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.
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.
Updated on May 16, 2023
$3,850 - $9,600
$52,000 - $208,000 p.a.
Time to build
$46,000 - $83,000 p.a.
How to Start a Private Investigation Business
Decide if the Business Is Right for You
Hone Your Idea
Brainstorm a Private Investigator Business Name
Create a Private Investigation Business Plan
Register Your Business
Register for Taxes
Fund your Business
Apply for Private Investigator Licenses and Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Run a Private Investigation Business - Start Making Money!
Private Investigation Business FAQs
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.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
Average level of education – The average private investigator has a bachelor’s degree.
Average age – The average private investigator in the US is 42.7 years old.
How much does it cost to start a private investigation business?
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:
Video camera, other cameras
Audio recording equipment
Setting up a business name and corporation
$150 - $200
Business licenses and permits
$100 - $300
Business cards and brochures
$200 - $300
$1,000 - $3,000
$1,000 - $3,000
Video camera and other cameras
$800 - $1,500
License and bonding
$500 - $1,000
$3,850 - $9,600
How much can you earn from a private investigation business?
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.
What barriers to entry are there?
There are a few barriers to entry for a private investigation business. Your biggest challenges will be:
Getting licensed, which usually includes a background check
Generating startup financing
Related Business Ideas
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
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.
Why? Identify an opportunity
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.
What? Determine your products or services
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.
How much should you charge for private investigation services?
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.
Who? Identify your target 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.
Where? Choose your business premises
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:
Central location accessible via public transport
Ventilated and spacious, with good natural light
Flexible lease that can be extended as your business grows
Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Private Investigator Business Name
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:
Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
Name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “investigation” or “private investigation”, boosts SEO
Name should allow for expansion, for ex: “Shield Investigative Services” over “Insurance Fraud Investigators”
Avoid location-based names that might hinder future expansion
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.
Step 4: Create a Private Investigation Business Plan
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:
Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
Product and Services: Describe your offerings in detail.
Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
Appendix: Include any additional financial or business-related documents.
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.
Make Logos, Business Cards, Social Designs and More!
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!
Choose where to register your company
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.
Choose your business structure
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:
Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company(LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
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.
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.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best option, other than friends and family, for funding a private investigation business.
Step 8: Apply for Private Investigator Licenses and Permits
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.
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.
Step 10: Get Business Insurance
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:
General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
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.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Develop your website
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.
Some of your business will come from the casual online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
Instagram: Same benefits as Facebook but with different target audiences.
Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Schedule Now”. This can sharply increase purchases.
Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal.
Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
Seek out referrals – Offer incentives to generate customer referrals to new clients.
Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
Do a webinar – Share your private investigation expertise online with a video seminar.
Testimonials – Share customer testimonials about how your private investigation services helped them.
Focus on USPs
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:
Discreet investigations to get to the root of your issue
Commercial private investigation services to protect your business
Private cyber investigations to track your hackers
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.
Step 12: Build Your Team
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:
Investigators – assist with cases
Receptionist – take calls, greet clients, customer service
General Manager – scheduling, accounting
Marketing Lead – SEO strategies, social media
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.
Step 13: Run a Private Investigation Business – Start Making Money!
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.
Private Investigation Business FAQs
Can a private investigation business be profitable?
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.
How much can I charge for private investigation services?
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.
How do I market myself as a private investigator?
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.
What types of cases or investigations can a private investigation business handle?
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.
How can I gather evidence and conduct surveillance effectively and legally?
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.
What state is best for private investigators?
States with high population and business activity like California, Texas, Florida, and New York often offer more opportunities for private investigators.