionized?
Insurance & Benefits: High rates of • What are the rates of the various types of insurance that your firm liability insurance, worker compensation purchases? and unemployment insurance might be • How have insurance rates changed over the past several years? red flags, while high levels of employee • How have changing insurance rates impacted your service prices? medical insurance are a favorable signal. • What type of benefits do you offer your employees? • Do you offer your employees medical insurance?
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Price Trend Factor Defi nition Weight Score Recent Price 40% 3 Neutral Compound annual growth rate in benchmark price over the past three years 1.5-3.0% Forecast Price 60% 4 Favorable Compound annual growth rate in benchmark price in the next three years 0.1-1.4% Weighted Score 50% 3.6
Market Structure Factor Defi nition Weight Score Availability of Substitutes 35% 3 Medium There are some substitutes for this product/service Market Share Concentration 25% 3 Medium The top four suppliers of this product/service have 30.1-49.9% market share Product Specialization 25% 1 High The product/service is assessed as having a high level of specialization Switching Costs 15% 3 Medium The cost of switching from this product and/or supplier is assessed as medium Weighted Score 20% 2.5
Market Risk Factor Defi nition Weight Score Price Driver Volatility 25% 5 Low Average absolute difference in percentage change of external drivers < 1.0% Recent Price Volatility 25% 5 Low Average absolute difference in % change in price over last 3 years < 1.0% Vendor Financial Risk 25% 5 Low The average level of financial risk for product/service vendors is assessed as low Supply Chain Risk 25% 5 Low The average level of product/service supply chain risk is assessed as low Weighted Score 30% 5.0
Overall Buyer Power Score 3.8
IBISWorld’s Buyer Power Score is a calculation based on weighted quantitative and qualitative factors that measure a buyers’ ability to negotiate lower prices and favorable contract terms. The higher the Buyer Power Score, the greater the average buyer’s negotiating strength for this product. The overall score is composed of three components: 1) Price Trend: compares this product’s average recent and forecast price change to the economy-wide inflation rate; 2) Market Structure: assesses the availability of alternatives and ease of purchasing in this product’s marketplace 3) Market Risk: measures elements of volatility and risk impacting a buyer’s confidence in making long-terms deals with suppliers of this product.
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Unarmed Guard A guard that is not licensed to Markup The total yearly price of security guard Jargon carry guns or trained to detain people. Also called services divided by the yearly base wage of the an observe and report guard. guards. Roving Patrol Guarding done at multiple facilities that belong to different customers.
HS The Harmonized Commodity Description and Producer Price Index (PPI) This index represents Glossary Coding System is maintained by the World Customs the change in the amount that producers receive for Organization as a standardized system of names their products or services, as opposed to the prices and numbers for classifying traded products. that consumers pay for them. Life Cycle All products and services go through Profit IBISWorld uses earnings before interest and periods of growth, maturity and decline. IBISWorld tax (EBIT) as an indicator of a company’s determines a life cycle by considering factors such profitability. It is calculated as revenue minus as pricing trends, the level and speed of product or expenses, excluding interest and tax. service change, the extent of a product’s distribution Profit Level Determined by the average profitability and the maturity of marketing trends. of the industry in which a product or service vendor Market Share Concentration Determined by the operates, compared to the average profit margin for market share of the top four vendors for a given all industries in the US. There are around 700 product or service: high is when the top four industries in the US classified using the NAICS vendors account for more than 50.0% of the product taxonomy (see NAICS). or service market share, medium is from 30.0% to Total Cost of Ownership Level Determined by the 50.0%, and low is less than 30.0%. total cost of ownership as a percentage of the NAICS The North American Industry Classifications benchmark purchase price per year: high is when System is the standard by which industries (not the total cost of ownership is greater than 100.0% of products) in the United States, Canada and Mexico the benchmark purchase price per year, medium is are classified. from 50.0% to 100.0%, and low is less than 50.0%. Price Driver Volatility Level Determined by the UNSPSC Coding for each report title is based average absolute difference in the percentage primarily on the United Nations Standard Products & change of input cost items and external demand Services Code. The code is a hierarchical drivers over the past three years: high is 3.5% or classification codeset of expenditure items. greater for all drivers, medium is from 2.0% to 3.4% Wages The gross total wages and salaries of all for all drivers, and low is 1.9% or less for all drivers. employees in the industry. The cost of benefits is Price Range The difference between the upper and also included in this figure. lower price bounds divided by the benchmark price: Z-Score The Altman Z-score formula is used to help wide is greater than 50.0%, medium is from 25.0% predict a company’s chances of going bankrupt to 50.0%, and narrow is less than 25.0%. within the next two years. The Z-score uses multiple Price Volatility Level Determined by the average corporate income and balance sheet values to absolute difference in the percentage change of the measure the financial health of a company. Z-scores benchmark price over the past three years: high is above 2.9 are defined as having a low financial risk 3.5% or greater, medium is from 2.0% to 3.4%, and level; scores between 1.23-2.9 are at a medium risk low is 1.9% or less. level and scores below 1.23 are a high financial risk level.
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