If you want to start a private investigation business at home because you want to solve murders before the police and get involved in exciting car chases and shootouts, then you might want to consider another career choice.
As a private investigator (PI), you are much more likely to get the goods on cheating spouses, do background checks on employees or tenants, investigate insurance claims, track down missing persons, do skip traces on spouses who owe child support, and even deal with computer hackers and provide online security.
A private investigation company can be a rewarding and, at times, exciting career that requires investigative experience, the ability to read people, determination, and patience. We can help you investigate ways to get involved in this career path.
Training Needed to Become a PI
Looking at fictional PIs, such as author Raymond Chandler's character Philip Marlowe, you might think that all you need to become one is a hard jaw and the ability to reel off zippy one-liners. However, there's more to it than that.
Requirements for getting a PI license as an individual and a business vary from state to state, so you'll need to check the specific requirements of where you live and work. While some states don't have an educational requirement for becoming a private investigator, it's a good idea to have a bachelor's degree or an associate degree related to the profession, such as criminal justice or crime investigation.
Many states won't let you jump up from in front of the TV and start fighting crime. They might require that you have a certain amount of law enforcement experience in the public or military sector before you start. (Some states will permit you to substitute education for actual years of experience in law enforcement.)
Investigative Work Required Upfront
When deciding how to start a private investigation company from home, think about the kinds of services you want to offer. These can range from arson investigations, security services, and bounty hunting to executive protection, computer forensics, and wrongful death claims.
Expenses and Pay
Startup costs for a private investigation business range between $2,000 and $10,000. Expenses might include a laptop computer, scanner, covert still cameras and video cameras, PI agency licenses and surety bonds, access to specialized databases, marketing materials, office supplies, tape recorders, and more.
Ongoing expenses can include regular marketing and promotions, overheads for your home office, and things that will probably be billable to clients, such as travel and accommodations.
PI services are usually charged by the hour, according to the type of service you offer and your experience. According to the U.S. Bureau of Labor Statistics (BLS), the median pay for private detectives and investigators is more than $53,000 per year or $26 per hour.
The good news is that the job outlook for PIs is expected to grow 8% by 2029, much faster than many other kinds of jobs. Driving the demand will be ongoing security concerns of clients and the need to protect confidential information.
A PI's Market
A private detective's market will likely include law firms handling civil and criminal cases, insurance companies, corporations, property management companies, and individuals whose needs may range from finding a lost loved one to doing a background check on a new nanny.
Private Investigator Licenses Required
Again, you need to check with your particular state, but some require private investigators to have licenses both for themselves, as individual private detectives, and for their private detective agency. Other states require licensing at the local level or through professional associations.
You might have to take an exam before you get your PI licensing and complete mandatory firearms training if the state allows you to carry a gun.
Basic licensing requirements for individual PIs often include:
- Being at least 21 to 25 years old
- Passing a background investigation (proving you have a clean criminal record and good character)
- Some states require that an applicant have between two and five years of relevant work experience and/or education
Plan Ahead for Your PI Business
Just as you need to be clear-headed and detail-oriented as a private detective, you should not launch your new venture without creating a business plan and outlining the financial and operational details of your proposed company. This will help give you a clear idea of the private investigative agency's financial picture, including when you might start turning a profit.
Typically, a private investigation business plan includes:
- An executive summary
- A description of products and investigative services
- An explanation of how the company will be organized and managed
- A competitive review
- Marketing and sales details
- A financial review
Under marketing and sales, you would do a competitive review and a look at the needs of your target market. What kind of clients can you expect in the area you are serving and what kind of services do they need? Who would your competitors be, what kind of services do they provide, and how much do they charge? Are there opportunities for you to provide overlooked services, to play up more years of experience, or to offer lower rates?
Surety Bonds and Liability Insurance
Most states will require that you get bonded and insured, specifying coverage amounts you need to get a private investigation license.
A surety bond protects your clients from any illegal or fraudulent activity that your private investigator business might commit. You might go to a surety company and ask for a $15,000 bond, for instance, and pay a 1% to 3% nonrefundable fee for it. If an aggrieved client makes a claim through the state's regulatory agency and wins, they would be paid from the surety bond and the surety company would likely come after your business to recoup their losses, including legal fees.
Commercial general liability insurance is intended to protect your PI business from damages coming from accidental bodily injury and property damage to third parties. It doesn't cover injury to employees. You would need workers' compensation insurance for that.
You should also check with your home insurance provider about any additional coverage you may need to run the business from your home office.
How to Keep Your Business Legal and Stay Busy
You are close to being able to start your new private investigation business but there are some more legal, marketing, and day-to-day operation hoops you need to jump through first to really be set.
Choosing a Business Entity
Besides getting a business license as a PI, you'll have to choose a legal business entity for your venture. You have a choice of structures, including:
- Sole proprietorship: This is a business owned by an individual. If you run your business under a name other than your own, you may have to register a "doing business as" (DBA) name.
- Partnership: This is a business owned by two or more associates who share costs, profits, and liabilities.
- Limited liability company (LLC): While this is structured similarly to a sole proprietorship or partnership, an LLC has a greater separation between personal and business assets. This can be a plus when it comes to taxes or liability in case of a lawsuit.
- Corporation: This is an option usually used by larger businesses with a lot of employees. It's a more complicated business entity that can issue stock, have certain legal rights, and serve to protect owners from specific kinds of liabilities.
Small businesses usually go for the first three options. They will often need to register their name and business through the secretary of state. You should choose a name that is unique and easy to pronounce and that reveals the nature of your business. State laws may require you to choose one that isn't the same as or similar to one that's already taken. It's a good idea to research your name through state business records, as well as federal and state trademark databases.
As well, your private detective startup may have to obtain an employer identification number (EIN) from the Internal Revenue Service (IRS) for federal tax identification purposes and if you are planning to hire employees. You might also need a separate ID for state taxes.
For accounting and tax purposes and to keep your personal and business assets separated in case of legal action, you should open (and might be required to do so by the state) a business bank account and a business credit card. These financial instruments can also build up your business's credit rating, which will help if you want a business loan or extended line of credit.
Promote Your Private Detective Business
To keep the doors open for your PI business, you may have to do some marketing and promotional work. This could involve creating business cards, customized pens, flyers, brochures, letterhead, and more that you can hand out to happy or prospective clients to generate word-of-mouth traffic.
The customized letterhead could be used when sending solicitation letters or direct mail (DM) campaigns to potential clients. You can also reach them through free online business listing and review sites, such as Yelp and Google My Business.
These days, it's a necessity to have a business website, acting at the very least as an online brochure for your private investigation business. You can hire a freelance designer to create a website through an online talent-matching service like Upwork. Alternatively, you may want to create the site yourself using a pocketbook-friendly platform like Wix, Weebly, or Squarespace.
You should also use social media to reach existing and prospective clients. You can make posts about your services, answer client questions, respond to both good and bad reviews, offer discounts and promos, and keep track of conversations involving your business and the private investigation industry. Your use of social media shouldn't be haphazard; you should develop a social media marketing plan that lets you use different channels effectively - including LinkedIn, Twitter, and Facebook - with metrics to determine how you've done so you can refine future marketing efforts.
Get Small Business Backup When You Can
Running a small business smoothly requires the right backup. For example, it's great to have online templates, easily customized with your logo. These can be filled out and automatically sent to clients whenever you want to provide a quote to land new jobs or invoice clients for your services.
With Skynova's accounting software, not only can you easily generate invoices but you can also handle your accounting and bookkeeping needs even if you don't have accounting experience. This module makes it easy to keep track of payments and expenses so it's simple to get a clear financial picture of your business and prepare for tax time.
Let Skynova Be Your Partner in the PI Business
When you are launching and running your private investigation business, you'll want to focus on the job at hand so that you get good results for your clients - whether they be a lawyer, an insurance company, or someone else. With Skynova's business templates and software modules, you can handle functions like accounting, billing, and estimating simply.
It's good to have a small business partner who can help you take care of tasks that could otherwise serve as an unwelcome distraction as you detect your way to crime-solving glory.