Where is your Profit Bottleneck?

If you are like most private investigators, you may be able to pinpoint an area or two that hasn’t done much for your bottom line. But many times, profits for private investigative firms are zapped in places you may not have considered.

Paul Beauchemin, a principal investigator for a Fortune 100 company, recently stated that gross margins at private investigative firms ranged between 24 and 28 percent in the last 3 years; however, after taxes he noted that profit margins came in at a paltry 1.8 to 7 percent.

With many private investigative businesses suffering from low profitability, what can you do to keep your firm not only afloat, but downright lucrative?

Here are a few areas of your business worth examining if your bottom line isn’t as thrilling as you’d hope:


The private investigative business is a labor-intensive business, meaning that your payroll is likely sucking up a good chunk of your profits. By some estimates, labor in a private investigative firm can equate to as much as 75 percent.

The problem may lie with the fact that as private investigators become more skilled at their jobs they either demand more money or move on, often taking clients with them. Recruiting and training the best private investigators, only to have them leave – and possibly take your clients with them – can be an incredibly draining – not to mention pricey – process.

For many private investigative firms, the answer may lie with freelancers. Hiring a freelance private investigator instead of investing a great deal of time and money hiring and training new employees may be the economical solution for which you have been searching. You can choose from the best and brightest, all the while saving yourself a considerable amount of hassle finding and keeping employees.

Other areas where it may pay to hire freelancers for your business include: marketing, administrative, payroll, and accounting. For private investigative firms, outsourcing is often the solution to tight profit margins.

Knowledge and Professionalism

With private investigative firms often offering clients similar services, what can you do to separate yourself from the crowd? For many private investigators, the key to increased business and better profit margins lies with the value of professionalism and expertise.

Private investigators should be experts in their field, with their most valuable resource being themselves. As such, professional development opportunities should be sought, and gaining valuable expertise in a particular area should be a goal. Knowledge cannot be faked, so staying ahead in terms of clients and profits always begins and ends with offering your clients the best services, which are ultimately born out of knowledge and professionalism.