How do I price security service contracts?
Price a security service contract from your own costs, not a competitor’s rate card. Here is what to put in the agreement, a simple way to do the math, what counts as a standard repair, and how to sell it as a service plan customers accept.
Price a security service contract from your own costs up, not from what the company across town charges. Add up what it really costs you to keep one customer's system working for a year, add the markup you need, and sell it as a service plan with a clear list of what's covered and how fast you show up.
That's the short answer. The rest of this post shows how to do each part without guessing.
What should a security service contract include?
A customer can't judge a price until they know what they're buying. Most fights over service agreements start with a vague scope, not a high number. Write down five things:
- Response time. Say how fast you answer and how fast a tech arrives. "Next business day" and "same day when the system won't arm" are two different promises with two different costs.
- Remote support. Plenty of problems, like a user code reset, a stuck zone, or an app login, can be fixed without a truck roll if your platform allows remote access. Say whether remote fixes are included and during what hours.
- Scheduled maintenance. How many inspection visits a year, and what gets checked on each one: sensors, sirens, backup battery, communicator signal, cameras.
- Parts and labor. Which parts are covered, which are not, and whether labor is included on covered repairs.
- Exclusions. Damage from storms, pets, remodeling, or the customer's own changes. Spelling these out up front saves an argument later.
Commercial fire alarm work has a floor under it. NFPA 72, the national fire alarm code, sets inspection and testing intervals, and your local fire authority enforces them. Price the required visits first, then build the service plan on top of them.
How do you figure out what to charge?
Start with costs, one customer at a time. You need four numbers from your own books:
- Loaded labor cost per hour for a tech: wage, payroll taxes, insurance, vehicle, fuel, and phone.
- Hours per year a typical customer uses: scheduled visits plus the service calls they actually place, including drive time.
- Parts you expect to replace. Backup batteries are the obvious one. Sealed panel batteries are commonly replaced every three to five years.
- Office time. Scheduling, billing, and answering the phone are real costs, even when you do them yourself at night.
Here is the math with made-up round numbers, only to show how it works. They are not market rates. Say a tech costs you $60 an hour fully loaded and an average customer uses four hours a year. That's $240 in labor. Set aside $40 a year for parts and $20 for office time, and you're at $300 a year before profit. Mark it up 40% and the plan is $420 a year, or $35 a month.
Swap in your own numbers. The point is that the price comes out of your costs, so it holds up when a customer pushes back.
Then check it against what nearby dealers charge. If your number lands well above theirs, the gap is usually in hours. Look at how many of those trips could have been remote fixes.
Should you charge time and materials or sell a service plan?
Most dealers end up offering both. Here's how they compare:
| Time and materials | Service plan | |
|---|---|---|
| How the customer pays | A bill after each visit | A set amount, monthly or yearly |
| How the customer acts | Every call costs money, so they wait | Calling is covered, so small problems get fixed early |
| Your cash flow | Lumpy, tied to breakdowns | Steady and predictable |
| Who carries the risk | The customer | You, so price for it |
| Effect on company value | One-time revenue | Recurring revenue, which buyers typically value more |
Keep time and materials for customers who decline the plan. Then make sure the plan looks like the better deal the first time something breaks. If one trip charge plus an hour of labor costs more than a few months of the plan, the choice makes itself for the customer.
Why do customers push back on the monthly price?
Often it's the words, not the number. Dealers on trade forums say customers bristle at "monthly payment" because it sounds like debt. "Service plan" sounds like something they get.
Three changes help:
- Call it a service plan or a protection plan. Never a payment, never a fee.
- Show what's inside before the price. Response time, visits per year, remote help, covered parts. Then the number.
- Put it on the bill they already pay. Most monitored customers already pay you every month. Adding service to that bill is one more line, not one more bill. Offer a small discount for paying the year up front if cash flow matters to you.
What counts as a standard repair?
Dealers ask each other this exact question, and the answers vary. That's the reason to define it in writing. A common split looks like this.
Covered: failed sensors and door contacts, keypads, sirens, backup batteries on schedule, communicator swaps, programming changes, and remote support.
Not covered: damage from weather, power surges, pets, or construction; adding new devices; moving equipment during a remodel; and equipment another company installed, unless you inspected it and accepted it onto the plan.
One example makes the point. A customer's dog chews through a motion detector. Under a clear contract, that's a billable repair at your normal rate, and nobody argues, because it was written down on day one.
When should you raise your service plan price?
Put a yearly price review in the contract from the start. Many alarm monitoring contracts already include a clause like this. Without it, every increase turns into a negotiation.
Review your costs once a year, in the same month every year. If your loaded labor cost went up, the plan follows. A small, steady increase with written notice is usually easier for customers to accept than a big jump after years of no change. Check your contract and your state's rules for how much notice you owe.
Frequently Asked Questions
Should I price a service plan by the number of devices?
For homes, a flat plan with a device limit is simpler to sell. For commercial accounts, pricing by device count or by site makes more sense, because a building with hundreds of devices and a small shop with a dozen are not the same job.
Can I include monitoring in the service plan?
Yes. Many dealers sell monitoring and service together as one monthly line. Keep the contract clear about which part is monitoring and which part is service, so a cancellation or a price change on one doesn't confuse the other.
What if a competitor charges less for service?
Ask what their plan includes. A cheaper plan with no response time and no parts coverage isn't the same product. Put your scope next to theirs and let the customer compare line by line.
Do I need a lawyer to write the contract?
Have one review it. Auto-renewal, cancellation, and notice rules vary by state, and a template borrowed from another state can miss the rules in yours.
A good service plan keeps the customers you already have. Getting new ones is the other half of the job, and more buyers now ask Google and ChatGPT which alarm company to call. Many independent dealers never get named in those answers. See where your company stands at aisecurityedge.com.