We earn commissions if you shop through the links below. Read more

How to Start a Private Investigation Business

Written by:

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 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.

How to Start a Private Investigation Business

Fast Facts

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.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a private investigation business has pros and cons to consider before deciding if it’s right for you. 

Pros

  • Interesting Characters – Never a dull moment for a PI
  • Flexibility – Work as much or as little as you want
  • Do Good – Help people solve problems

Cons

  • Safety Risk – More dangerous than most businesses
  • Licensing – State regulations can be a burden

Private Investigation industry trends

Industry size and growth

private investigation industry size and growth

Trends and challenges

Trends in the private investigation industry include:

  • Security concerns over things like trademark infringement are driving higher demand for commercial private investigation services that include trademark investigations and competitor research. 
  • The demand for fraud investigations is rising, presenting more opportunities for private investigators to do more than just personal dispute investigations.

Challenges in the private investigation industry include:

  • Changing government regulations, including new video and audio surveillance laws, are making it more difficult for private investigators to collect evidence.
  • Because of the way private investigators are portrayed in the media, people often have unrealistic expectations of private investigators.
private investigation Trends and Challenges

Demand hotspots

  • Most popular states – The most popular states for private investigators are Montana, the District of Columbia, and Delaware.((https://www.zippia.com/investigator-jobs/best-states/))
  • Least popular states – The least popular states for private investigators are South Carolina, Indiana, and Florida.
private investigation demand hotspots

What kind of people work in private investigation?

  • Gender –  26.9% of private investigators are female, while 69.7% are male.((https://www.zippia.com/private-investigator-jobs/demographics/))
  • 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.
private investigation business earnings forecast

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: 

  • Computer
  • Video camera, other cameras
  • Audio recording equipment
Start-up CostsBallpark RangeAverage
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

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.

private investigation business earnings forecast

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.
How to Start a Private Investigation Business

How to Start a Background Check Business

How to Start a Private Investigation Business

How to Start a Security Guard Business

How to Start a Private Investigation Business

How to Start a Personal Concierge Business

Step 2: Hone Your Idea

develop a business idea

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
private investigation business idea rating

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
  • Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

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: Summarize your business concept, the market, and the reason your private investigation firm will succeed.
  • Business Overview: Describe what your private investigation firm does, the niche it fills, and why it’s needed.
  • Product and Services: Outline the specific investigative services you offer, such as background checks, surveillance, or fraud investigation.
  • Market Analysis: Assess the demand for private investigative services in your target area, including market size and client demographics.
  • Competitive Analysis: Identify your main competitors and what sets your firm apart from them in terms of services, expertise, and pricing.
  • Sales and Marketing: Explain your strategy for attracting and retaining clients, including advertising channels and networking tactics.
  • Management Team: Present the background and roles of the key players who will drive your firm’s success.
  • Operations Plan: Detail the day-to-day operations, such as client case management, reporting, and follow-up procedures.
  • Financial Plan: Provide financial projections, startup costs, and budgeting strategies for your firm.
  • Appendix: Include supplementary materials like resumes, permits, or detailed research that supports your business plan.
what to include in a business plan

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.

Step 5: Register Your Business

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.
types of business structures

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. 

Form Your LLC

Choose Your State

We recommend ZenBusiness as the Best LLC Service for 2023

starts at $0, plus state fees

4.7/5

starts at $0, plus state fees
Visit ZenBusiness

Step 6: Register for Taxes

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.

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. 

types of business financing

Step 8: Apply for Private Investigator Licenses and Permits

Business Licenses and Permits

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.

Step 9: Open a Business Bank Account

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. 

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.
types of business insurance

Step 11: Prepare to Launch

Launching a Business

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. 

You may want to use industry-specific software, such as ShotSpotter, Thomson Reuters, or eInvestigator, to manage your cases, evidence, reporting, invoicing, and payments.

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • 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. 

Marketing

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:

  1. Specialized Content Creation: Develop informative content on social media platforms, blogs, or webinars that showcase your expertise in specific investigation niches (e.g., corporate fraud, infidelity investigations). This establishes you as an authority in your field.
  2. Client Testimonials and Case Studies: Encourage satisfied clients to share their experiences through testimonials and case studies. This builds trust and credibility, assuring potential clients of your proficiency in handling diverse cases.
  3. Strategic Partnerships: Forge alliances with attorneys, insurance companies, and other related professionals. Establishing mutually beneficial partnerships can lead to referrals and a steady stream of clients.
  4. Community Outreach: Actively engage with your local community by participating in events, sponsoring local activities, and offering free educational seminars on personal or corporate security. This not only enhances your visibility but also fosters community trust.
  5. Social Proof through Certifications: Obtain relevant certifications and display them prominently in your marketing materials. Certifications serve as social proof of your competence and adherence to industry standards.
  6. Digital Advertising Targeted at Businesses: Utilize targeted digital advertising on platforms like LinkedIn or industry-specific forums to reach businesses in need of investigative services. Tailor your ads to address their pain points and emphasize the value you bring.
  7. Referral Programs: Implement a referral program that rewards existing clients or partners for referring new business to your agency. Word-of-mouth referrals can be a powerful source of new clients.
  8. Thought Leadership: Write articles for industry publications, participate in relevant podcasts, or speak at conferences to establish yourself as a thought leader. This exposure can attract clients seeking the expertise of a reputable investigator.
  9. Strategic Geographic Targeting: Focus your marketing efforts on specific geographic areas where there is a high demand for private investigation services. Tailor your messaging to address the unique concerns of that region.
  10. Engage with Online Forums and Groups: Actively participate in online forums and groups related to your investigative niches. Offer advice, answer questions, and subtly promote your services, showcasing your knowledge and building a network within the community.

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 
unique selling proposition

Networking

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

Building a Team for a New Business

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!

Running a Business

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. 

Comments

Leave a Reply

Your email address will not be published. Required fields are marked *

How to Start a Private Investigation Business