How to start a private investigation business: your first moves

Starting a private investigation business is a rewarding venture that combines keen observation and discretion with smart business sense. The industry is worth billions, with steady demand for investigators to handle everything from corporate fraud and background checks to supporting legal cases.

This guide will take you through the practical steps of obtaining necessary licenses, validating your business concept, acquiring equipment, and securing funding to help you launch a successful private investigation business in the U.S.

Step 1: Plan your business and validate your idea

First, gauge local demand. You can talk to attorneys, insurance adjusters, and corporate security managers to understand their needs. Reviewing public court records also reveals the types of cases that frequently require investigation in your area, pointing you toward a profitable niche.

Many new investigators make the mistake of offering every service. Instead, focus on one or two specialties, like background checks for landlords or surveillance for family law cases. This helps you build a reputation and market your business more effectively.

Estimate your startup costs

With a niche in mind, you can create a realistic budget. Initial investment often ranges from $2,000 to $7,000, but this varies by state and the scale of your operation. Your primary expenses will likely include:

• Licensing and insurance: $500 - $3,000, depending heavily on state requirements.
• Basic equipment: $1,000 - $2,500 for a quality camera, audio recorder, and GPS tracker.
• Business setup: $500 - $1,500 for LLC formation, a simple website, and business cards.

Here are 3 immediate steps to take:

• Identify a potential niche by speaking with three local attorneys about their needs.
• Research two competing PI agencies in your area to see what services they specialize in.
• Draft a preliminary budget using the cost estimates provided for your specific state.

Step 2: Set up your legal structure and get licensed

You should form a Limited Liability Company (LLC) to protect your personal assets. Once your LLC is registered with your Secretary of State, get a free Employer Identification Number (EIN) from the IRS. You need an EIN to open a business bank account.

State licensing and insurance

Private investigation is regulated at the state level. For example, Texas PIs are licensed by the Department of Public Safety, while California uses the Bureau of Security and Investigative Services. Most states require you to be over 21 with a clean criminal record.

Application fees typically run from $100 to $500, and processing can take 60 to 120 days. A big mistake is to take cases before your license is in hand; this can lead to fines and application denial. So, plan for this waiting period.

With that in mind, you will also need insurance. Most states mandate Errors & Omissions (E&O) coverage. A standard $1 million policy protects you from client claims and may cost between $500 and $1,000 annually. Secure this before you finalize your license application.

Here are 4 immediate steps to take:

• File for an LLC with your state's Secretary of State.
• Apply for a free Employer Identification Number (EIN) on the IRS website.
• Find your state's PI licensing board and download the application forms.
• Contact an insurance agent for a quote on a $1 million E&O policy.

Step 3: Secure your insurance and manage risk

Beyond the required E&O policy, you need other coverage. General Liability insurance protects you if you accidentally damage property or cause injury during a job. A $1 million policy typically costs $400 to $700 annually.

Key insurance policies for PIs

Your personal auto policy will not cover you during surveillance work. You need a separate commercial auto policy for any vehicle used for business. If you plan to hire other investigators, you must also have workers' compensation insurance.

A big mistake is to use a general insurance agent. They often do not understand the unique risks of PI work, such as claims of defamation or invasion of privacy. You should work with a specialist. Consider providers like El Dorado Insurance, NAPLIA, or Lockton Affinity who focus on the investigation industry.

Here are 4 immediate steps to take:

• Get quotes for a $1 million General Liability policy.
• Ask your auto insurer about a commercial policy for your business vehicle.
• Contact a specialized provider like El Dorado Insurance for an E&O quote.
• Review your state's workers' compensation laws if you plan to hire staff.

Step 4: Choose a location and buy your equipment

Most new PIs start with a home office to keep overhead low. A dedicated commercial space is rarely necessary at first. You should check your local zoning ordinances for rules on home-based businesses, but professional services like investigation are often permitted without issue.

Your investigator's kit

Your effectiveness often depends on your gear. A common misstep is buying cheap gadgets that fail during a case. It is better to invest in reliable equipment from the start. You can find what you need from online suppliers like SpyTec or BrickHouse Security.

• DSLR Camera: A camera with a telephoto lens (300mm or more) is a core purchase. Expect to spend $700 to $1,500 for a dependable setup.
• Covert Camera: For indoor work, a pen or button camera is useful. These range from $100 to $300.
• GPS Tracker: A magnetic tracker is invaluable for surveillance. The hardware is about $50, but the monthly data plan will run you $20 to $50.
• Digital Voice Recorder: A small, high-quality recorder for notes and interviews costs between $50 and $150.

Here are 4 immediate steps to take:

• Check your city’s zoning rules for home-based professional services.
• Create an equipment budget, prioritizing a quality DSLR camera and lens.
• Compare GPS tracker subscription plans from two different suppliers.
• Browse covert camera options on a specialty site like SpyTec.

Step 5: Set up your payment system

Billing and retainers

Most PIs work on a retainer basis. You should request an upfront payment, typically $1,000 to $5,000, before you begin an investigation. This amount is held in trust, and you bill your hourly rate and expenses against it. Always get a signed agreement first.

A mistake some new investigators make is to start work without a retainer. This leaves you vulnerable if a client disputes charges later. Your contract should clearly state your hourly rate, what the retainer covers, and how you will handle any unused funds.

Accepting payments

You need a reliable way to get paid. For investigators who meet clients in person, a mobile payment solution is a great fit. It allows you to secure a retainer on the spot, which can be the difference between landing a case and a client walking away.

For private investigation businesses that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit and digital wallets directly through your smartphone - just tap and done. Other providers often charge 2.5% to 3.5% plus monthly fees.

At just 1.99% per transaction with no hidden costs or extra hardware needed, it's particularly useful for collecting retainers from new clients immediately. Getting started is straightforward.

• Get Started: Download the JIM app for iOS.
• Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
• Access Funds: Your money is available right on your JIM card as soon as the sale is done - no waiting for bank transfers.

Here are 3 immediate steps to take:

• Draft a standard retainer agreement that specifies your hourly rate and payment terms.
• Research two accounting software options, like QuickBooks or FreshBooks, for invoicing.
• Download the JIM app to see how it works for mobile payments.

Step 6: Fund your business and manage finances

Secure your startup funding

Most PIs self-fund or use personal loans. If you need external capital, an SBA Microloan is a strong option. These loans go up to $50,000 and are designed for new businesses. Interest rates typically range from 8% to 13%.

A mistake is to apply without a solid business plan. Lenders want to see your niche, projected costs, and how you will find clients. Your plan from Step 1 is your best asset here. Prepare it before you approach any lender.

Manage your working capital

You should have at least six months of operating expenses in the bank. For most solo PIs, this means having $5,000 to $10,000 set aside. This covers insurance, fuel, marketing, and subscription fees while you build your client base.

With your funding secured, open a separate business bank account immediately. Mixing personal and business finances complicates taxes and pierces the liability protection of your LLC. This is a simple step that protects you legally and financially.

Here are 4 immediate steps to take:

• Calculate your estimated operating costs for the first six months.
• Research two SBA-approved microlenders in your state.
• Open a dedicated business checking account for your LLC.
• Update your business plan with detailed financial projections.

Step 7: Hire your team and set up operations

You will likely start as a solo operator. As you get busier, consider subcontracting work to other licensed PIs. This lets you take on more cases without the overhead of an employee. Expect to pay subcontractors between $30 and $60 per hour, depending on their experience.

A big misstep is to hire a subcontractor without thoroughly vetting them. Always verify their license is active and check their references. Your license is on the line if they make a mistake, so treat this process with care.

Set up your operational software

Spreadsheets will not cut it for long. You should use case management software to keep your investigations organized. Programs like CROSSTrax or Trackops help you manage case files, track time, and generate client reports. Monthly costs are around $50 to $150 per user.

Once administrative work consumes over 25% of your week, you might want to hire a part-time administrative assistant. They can handle scheduling, invoicing, and client intake for about $18 to $25 per hour. This frees you up for billable investigative work.

Here are 4 immediate steps to take:

• Create a list of three licensed PIs in your area you could use as subcontractors.
• Request a demo for a case management software like CROSSTrax.
• Outline the specific tasks you would delegate to an administrative assistant.
• Confirm your state's legal distinction between an employee and a subcontractor.

Step 8: Market your business and get clients

Build your professional network

Your first clients will likely come from referrals. Focus on building relationships with attorneys, paralegals, and insurance adjusters. You might want to attend local bar association meetings or legal industry mixers. Set a goal to connect with five new legal professionals each month.

Many new investigators try cold calling or sending mass emails, but this approach rarely builds the trust needed for this line of work. A personal introduction from a mutual contact is far more powerful. Your reputation is your best marketing asset.

Establish your online presence

A simple, professional website is a must. It should clearly state your niche, services, and license number. You do not need a complex site; a clean one-page design is often enough. Also, set up a free Google Business Profile to appear in local search results.

Once your site is live, you can expect about 2-3% of visitors to contact you. Your cost to acquire a client through online channels might range from $100 to $400, depending on your market and the competitiveness of your niche.

Here are 4 immediate steps to take:

• Create a list of 10 local law firms that practice in your niche.
• Set up your free Google Business Profile with photos and service details.
• Draft the content for a one-page website that highlights your specialty.
• Find one local bar association event to attend in the next month.

Step 9: Set your pricing strategy

Choose your pricing model

Most PIs charge an hourly rate, typically between $75 and $150. Your rate depends on your location and specialty. For example, a complex financial fraud case in a major city will command a higher rate than a simple locate in a rural area.

For predictable tasks like background checks or asset searches, you might offer a flat rate. A basic background check could be priced from $150 to $500. This gives clients cost certainty, which can be a good selling point for specific services.

Research rates and billable expenses

To set your rate, call five other PI agencies in your area and ask for their hourly rate and retainer requirements. Many will tell you over the phone. It is tempting to undercharge to get clients, but this often backfires by attracting clients who dispute every charge.

Remember that your hourly rate covers your time, not your expenses. You must bill separately for costs like mileage (at the current IRS rate), database fees, and court filing charges. A frequent error is to absorb these costs, which directly eats into your profit margin.

Here are 4 immediate steps to take:

• Call five local PI agencies to research their hourly rates.
• Decide on your standard hourly rate based on your market.
• Create a flat-rate price for a basic background check.
• Make a list of all expenses you will bill separately, like mileage and database fees.

Step 10: Control quality and scale your business

Maintain high standards

Your reputation depends on consistent service quality. After each case, you might ask clients for a simple 1-10 satisfaction rating. An average score of 9 or higher shows you are on the right track. This feedback is more valuable than any advertisement.

As you gain experience, consider a professional credential like the Professional Certified Investigator (PCI). Many investigators damage their brand with inconsistent reports. You can avoid this by creating a standard report template to ensure every client receives a professional, uniform document.

Plan your growth

Growth should be deliberate. If you turn down more than 20% of qualified cases in a month because you are too busy, it is time to engage a subcontractor. This lets you expand your capacity without the commitment of a full-time hire.

Once non-billable work like invoicing and scheduling consumes over 10 hours of your week, a part-time virtual assistant can free you up. This allows you to focus on investigative work. Your case management software, like CROSSTrax, will be vital to manage the increased workload.

Here are 4 immediate steps to take:

• Research the requirements for a Professional Certified Investigator (PCI) credential.
• Create a standard client report template for your agency.
• Track the number of qualified cases you turn down over the next 30 days.
• Log your non-billable administrative hours for one week to assess your workload.

Starting your private investigation business is an exciting path. Remember that your reputation for discretion is your most valuable asset, more than any piece of gear. You have the roadmap to get started, so trust your instincts and begin your journey with confidence.

And when you land that first client, getting paid should be just as straightforward. JIM turns your smartphone into a card reader, so you can accept payments on the spot for a flat 1.99% fee. No extra hardware is needed. Download JIM to get set up.