Private Investigation Business Overview
Private investigation businesses provide professional investigative and detective services to individuals, companies, law firms, and insurance providers. These firms conduct various types of investigations and background research.
Many investigators have backgrounds in law enforcement, military service, or other security roles, bringing valuable skills and knowledge to their work. While technology has improved investigation capabilities, the profession still requires strong analytical abilities, attention to detail, and excellent communication skills.
Related: Checklist To Start A Business
How Do Private Investigation Businesses Make Money?
Private investigation firms generate income through various investigation and research services provided to their clients. The most common sources include:
- Background Check Services: The primary source of revenue comes from conducting background checks for employers, as businesses constantly need to verify potential employees’ histories. These checks typically include criminal records, employment verification, and education confirmation.
- Surveillance Services: Investigators monitor and document the activities of individuals in cases involving insurance claims, infidelity, or child custody disputes. This includes both physical and digital surveillance methods.
- Corporate Investigation: Services involve investigating workplace incidents, employee misconduct, theft, or fraud within companies. Investigators gather evidence and prepare detailed reports for management or legal teams.
- Legal Support: Investigators assist attorneys by locating witnesses, conducting interviews, gathering evidence, and providing expert testimony for civil or criminal cases.
- Insurance Investigation: Work involves examining suspicious claims, documenting evidence of fraud, and providing detailed reports to insurance companies.
- Missing Persons: Investigators help locate missing individuals, ranging from finding long-lost relatives to tracking down debtors for financial institutions.
- Digital Forensics: Services include recovering digital evidence, analyzing electronic devices, and investigating cybercrime incidents for both individuals and businesses.
Industry Statistics
Private investigation services are classified under NAICS 561611 – Investigation Services. This classification includes businesses performing investigation, detective, and background screening services. Here are some important numbers about the industry.
Private Investigation Industry Size & Growth: The investigation services industry generated $8.3 billion in revenue last year. Over the past five years, the industry has shown modest growth, with an average annual increase of 1.3%. Growth projections indicate continued expansion over the next five years as companies maintain strict hiring practices and increase their focus on preventing fraud and theft. (IBISWorld)
Number of Private Investigation Businesses: Currently, 25,051 private investigation firms operate across the country. The industry remains highly fragmented, with no single company holding a dominant market position. This fragmentation creates opportunities for new firms to establish themselves in local markets or specialized investigation niches. (IBISWorld)
Private Investigation Profit Margin: Private investigation firms typically maintain moderate profit margins. While individual cases can be quite profitable, operating costs, including employee wages, insurance, and technology investments, impact overall profitability. Net profit margins for investigation firms average between 6-10% of revenue.
Startup Stories
Costs To Start a Private Investigation Business
Starting a private investigation business typically costs between $5,000 and $50,000. The range varies based on the size of the operation and the types of services offered.
There are several expenses to consider when starting a private investigation business. Here are some of the common costs:
Training and Licensing: Private investigators need proper licensing and training to operate legally. This includes completing required coursework, passing background checks, and obtaining state-specific licenses. The costs for training programs and licensing typically range from $1,500 to $5,000.
Equipment: Professional investigation equipment includes surveillance cameras, recording devices, computer systems, and specialized software for background checks and data analysis. Basic equipment packages start around $2,000 but can exceed $15,000 for more advanced technology.
Insurance: Professional liability insurance protects against claims of negligence or errors in investigations. General liability and professional insurance coverage generally cost between $1,200 and $3,000 annually, with some carriers requiring upfront payment for the first year.
Office Space: While many investigators start from home, some choose to rent office space for client meetings and document storage. Monthly rent, plus utilities and basic office furnishings, can range from $500 to $2,000.
Vehicle: A reliable vehicle is necessary for surveillance work and traveling to investigation sites. When dedicated for business use, vehicle costs typically range from $8,000 to $25,000, depending on the type and age of the vehicle.
These estimates provide a general overview of startup costs, but actual expenses will vary.