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Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on March 14, 2022
Updated on March 13, 2024
Investment range
$3,850 - $9,600
Revenue potential
$52,000 - $208,000 p.a.
Time to build
3-6 months
Profit potential
$46,000 - $83,000 p.a.
Industry trend
Growing
Commitment
Flexible
Have you ever daydreamed of being a private eye and solving the big murder? Being a private investigator is probably not as glamorous as you imagine. But nor is it a difficult line of work to get into, and it can be quite lucrative. The US private investigation industry is worth a massive $6.5 billion and growing, so there is real money to be made. If you run your private eye business from home the investment is minimal, you just need a license and some equipment and you can start investigating.
But before you jump in and start your own private investigation firm, you need to understand what’s involved in starting and running a business. Luckily, reading this step-by-step guide is all the homework you need to do to begin your successful journey into investigations and entrepreneurship.
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Starting a private investigation business has pros and cons to consider before deciding if it’s right for you.
Trends in the private investigation industry include:
Challenges in the private investigation industry include:
Startup costs for a private investigation business range from $3,800 to $9,600. Costs include a computer, website, cameras, and the cost of licensing and a surety bond.
Education and certification requirements for a private investigator license vary by state. Check with your state for requirements. You’ll also most likely need a surety bond, which generally only costs a few hundred dollars a year. If you’re going to have a firearm, you’ll likely need a gun license and a concealed carry license.
As a licensed private investigator, you’ll need a handful of items to be successful, including:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Setting up a business name and corporation | $150 - $200 | $175 |
| Business licenses and permits | $100 - $300 | $200 |
| Insurance | $100-$300 | $200 |
| Business cards and brochures | $200 - $300 | $250 |
| Website setup | $1,000 - $3,000 | $2,000 |
| Computer | $1,000 - $3,000 | $2,000 |
| Video camera and other cameras | $800 - $1,500 | $1,150 |
| License and bonding | $500 - $1,000 | $750 |
| Total | $3,850 - $9,600 | $6,725 |
Private investigation services cost about $100 per hour on average. You’ll have few ongoing costs since clients will reimburse you for expenses, so your profit margin should be about 90%.
In your first year or two, you could work from home 10 hours per week, bringing in $52,000 in annual revenue and more than $46,000 in profit, assuming that 90% margin. As you begin to get repeat business and referrals, you could work up to 40 hours per week. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 40%. With annual revenue of $208,000, you’d make a tidy profit of more than $83,000.
There are a few barriers to entry for a private investigation business. Your biggest challenges will be:
Now that you know what’s involved in starting a private investigation business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Research private investigation businesses in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a business that offers private security services, trademark investigation, or cybersecurity investigation.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as fraud investigations or financial dispute investigations
This could jumpstart your word-of-mouth marketing and attract clients right away.
Your services will depend in part on your skills. If you’re tech-savvy, you will be able to do things like cyber investigations. If you have financial knowledge, you can do financial dispute investigations. Make a list of all the services within your skillset that you’ll be able to offer.
The average rate for a private investigator is $100. If you’re performing services that require a higher level of skill, you may be able to charge more. Your ongoing expenses will be low, so you should aim for a profit margin of about 90%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will be broad, but you may decide to focus more on commercial investigation services, in which case your target market will be business owners. You can find them on sites like LinkedIn. You could also offer your services on social media like Instagram and Facebook.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to private investigation businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your private investigation business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding a private investigation business.
Starting a private investigation business requires obtaining a number of licenses and permits from local, state, and federal governments.
In most states, you’ll need to get a private investigator’s license and an agency license. Requirements vary by state.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your private investigation business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as ShotSpotter, Thomson Reuters, or eInvestigator, to manage your cases, evidence, reporting, invoicing, and payments.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Embarking on the journey of starting a Private Investigation Business requires more than just technical skills; effective marketing is crucial to attract clients and build a solid reputation. Here are concise and practical marketing strategies to boost your private investigation business:
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your private investigation business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your private investigation business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a private investigation business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in private investigation for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in private investigation. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a private investigation business include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Private investigations are a massive and growing industry, so the opportunity is real. If you’re a retired police officer, security guard, or served in the military, a private eye business could be right up your alley. If you don’t have a law enforcement background but have a knack for finding clues and solving mysteries, you could still start your own private investigations firm and make good money. Now that you’ve done your business homework, it’s time to start solving crimes and building your successful investigations business.
Yes, a private investigation business can be very profitable because expenses are low and hourly rates are about $100. You should be able to grow your business by providing value to clients who will then give you referrals.
Rates can range from $80 per hour up to $200 an hour for services that require a higher level of skill, such as cyber investigations. Most private investigation services charge around $100 per hour.
To effectively market yourself as a private investigator, create a professional website that showcases your expertise and services. Utilize online platforms and social media to establish a strong online presence. Network with attorneys, insurance companies, and other potential clients in need of investigative services.
Private investigation businesses can handle a range of cases and investigations, including background checks, due diligence investigations, surveillance for legal or insurance purposes, locating missing persons, fraud investigations, domestic investigations, employee misconduct investigations, intellectual property investigations, security consultations, and process serving.
Familiarize yourself with local, state, and federal laws regarding surveillance, privacy, and evidence collection. Obtain any necessary licenses and certifications. Consult legal professionals to ensure you understand the legality of specific investigative techniques and always operate within the boundaries of the law.
States with high population and business activity like California, Texas, Florida, and New York often offer more opportunities for private investigators.
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