You Won the Security Contract. Did Your Company’s Profit Grow as Expected?
Why successful account start-ups can create costs that extend far beyond the new contract—and what those costs may reveal about your operation.
Eric Galuppo, VAMO Digital, CALSAGA Associate Member
The contract was awarded. The start date was firm. Every post was covered on day one.
The client received what was promised. Billing began on schedule. Monthly revenue increased as projected.
By most operational measures, the start-up was successful.
But when the monthly P&L arrived, did the additional revenue produce the profit you expected?
For experienced security company executives, that question deserves a closer look.
The Costs That Follow a New Contract
Consider a familiar situation.
A new account requires eight officers across three shifts. Six are hired and cleared before the start date. The remaining coverage must come from somewhere.
An officer from an established account works double shifts. A Field Supervisor fills an overnight post. One of the company’s most dependable officers is reassigned because the new client needs an experienced person at the front desk.
Every post is covered. The client is satisfied.
The start-up succeeds.
None of these decisions is necessarily wrong. They reflect the commitment and flexibility required to operate a successful contract security business.
But the financial consequences may extend well beyond the new account.
The experienced officer came from another assignment. If replacing that officer requires unbilled overtime, the additional cost may appear under an entirely different client account.
The Field Supervisor covering a post is temporarily unavailable for normal field responsibilities. Recruiting resources shift toward the new contract while existing vacancies still require attention. Operations managers spend additional time coordinating coverage, resolving problems and supporting the client.
Each decision may be operationally necessary.
Each may also consume resources or create expenses elsewhere in the company.
And each financial consequence may appear in a different part of the P&L.
What Your P&L May Not Be Telling You
Your financial statements may accurately report overtime, payroll, recruiting, training and supervisory expenses.
But do they reveal which operating decisions and conditions caused those costs—and how those causes are connected?
That distinction matters.
The P&L can show where an expense was recorded without necessarily revealing the operating event that made the expense necessary.
Consider unbilled overtime.
It might result from an unexpected absence, an insufficient relief pool, an extended vacancy or the reassignment of experienced officers to support new business.
The financial symptom may look the same.
The underlying operating problem—and the appropriate solution—may be entirely different.
Reducing overtime without understanding its causes may temporarily improve one financial measure while leaving the conditions that created the expense unchanged.
The same principle applies to supervisory labor, recruiting activity and management involvement.
When experienced managers repeatedly step in to compensate for staffing shortages, scheduling breakdowns or communication gaps, their involvement may keep the operation running successfully.
But necessary management intervention is not without cost.
And when temporary intervention becomes routine, it can conceal an operating condition that continues to consume profit.
When Temporary Solutions Become Permanent Costs
The most revealing part of a new account’s financial performance may come after the start-up is considered complete.
Did the double shifts stop?
Was the reassigned officer replaced without creating continuing overtime?
Did the Field Supervisor return to normal responsibilities?
Did recruiting catch up with staffing requirements?
Did the additional management involvement disappear?
Or did some of those temporary solutions quietly become part of the company’s normal operating structure?
Not every start-up expense represents a problem. Some are legitimate investments in bringing profitable new business online.
The important distinction is knowing which costs were temporary, which continued and which recurring expenses might have been reduced or prevented through a different operating approach.
Without that understanding, a company can continue adding revenue while absorbing operating inefficiencies that prevent the corresponding profit from reaching the bottom line.
The Opportunity Is Bigger Than Reducing Expenses
Improving profitability is not simply a matter of cutting costs.
It is a matter of understanding why costs occur, how operating conditions create them and what must change to prevent unnecessary recurrence.
For example, recurring overtime may point to inadequate relief capacity. Persistent vacancies may reflect how late recruiting receives staffing requirements. Repeated supervisory intervention may reveal weaknesses in scheduling, communication, accountability or the handoff of responsibilities.
These conditions require different responses.
The solution might involve staffing strategy, workflow redesign, clearer responsibilities, better information or more effective use of technology.
The operating problem should determine the solution—not the other way around.
Once the condition is understood, the response can be designed around what actually needs to change and how the people, responsibilities, processes, information and technology involved should work together.
That is where a deeper understanding of operations can become a meaningful source of additional profit.
A Question Worth Asking About Your Next P&L
You do not need to analyze the entire company to explore this opportunity.
Start with one recent account start-up that required significant overtime or management intervention.
Look beyond the direct expenses charged to that account.
Consider the officer reassignments, replacement coverage, recruiting activity, training, supervisory involvement and other identifiable resources required to make the start-up successful.
Then ask:
Can we identify the full financial impact of what our organization had to do to support this new contract—not just the costs recorded against the contract itself?
Which costs disappeared once the account stabilized?
Which continued elsewhere in the organization?
Which might have been prevented by changing how the operation was organized, staffed, coordinated or supported?
You may discover that the apparent cost of servicing the new contract and the total incremental cost of supporting it are not the same.
That difference is worth understanding.
Because the next meaningful improvement in your company’s profitability may not require another contract, a higher billing rate or a reduction in service quality.
It may come from understanding—and improving—how your existing operation converts revenue into profit.
A Perspective from VAMO Digital
VAMO Digital provided this article to help contract security company owners and executives think differently about how operating conditions can affect the P&L and retained profit.
Our approach begins with understanding the operating environment and the underlying causes of recurring costs, then determining how people, responsibilities, processes, information and technology can work together more effectively.
We believe meaningful profit improvement begins with understanding where—and why—profit is being absorbed before deciding what needs to change.
Eric Galuppo is the founder of VAMO Digital and a Structural Growth Architect focused on how operating conditions affect profitability in private security companies and how people, processes, information and technology can be designed to work together more effectively.