The math doesn’t work anymore. That’s the blunt assessment from three Memphis security company owners I spoke with over the past two weeks, each trying to figure out how to keep their businesses running while inflation eats through their margins like termites through wet wood.
March’s Consumer Price Index came in at 8.5% year-over-year, the highest reading in four decades. For security companies operating on already thin margins, that number translates into real pain at the gas pump, on payroll sheets, and in awkward conversations with clients who don’t want to hear about rate increases.
The Wage Problem Nobody Can Ignore
The Bureau of Labor Statistics pegs the median hourly wage for security guards nationally at around $15 an hour. In Tennessee, the numbers track close to that range. Unarmed guards in the Memphis metro area typically earn between $14 and $16 per hour. Armed guards command $16 to $18, sometimes a bit more depending on the site and the shift.
Those wages were already a problem before inflation started climbing. Security has always been a high-turnover industry. The national turnover rate hovers between 100% and 300% annually, depending on which industry survey you trust. Memphis runs on the higher end. Guards can make similar money at Amazon’s fulfillment center in Olive Branch or at the FedEx hub on Democrat Road without the hassle of overnight shifts at a construction site in Frayser.
Now add 8.5% inflation to the mix. A guard making $15 an hour in January 2021 has effectively taken a pay cut if wages stayed flat. The same paycheck buys less gas, less food, less everything. So guards leave. They go to warehouses, fast food, retail, anywhere that’s bumped pay to compete in this tight labor market.
“I lost four guards in February alone,” said one East Memphis security firm owner who asked to remain anonymous because his clients would panic. “Two went to FedEx, one went to a warehouse job in Southaven, one just stopped showing up. That’s four posts I had to scramble to fill.”
Gas Prices Are the Other Squeeze
Security companies that run patrol vehicles are getting hit from a different angle. The average gallon of regular gasoline in Tennessee crossed $4 in March and kept climbing. For a company running six patrol vehicles across Shelby County, each logging 80 to 100 miles per shift, fuel costs have roughly doubled compared to early 2021.
Consider the numbers. A patrol vehicle getting 18 miles per gallon and covering 90 miles per shift burns five gallons. At $2.20 a gallon in early 2021, that’s $11 per shift. At $4.20 in spring 2022, it’s $21 per shift. Multiply that across six vehicles running two shifts a day, seven days a week, and fuel costs alone jumped from about $924 a month to $1,764. That’s an extra $840 monthly that has to come from somewhere.
For large national firms like Allied Universal and Securitas, these cost increases get absorbed across massive operations spanning dozens of states. Allied Universal, with roughly 800,000 employees worldwide after acquiring G4S in 2021, can negotiate bulk fuel contracts and spread cost increases across a client base of thousands. Securitas, the Swedish-headquartered giant with more than 350,000 North American employees, operates with similar scale advantages.
Local Memphis firms don’t have that cushion. A company like Phelps Security, one of the oldest and largest security firms in the Memphis area with more than six decades in business, can’t absorb cost increases the way a multinational can. Neither can Imperial Security or the dozen or so mid-size firms working the Memphis market. Every dollar in new costs either comes out of the owner’s pocket or gets passed to clients.
The Rate Increase Conversation
Passing costs along sounds simple. In practice, it’s the most dreaded conversation in the industry right now.
Security contracts in Memphis typically run 12 to 24 months. Many were signed in 2020 or early 2021 when costs were lower. Those contracts often have limited provisions for mid-term rate adjustments. Some include annual escalation clauses tied to CPI, which helps now, though even a CPI-linked adjustment kicks in once per year and doesn’t cover the full gap.
Clients, meanwhile, are dealing with their own inflation pressures. A property management company overseeing apartment complexes in Hickory Hill or Parkway Village already faces rising maintenance costs, higher insurance premiums, and tenants struggling to keep up with rent increases. When their security provider calls asking for a 15% rate bump, the conversation rarely goes well.
“The client told me I was welcome to raise my rates, and they’d be happy to get three bids from other companies,” one firm owner recounted. “That’s not really a negotiation. That’s a threat.”
Some firms are trying to split the difference. One approach gaining traction: raising bill rates by 8% to 10% while absorbing the remaining cost increases through internal cuts. That might mean reducing administrative overhead, cutting back on vehicle maintenance schedules, or delaying equipment purchases.
Others are restructuring their service models entirely. Instead of staffing a guard post 24/7 at $15 per hour (costing roughly $5,500 per month in wages alone before insurance, taxes, and overhead), they’re pitching hybrid solutions. Eight hours of guard presence during peak times, supplemented by camera monitoring and random patrol checks during off-hours.
Big Firms vs. Small Firms: Different Playbooks
Allied Universal and Securitas have been raising their starting wages for the past year. Allied Universal posted starting rates of $15 to $18 per hour for Memphis-area positions in early 2022, up from $12 to $14 just two years prior. They can afford to do this because they operate at scale and because their contract structures with national clients often include built-in cost adjustments.
These national companies have also started offering benefits packages that local firms can’t match. Health insurance, 401(k) plans, tuition reimbursement, employee assistance programs. When a guard can get benefits at Allied Universal or stay at a local firm making similar hourly wages with no benefits, the decision isn’t complicated.
Local firms are responding with what they’ve always offered: flexibility, personal relationships, and community ties. A guard at Phelps Security is more likely to know his supervisor personally, get scheduling flexibility, and feel like part of a team rather than an employee number at a company with hundreds of thousands of workers.
“We can’t compete on benefits,” admitted one local firm owner with operations across the Poplar Corridor and the Germantown area. “What we can do is treat people like human beings. I know every one of my guards by name. I know their kids’ names. When they need a day off, I don’t make them submit a request through some app. They call me.”
That personal touch retains some guards. It doesn’t retain all of them, and it certainly doesn’t attract new ones when the starting wage gap keeps widening.
What’s Actually Working
A few Memphis firms have found creative approaches worth noting.
One company shifted from hourly wages to a tiered pay structure. New guards start at $15 per hour. After 90 days with no missed shifts and no client complaints, they jump to $16.50. At six months, $17.50. At one year, $18.50 plus a small annual bonus. The firm’s owner said turnover dropped by about 30% after implementing the system, though he acknowledged the higher costs required renegotiating several contracts.
Another firm started offering gas cards as a retention tool. Guards who complete a full month of scheduled shifts receive a $100 gas card. It’s cheaper than a raise and directly addresses the pain point most guards complain about.
A third approach involves cross-training. Some firms are training guards in basic alarm monitoring, access control systems, and camera operation. Guards with broader skills command higher rates from clients, which creates room for higher wages without crushing margins.
The Uncomfortable Truth
The security industry has operated on razor-thin margins for decades. A well-run security company might clear 3% to 5% net profit on a good year. Many operate on less. When costs jump 8% to 12% across the board, there’s simply no fat to trim.
Something has to give. Either wages rise and clients pay more, or wages stagnate and companies can’t staff their posts, or firms cut corners in ways that compromise service quality. None of these outcomes are good for the Memphis security market.
The national conversation about inflation tends to focus on gas and groceries. For the security companies working the parking lots of Wolfchase Galleria, the construction sites along the I-40 corridor, and the office buildings in Downtown Memphis, inflation shows up differently. It shows up as empty guard posts, longer response times, and owners working 80-hour weeks trying to hold everything together.
Spring 2022 is looking like a reckoning. The companies that survive will be the ones that figured out how to have honest conversations with their clients, found creative ways to retain their guards, and accepted that the old pricing models aren’t coming back. The ones that pretend nothing has changed will find out the hard way that the math really doesn’t work anymore.