How to Start a Private Investigation Business

by Ibrahim Agunpopo
121 views 4 minutes read

Have you always had a knack for getting to the bottom of mysteries and revealing hidden truths? Does conducting surveillance, tracking down leads, and solving puzzles excite you? If so, starting your own private investigation firm may be the perfect career path for you.

The private investigation industry is booming, with an estimated global value of $16 billion. As legal cases, insurance claims, and suspicious situations continue to mount, demand for PIs grows. Read on to discover if this lucrative industry is right for you and how to launch your own PI business.

An Investigative Industry Full of Potential

Over 58,000 private investigation firms currently operate across the United States alone, generating combined annual revenue of $5 billion. Not only is the industry expansive, but it also offers immense growth opportunities. IBISWorld predicts the US private investigation market will continue expanding through 2027 with increases in both corporate spending and higher insurance claims fueling 3-4% annual growth. According to their analyis, revenue for investigation services is set to climb at a CAGR of 1.3% to $8.3 billion through 2024, including a 0.9% dip in 2024 alone

The profitable prospects don’t end at the American borders either. The global market value for private investigation services hit $15.12 billion in 2019 and is projected to rise at a compound annual rate of over 5% through 2027, resulting in a market size exceeding $23 billion.

So what’s driving this burgeoning industry? Several key factors come into play:

  • Increased Legal Activity = As lawsuits and criminal cases increase, so does demand for evidence investigations and credibility checks. Surveillance work and background searches are key PI tools that inform legal strategies and provide hard facts.
  • Insurance Claims Investigations = From fraudulent or inflated personal injury claims to suspicious home or commercial property damage claims, insurance companies heavily rely on PIs to uncover factual evidence regarding cases and claimant credibility.
  • Corporate Due Diligence Needs = Businesses lean on investigators for everything from pre-employment screening to intellectual property protections. They may also hire PIs to research prospective partners, investigate internal theft, or conduct secret shopper operations.
  • Matrimonial Investigations = From tracking down hidden assets to confirming infidelity accusations, PIs are a pivotal resource in separation and divorce cases. Surveillance, computer and mobile forensics, and exhaustive financial research pinpoint facts related to alimony arguments, child custody arrangements, and estate divisions.
  • Personal Situations = Individuals hire PIs for very personal reasons too. These range from anxieties over a loved one’s unexplained whereabouts to suspicions of a cheating spouse. Child custody concerns, family welfare checks, locating biological parents or siblings, and tracking down old friends also drive personal investigation requests.

Launching a PI business places you at the epicenter of all this demand across legal, corporate, insurance-based, matrimonial, and individual investigative needs. Let’s delve into the costs, steps, and details central to opening your firm.

Starting Your Private Investigator Firm: Initial Steps

While launching a PI company doesn’t require extensive formal education, investigative, possessing investigative and business acumen is crucial for competitive and legal reasons. Keep in mind due diligence laws, seek professional training, ensure licensing compliance, and focus on niche specialties to thrive in the expansive investigation marketplace.

Here are seven key steps for founding and operating your investigative agency:

1. Research Private Investigation Laws and Licensing

Before establishing a private investigation business, it is essential to thoroughly research the laws and licensing regulations governing the PI industry in your specific region, state, or country. Familiarize yourself with the local legal requirements before initiating any business paperwork or advertising your services. Obtaining the necessary licensing not only lends legitimacy to your operation but also ensures strict adherence to confidentiality, privacy rights, surveillance, and evidence procurement laws, fostering a reputable and compliant investigative practice.

Research specifics for your jurisdiction regarding:

  • Mandatory Licensure = While some US states, such as Alaska, Colorado, Idaho, Mississippi, and South Dakota, currently don’t require licenses, the majority do mandate an application process. This typically includes fees, documented experience hours, insurance minimums, age requirements, testing, etc., to legally practice investigations, surveillance, and evidence recovery. Countries around the world also take varied approaches to licensing in the private investigation field. Therefore, it is crucial to study whether or what licensure rules apply in your specific jurisdiction.
  • Continuing Education Minimums = Even if a license isn’t compulsory to operate in your area, considering certifications through a PI association or governing body is wise. Engaging in continuing education helps expand both business and investigative expertise, enabling you to excel as regulations and technologies progress.
  • Tax Structure = Determining your agency’s tax structure is a pivotal decision. Options include operating as a sole proprietorship, partnership, Limited Liability Corporation (LLC), S Corporation, or another business type. Examine these options to determine the most ethical and tax-advantageous approach for your private investigation agency.

2. Define Your Specialty Niche

Private investigators often wear many hats and engage in a wide range of cases. However, new agency owners tend to fare better by concentrating their knowledge and marketing efforts around specific niches, rather than diluting expertise across all investigative areas.

Would you prefer to focus exclusively on insurance claims, conduct background checks for employers, handle domestic cases, or specialize in corporate fraud? Tailor your training accordingly and craft messaging that resonates with your niche clientele. As your agency becomes established, you can consider diversifying into additional specialties over time. This focused approach allows you to build a strong reputation within your chosen niche and positions your agency for success.

3. Pursue Private Investigator Education & Training

While many jurisdictions do not mandate college degrees for obtaining a private investigator (PI) license, pursuing educational credentials and gaining hands-on case work is a wise move in this industry. Experience and credibility play a crucial role in driving business in the highly competitive field of private investigation.

Investigate what curriculum, degrees, or certificates are recommended or align with your planned specialty area. For instance, acquiring expertise in computer forensics can be incredibly valuable when investigating fraud. Consider coupling technical skills with investigative training, such as obtaining a Certificate in Private Investigations, to establish a commanding knowledge base.

If possible, seek out volunteer or internship opportunities to learn from seasoned PI mentors. Engaging in shadowing experiences for surveillance work, data searches, or witness interviews can provide invaluable real-world experience, enhancing your skills and understanding of the profession.

4. Assemble Your Physical & Digital Toolkit

In the private investigation industry, similar to any other field, professionals rely on robust equipment resources and cutting-edge technologies to capture evidence and conduct effective surveillance. It is crucial to assemble a comprehensive set of both digital and physical gear that aligns with the specific needs of the diverse cases expected within your target niche.

Common starter equipment for new PIs includes:

  • Document scanner & printer all-in-one device
  • Professional camera kit with telephoto capabilities
  • Dashboard camera
  • Audio recording devices: digital recorder, pen recorder, phone app
  • Lock pick set (ensure legality)
  • Headlamps, small flashlight
  • Vehicle GPS tracker (multiple for tailing)
  • Extra secure phone with encrypted apps
  • Binoculars, maps
  • Inconspicuous clothing, disguises
  • Computer with encryption, firewalls, case management software

As your agency grows, consider adding lobby surveillance systems, credentialing badge makers, mobile forensics tools, additional cameras, or drones to enhance your capabilities. It’s advisable to lease or finance more elaborate equipment only when your PI business income consistently supports such overhead, ensuring prudent financial management.

5. Establish Your Office Systems & Infrastructure

Every private investigation (PI) company requires basic back-office infrastructure to facilitate daily administrative operations. For bootstrapping startups, leaning on technology can help minimize costs. Utilizing cloud-based systems provides scalable solutions as caseloads grow. Key areas to consider include:

  • Client records & case management
  • Invoicing systems
  • Virtual phone services
  • Payment collection
  • Email marketing, CRM platforms, lead nurturing workflows

Factor basic office equipment like computers, printers, and supplies into your launch plans as well. Consider positioning your agency in a commercial space for client meetings later by leasing inexpensive office space or renting by the hour as needed initially. This approach allows for flexibility and cost-effectiveness during the initial stages of your PI business.

6. Acquire Private Investigator Insurance

Checking state or country rules regarding necessary liability coverages and policy minimums is crucial for maintaining a private investigator license. Understanding these regulations is vital to ensuring compliance. Here are key types of insurance to consider:

  1. General Liability: Protects against bodily injury or property damage that occurs on your business property.
  2. Professional Liability: Shields against damages or lawsuits resulting from oversights or mistakes in your professional services.
  3. Errors & Omissions (E&O) Policies: Add an extra layer of protection in this litigious industry, covering potential mistakes and negligence in your work.

Understanding the specific requirements and minimums mandated by your jurisdiction is essential. Discussing options with qualified insurance agents will help ensure that you have adequate and affordable coverage to protect both your business and your clients.

7. Fund Your Private Investigator Business Launch

Launching a private investigation agency involves significant capital investment, covering equipment, insurance, training, certifications, workspace, marketing, and a living salary as the business gains traction. On average, total startup costs can range from $10,000 to $60,000 or more, depending on the niche, services offered, and location.

If possible, consider self-funding your operation through personal savings. Additionally, explore small business administration grants or incentives programs available in your jurisdiction. Bank loans can also be a viable option, ideally securing loans with minimal interest rates. Seek guidance from the Small Business Development Center (SBDC) to structure competitive loan applications that showcase your private investigation acumen and capabilities. This strategic approach can enhance your chances of securing the necessary funding for a successful agency launch.

8. Setting Your Rates & Service Offerings

With your private investigator education, licensing, niche selection, tools, and workspace secured, the foundational elements are in place for smooth business operations. Now, shift your focus to profit-driving specifics, particularly defining your service offerings and setting rate structures.

Begin by studying competitors’ rates, taking into account your specialization, experience level, equipment assets, office expenses, cost of living, and desired profit margins. Consider billing higher rates for niche services like computer forensics, and set competitive prices for commoditized offerings like simple background checks.

It’s crucial to recognize that private investigators often dedicate 70-80% of their business efforts to sales and marketing. Seek guidance from seasoned PI agencies on structuring referral programs or partnerships with prominent law firms. Such channels can lead to high volumes of lucrative cases more effortlessly, enhancing the overall success of your business.

Top Locations Worldwide for Founding Private Investigator Business

  1. China:
    • Significant demand emerged post-2009 due to changes in censorship laws.
    • Opportunities for investigators fluent in Chinese law, with a focus on fraud services, corporate espionage, intellectual property protection, and complex divorce litigation.
  2. India:
    • Booming economy creates demand for corporate fraud and background check services.
    • Matrimonial and cybercrime cases are prevalent in this tech-savvy nation.
  3. The Philippines:
    • Regulatory changes have allowed and encouraged private detectives.
    • Economic growth and high social media usage contribute to demand for investigators skilled in digital footprint reconciliation and corporate due diligence.
  4. Kenya:
    • A relatively new industry with growing opportunities.
    • Increased demand for corporate research, fraud investigation, and executive protection services as businesses expand across Africa.
  5. United Kingdom:
    • Well-established investigation market with increased caseloads.
    • Population spikes in major metro areas and legal reforms, such as no-fault divorces, contribute to thriving sectors like matrimonial disputes and insurance claims investigations.
  6. United States:
    • Rapidly growing demand for private investigators, particularly in metropolitan hubs like New York City, Los Angeles, and Miami.
    • Opportunities in areas such as insurance fraud, infidelity and asset searches, digital forensics, and pre-employment screening.
    • The well-established legal and corporate climates ensure consistent case referrals, making the U.S. an ideal base for launching and sustaining lucrative investigation firms.

The diverse opportunities in these regions highlight the dynamic nature of the private investigation industry globally.

Tips for Operating a Profitable Private Investigator Business

Operating a profitable private investigation business involves strategic decisions and ongoing efforts. Here are tips to ensure your PI firm remains stable, productive, and highly profitable:

  1. Continuous Learning:
    • Invest in professional development courses and certificate programs.
    • Stay well-versed in technologies used by suspects and surveillance innovations.
  2. Build Relationships:
    • Develop close ties with law enforcement and legal communities.
    • Trusted relationships with detectives, attorneys, and paralegals lead to referrals.
  3. Clear Contracts:
    • Create binding contracts detailing rates, retainer fees, scope-of-work, encryption responsibilities, evidence ownership clauses, and confidentiality agreements.
  4. Discreet and Thorough Work:
    • Handle each case discreetly, cautiously, and without assumptions.
    • Follow leads thoroughly to avoid missed evidence and botched cases.
  5. Scalable Software:
    • Choose software and database systems capable of handling increasing caseloads.
    • Scalable solutions allow efficient management of records, evidence, reporting, and scheduling as the agency grows.
  6. Craft a Detailed Business Plan:
    • Dedicate time to carefully plan and research before starting your business.
    • Draft a solid business plan that outlines critical success factors, resources, challenges, mission, niche services, ideal customer profiles, startup budgeting, operations workflows, competitor analysis, income projections, and ethical guidelines.

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