Would you rather have one case that paid $10,000 or ten cases that paid $1,000?
We’ve chosen the latter strategy. Our experience has been that ten “small” cases will produce ten more cases a lot faster than one large case will produce another large case. Those ten cases typically came from four or five attorneys, who in turn referred two to three other attorneys to us.
And frankly, those ten “small” cases often developed into much larger cases, often three to four times the initial amount designated.
Using this strategy and a “blended” hourly rate, within three years our client list, revenues, and case volume had grown so much that we hired another investigator, began contracting with other agencies, moved to larger offices, and brought in an office manager and a researcher.
I tend to view our income sheet in percentages of the gross: We try to maintain a balance of state- and federally-funded criminal cases at the lower rate (x), and private criminal, family and civil cases at the higher rates (y and z). These are factors which are unique to our specific agency and our areas of expertise. While the details will vary widely with each agency owner, the principles I will outline should apply across the board.
Having a strategy for your business, and determining how to position your agency to maximize your time and personal expertise, are the ingredients for your long-term success.
The Low-Hanging Fruit
Our friend Don White, a financial planner in Stuart, Florida, tells a story of picking lemons off a tree in his backyard. He was high on a ladder, stretching to reach the biggest, most tempting citrus at the top of the tree. His wife Grace came outside and asked him what he was doing.
“These lemons up here are so plump and juicy,” Don explained. Grace sensibly pointed out the dozens of lemons at the bottom and middle of the tree. “What about all those?” she asked him.
The lemons lower down the tree may not have been the most delicious, but they were pretty tasty, too.
In the context of PI business development, we all hope for those those plump, juicy cases at the top of the tree: the work we like best at a high hourly rate, with a big fat retainer. But there are also plenty of perfectly good cases further down the tree — cases within your area of expertise that may not necessarily meet all your requirements, such as retainer amount, your highest hourly rate, or even your standard mileage charge.
The decision to accept a case at a lower rate should be based on your cash flow needs, your schedule, your interest, and most importantly, whether this case will provide you with a steady stream of cases from the same client or referrals to others.
It is possible to charge less and make more, but only as a strategy for growth, and not as a substitute for quality or integrity.
It has become clear to me that work begets work, and cases beget more cases. Volume is the magic ingredient to a successful business. Friends of ours have an agency that specializes in providing surveillance to insurance companies that “influence” (set) their hourly rate. But they employ several full-time investigators and cover expanding portions of the state, and their potential for growth is excellent. By knowing their market, providing a quality service, managing their cash flow, watching their margins, and bringing in the low-hanging fruit, our friends have built a successful business that could be a model for investigators across the country.
Many of our court-appointed cases can be worked by someone with less experience, or even an intern, provided that the work product is directed and reviewed by a senior investigator. While this may require the agency owner to put in some additional time up front, it potentially frees the owner from handling every single detail of every single case. And it also creates opportunities for new investigators to learn the skills necessary to become professionals.
Obviously, the difference between the hourly rate of x and the hourly rate of the junior investigator is the agency owner’s profit. And profit is what produces so many (but not all!) of the benefits that induced us to get into this business.
Cut-Rate or Cash Flow?
Professional rates vary widely across the country and even across the state. What one investigator charges in Milwaukee, Wisconsin may not be workable in Weeki Wachee, Florida. Professionals need to charge a fee that is in line with both the quality of their services and the market they practice in.
So I am NOT recommending that you become the “cut-rate” leader in your market. While there are always investigators who will try to drum up business by offering the lowest prices or hourly rate, I don’t believe that you should become one of them. I have no desire to be known as “The Cheap Detective.” In fact, I want to be positioned as the quality leader, and therefore, worthy of the rates I charge my best clients.
But to maintain cash flow and a steady stream of cases and referrals, we continue to accept an hourly rate of x, while building our list of z clients and moving up our y clients.
It is possible to charge less and make more, but only as a strategy for growth, and not as a substitute for quality or integrity. Know your market and set your rates accordingly. Charge an amount that will provide you with a profit and allow you to expand your business. Don’t be the “cut rate” leader, but recognize that accepting a little less on a case now for a lot more cases later can be a sound financial decision.
And take the low-hanging fruit when you see it in front of you. Just as you can kill yourself falling off a ladder, you can go out of business by charging too much or too little.
About the author:
Mark J. Murnan is a Certified Legal Investigator (CLI) and a licensed private investigator since 2001. Mr. Murnan’s agency, Complete Legal Investigations, Inc., focuses on criminal defense, civil litigation and plaintiff personal injury investigations. He has written extensively for professional journals and often lectures on investigative procedure. He and his wife and partner, Wendy Murnan, are the co-creators of the popular YouTube channel, “Investigators in Cars, Drinking Coffee” (bit.ly/CLIYouTube), and co-authors of a series of business manuals for private investigators, available at https://TheProfitablePI.com.