After a decade of running a private investigation agency, the Diligentia Group’s Brian Willingham looks back on what counts most for his company’s bottom line.
At the beginning of each year, I typically sit down to reflect on the past year and to plan a little bit for the year to come. In general, I’m not much of a planner. I know people love to set goals, targets, business plans, and such. I think it’s a massive waste of time, especially for a small business.
But I need to stay competitive, find trends, and refine my tactics and methods to keep growing my business.
I love to read academics, bloggers, and business people expound the virtues of how to “Simplify Your Business,” “Build Good Habits,” or “Stop Being Crazy at Work.” I can listen to Gary Vaynerchuk all day, telling me about B2B marketing trends for 2019. Or Jason Fried can give me a play-by-play on how to avoid exhaustion, stress, and burnout.
But what’s more important to me is to have real data about what makes my business better. “Practical intelligence” is what I like to call it. One thing that’s about as practical as you can get is looking at the bottom line.
So every year, I sit down to review my financial statements, to get a better understanding of where my dollars were spent and more importantly, how my dollars came in. Trying to figure out what worked and what didn’t, using some real data.
This year’s data is even more interesting than in previous years, since it’s now been nearly a decade since I opened my “office” in the basement of my condo.
I’ve since graduated to a real office. I have one investigator on staff and also use a number of outside investigators on a regular basis.
Here are some things I am seeing.
For years, I’ve been howling to anyone who would listen that my website has been the single most important thing that I have done for my business. From a pure dollar standpoint, that’s totally not the case, but it’s still one of my most valuable assets.
Let me explain.
On average, we’ve estimated about a 1,200 percent return on our investment each year for every dollar we put into the website. In other words, for every $1,000 we spend on video production, proofreading, hosting, website design, stock photography, and whatever else it takes to bring the site to life, we bring in about $12,000 in revenue—twelve times what we spent.
Sounds like a pretty good investment, right?
It was a great investment. And continues to be.
But it’s 2019. Everyone has a website. So having a website doesn’t really mean a damn thing unless you are driving people to said website.
In our case, we’ve had more than one million visitors over the past ten years, and at our peak, we had 40,000 visitors a month. That wasn’t because I paid some sketchy firm in the Philippines to get me to the number one position on Google or forked over thousands of dollars over a ten-year period in Google Adwords. It was completely organic, and it was all because of blogging.
To date, I’ve written over 275 blog posts—some of which I have poured my heart and soul into, only to be read by a handful of people. (This is one of my favorites, which has been read by my mom and wife, and that’s about it.) Meanwhile, others I wrote, like this one, continue to get hundreds of visitors each month. The beauty of blogging and the Internet is that these posts have an amazing shelf life.
Now, there are a couple of pretty big caveats here.
First, it took me nearly a year-and-a-half of blogging before I saw a single new client from my website. So I am not going to pretend that this was some get-rich-quick scheme.
Also, when I started blogging in early 2010, I was literally one of the only ones. Apparently, the rest of the world has finally figured it out, too. So if you’re starting a blog today, it might require a bit more effort to get some traction. And there are so many other ways to build a following these days: through YouTube, Twitter, Facebook or other social media sites.
Secondly, the return on investment doesn’t take into account the countless hours it has taken to write those 275-plus articles.
Website Brings Direct Work, but It’s Small and Time Consuming
One side effect of website traffic is that you get lots of inquiries from people who are absolutely batshit-crazy. So when I first started, I would pick up the phone in the middle of the night and have lengthy discussions with people who had no intention of actually becoming a client but just wanted to pick my brain or have someone to talk to.
That got old quickly.
I soon began steering people to email me or submit an inquiry on a website form so I could answer when it was convenient for me (and get some sleep) instead of when it was convenient for them.
And when that didn’t work, I used an answering service to weed out all of the unqualified people, spam calls, or people who were just looking for free advice.
In the early days, I wasn’t terribly strategic about what I was writing. Most experts will tell you to write a blog post for your ideal client, but I would write about a case I’d just worked, anything I found interesting, or stuff that pissed me off. So when I wrote about how to find someone on Facebook without knowing their name, I didn’t realize that it would turn into ~300,000 pageviews and hundreds of inquiries from psychos looking for their true love, whom they passed by on the street and “forgot” to ask for their number.
The other thing about web inquiries was that they were usually from people looking for a long-lost loved one or a background check on a possible new family member. These were typically people who’d never used an investigator before and needed a lot of hand-holding. Many of them had a specific need in a specific situation, so I would probably hear from them once and never again. In fact, 80 percent of these website clients only worked with us on one occasion.
That’s not an easy number to duplicate every year.
Like everyone else, I’d rather have good, repeat clients, not one-offs or one-timers.
Lifetime Value of a Client
All of this got me thinking: What was the actual lifetime value of a client who came in?
The average value of the client who came through the website over their lifetime? $3,420. Average value of a referral client? $12,552. Average value of a personal reference? $27,691.
In summary, blogging drove tons of traffic, which in turn drove tons of inquiries, which in turn drove work. But it was time-consuming and not hugely lucrative. If I look at my top 20 clients by revenue over the last ten years, 63 percent were personal connections, 30 percent were from referrals, and 7 percent were from the website.
That said, the website still drives about 15 percent of overall business and 30 percent of new business, so it’s still valuable.
Where Does Business Come From?
Since 2009, 55 percent of our revenues have come from personal connections that I have developed over the years, whether it’s from former colleagues, former clients, friends, relatives, or whatever.
Another 30 percent were from referrals. In most cases, it’s the above personal connections who have referred me.
The remaining work, 15 percent, has come from the website.
I’ve made my case for the website. It’s certainly valuable, but the percentage of work from personal connections and referrals is pretty astronomical and a bit of an eye opener.
So if you asked me today, if I had to spend $5,000 on a new website or $5,000 on building relationships, I think I would chose building relationships ten out of ten times.
Don’t Put Your Eggs in One Basket
We’ve had one major client who, since 2009, has accounted for around 35 percent of sales. I am forever grateful for that relationship. I truly don’t know where I would be without this client, but that’s a worrisome number of eggs to place in one basket.
In the very early days, this particular client accounted for about 70 percent of my work and was one of only seven clients I had. I knew right from the start that I didn’t want to rely on any one client and that having a diverse set of clients was critical for my future. Over the last seven years, this one client has ranged anywhere from 20 percent to 50 percent of my business in any given year.
Fifty percent is way too much. Today, this client accounts for about 20 percent of overall sales and is one of about 55 clients I do business with regularly.
It’s nice having a great client relationship with someone who gives you interesting work. It’s easy to sit back and not look for other clients, knowing that you have a dream client in your back pocket, but that’s a dangerous game. They can disappear at any moment.
Over the last few years, we have averaged about 55 clients per year, which is much more comfortable than seven. I’d like to keep it that way.
On average, new business accounts for about 30 percent of revenues each year. I’m not sure what the going rate is for a professional service business, but considering that about 70 percent of our revenue is from existing clients and 30 percent is from new business, I am pretty happy with that.
Anyone in this business knows that it’s hard to predict work. There have been times when my biggest client from one year all but disappeared the next year, since it was a criminal case that went to trial and was over. We don’t sell widgets or have a steady stream of income from ongoing services, so business is going to fluctuate.
This can make this industry absolutely maddening. But it’s also what makes it interesting and unique. And it means you’d better be financially prepared for the ups and downs.
Things that Don’t Show Up on Financial Statements
Some things don’t show up on the sales data, issues I feel the need to point out. All of these sales from referrals, personal connections, and to a lesser extent from the website, would not have happened without three things: doing great work, being helpful, and being kind.
My best marking tool is doing great work. There is no close second.
Whether it’s a potential client, someone who wants to get in the business, or a fellow investigator who needs a set of listening ears, being helpful and kind to people has always given me a lot a satisfaction. I know that being kind is not generally in the vocabulary of private investigators, but it’s in the vocabulary of most humans and should be utilized more often.
The other thing that will never show up on my financial statements is the brand that I’ve created by blogging, social media, and connecting with people over the years. There is no dollar amount to place on that. The reality is that we are never going to get a client based on something that I say on social media. But in this day-and-age, not having a social media presence is akin to not existing at all.
At the end of the day, it’s tough to separate one factor from another when it comes to what drives business. Doing good work, treating people well, forming strong relationships, and maintaining an idea-driven industry blog are all pieces of an interlocking puzzle that takes years to assemble. I’ve befriended many fellow investigators who found me via my blog or a social media feed; we then refer clients to each other, some of whom become repeat customers—but only if I do a great job for them.
So assigning a specific dollar figure to any one of the elements I mentioned is tricky at best. All I know is that establishing a strong reputation and brand requires all of those elements in various combinations, deployed over time. And it’s a formula that’s always in flux.
Brian Willingham is a New York private investigator, Certified Fraud Examiner, and founder of Diligentia Group. To read more Willingham wisdom, check out his blog and his previous stories for PursuitMag.