Do not underestimate this business just because it is not yet very popular in the media. Security agency business is a service trade where you provide security related human resource to companies, housing blocks and other structures.
The market in detail
Today, it is a 22,000 crore business and it is estimated to become 40,000 crore within the end of the next year. There is a solid 25% and above growth in the market and with the increase in the building structures, malls, complexes, corporate and others, the need for security guards is in a high demand.
The number of small time competitors is high in this market. If you are able to create a medium sized venture then competition would be very low. The switching cost of the market is very high because of the complexity of finding a loyal and efficient security agency. The purchasing power of the customers is high. Thus, this is a vendor driven market. With the insecurity building in the community, the attractiveness of the market is very high.
The company should be registered as a private limited company or as a limited liability partnership company. The services should be registered for service tax if your revenue increases more than 9 lakhs per annum. If you are employing more than 20 people in the company, you need to have ESI registration. According to the private security agencies act, you need to obtain a license from the police department and the home department of the state.
Requirements for starting the business
Apart from the license requirements, this business is totally dependent on your human resources. You need to hire at the least 10 experienced and fresh security guards to start up a business in this industry. The office structure is not as much important as your asset. You need to provide your resources, as much asset as possible for the safety purposes.
Apart from the housing blocks, corporate structures and finance entities, you can also cater your services to individuals who are in need of security for a certain process, like when travelling with valuable items. In recent times, the most profitable client is the cash logistic companies. About 15 thousand crore worth of money is being transported around the city, every day. They are in need of security guards for increasing their reputation. It is also profitable to link your business with any real estate developer or property management companies for better customer base.
As stated about the office space is not much of a factor in this business. You can hire a small rental space for about 5,000 to 10,000 rupees to start up your business. You would need to train the employees through authorized training centres. The training cost can vary from 5,000 rupees to 30,000 rupees. The major investments would be the assets including arms, tracking devices and others. An internet connection would be required for maintaining the business. The internet connection charge can go as high as 2,000 rupees per month. Thus, you would need 1.5 lakhs to 3 lakhs to start up the business.
Return on investment
You can charge your clients per month or per hour basis. It is profitable to charge them with a cost including 2% profit for every hour. With this charging, you can enjoy 25% return on investments. If you are able to get hold of some corporate clients like malls and corporate companies, you can easily break even and enjoy 60% return on investment. This is possible only if you are able to frequently add customers to your business. Word of mouth matters a lot in this business. You need to create a logo, a website and register in the local and online yellow pages to get more coverage.
There is a scope of 40% increase in the demand in the next 6-7 years and thus, with this boost, this is a good market sector to invest your time and money.
- You can contract the security guards to reduce the time and money associated with hiring and training them. You can have a better control over the quality of the service too. However, the guards might not be loyal to your entity. They can move out of your concern along with some of your best clients.
- If you are planning to hire and hold your human resources, one of the major expenses would be the insurance cost.
- It is better to lease the patrol vehicles than to buy them.
- Reduce the costs related to the infrastructure. You need not need an aesthetically pleasing environment to showcase your business.
This might look like a high risk business, but with the increasing demand and lack of supply in the market, this is one of the most advantageous sectors to start a business with minimum amount of initial capital.