As I enter my fifth year in business, I am proud of the fact that I am about to beat the odds. According to the U.S Dept. of Commerce, only one in two small businesses survive for more than five years. Having launched my business in January of 2007, most of my time as a small business owner has been, in what many believe, to be the toughest economy since the great depression. What can we as PI’s do to ensure we succeed in tough times? Here’s what has worked for me:
Have a Plan
It has been said that those who fail to plan, plan to fail. There is almost nothing you will ever do that will consume more of your time, treasure and talents than running your own business. I retired from law enforcement where there seems to be a game plan for everything, from forced cell extractions, to felony car stops, to high risk search warrant service. A game plans in the law enforcement context is an outline describing the mission to be completed, by whom, what their individual responsibilities are. It defines the outcome and how you know if you have met that objective or not. A business plan is nothing more than a game plan for your business. Amazingly, most of the PI’s I know never took the time to write a business plan. Your business plan is your game plan for success.
The game plan for your PI business should not be a one time exercise that you forget about as soon as you’re up and running. It is a living document that should be referred to regularly throughout the year and revised at least annually. You might consider including a section that outlines your operational, marketing, and financial goals and the benchmarks you hope to hit monthly or quarterly to see if you are on track. Take the time once a month or quarter to review your actual performance and make adjustments as needed.
Marketing, marketing, marketing!
You can’t turn on the TV without seeing a McDonald’s, Budweiser, Ford or IBM commercial. If these well established, international, multi billion dollar companies have to advertise their well known and established products, how can you expect to succeed if you don’t advertise yours? Personal networking at industry associations such as your local Bar Association, a professional marketing flyer and good old business cards are a good start. Potential clients won’t know you’re out there if you don’t tell them!
Optimize your website
This assumes you have a website and for any PI that is serious about developing their business, this is a must. Optimization means doing what it takes, or paying a service to do what it takes to ensure your website registers on the search engines for the services you provide. It bears repeating, potential clients won’t know you’re out there if you don’t tell them!
Charge a fee commensurate with your experience
Deciding what to charge your clients is more art than science. Fees for licensed private investigators can range from $25 per hour for sub-contacted work to more than $150 per hour for specialized work. We are all in business to make money. Being the lowest priced does not necessarily mean you’ll get more work. In fact, sometimes it can work against you by making your service look cheap compared to your competitors. Find out what the service rate range is in your market, make an honest assessment of your skills, background and experience and set your fees accordingly. If you have a particular area of expertise that is in high demand, take that into account and charge higher rates. At the very least you should be priced slightly above the average rate of your competitors.
Use a retainer agreement
Cash flow is the mother’s milk of any business. You need cash to survive. But managing accounts receivables and collections for work already performed can be a drag for the small business owner. The best way to avoid being owed for services performed is to collect payment up front by way of retainer. You should also have a retainer agreement or contract that clearly defines the scope of the work to be completed in the event your client fails to pay after the fact. This can help you convince the client to pay or provide the means to secure a judgment against them in court if need be.
Keep up to date with training
This PI industry is not a static one. Every year there are countless additions, modifications and update to the volumes of laws, codes and administrative materials we work with in the various aspects of investigations. Technology advancements are creating better, more efficient, cameras, recorders, tracking devices and other tools of the trade at an alarming rate. In addition, business applications like the i-Pad, remote desktop applications and accounting or case management software help us operate more efficiently at less cost. The best way I know of to keep abreast of these essential changes is to join industry associations like the California Association of Licensed Investigators and attend professional conferences and seminars where you can rub elbows with experts in the field. They say experience is the best teacher, but it often comes at a price. Why not find out what works best from those who have already paid the price and put that knowledge to work for you?
You can do it!
If starting and running a successful business were easy, everyone would do it. But there have been plenty of business successes even in tough times, look at these examples from the great depression:
- Howard Johnson’s was a single restaurant until 1932. Through franchising, it added 40 restaurants by the end of 1936 and had 107 units by 1939.
- Boeing created the first modern airliner, the 247, in 1933.
- Hormel introduced its canned chili in 1936 and Spam in 1937 while the Depression was in full swing.
- Curt Carlson founded the Carlson Cos. — today a multibillion-dollar behemoth — in 1938 with a $55 loan.
- A downturn can spark great things. In 1975, at the end of another serious recession, Roger Schelper and his buddies decided to open what is today Davanni’s, a New York-style pizzeria in Minneapolis-St. Paul.
If you practice good sound business principles in your PI business now, you are laying the foundation for your business to be well positioned to capitalize when the economy does rebound.