Ask for a check before you begin work. Put the agreement in writing. Protect the client’s money until you’ve earned it. You’ll be glad you did — and ultimately, so will your clients.
Start taking retainers.
Those three words represent some of the best advice I’ve gotten in five years of owning my business. I don’t know whether it was another investigator or an attorney who said them to me. I don’t remember where I was when I heard them. I’m certain, though, that since I started requiring retainers, I’ve spent zero hours trying to get clients to pay me after their jobs are complete.
As professional investigators, our customers fall into several categories: law firms, private citizens, fellow investigators, insurance companies, corporations, and government agencies. Regardless of which group or groups you do work for, we all have several things in common. We expect to get paid for our work. We prefer to get paid promptly. None of us likes spending weeks or months passively waiting for or actively chasing down money we’ve earned.
I started working from retainers several years ago and have never looked back. My state and federal government contracts, which I don’t get retainers for, pay like clockwork. Almost every other job I take begins with a refundable, replenishable retainer from the customer. Not taking retainers is like not locking your front door and then being surprised when you get robbed.
“Not taking retainers is like not locking your front door and then being surprised when you get robbed.”
There’s no reason to worry about not getting paid for a job when I have a payment before starting.
The Customer Benefits, Too
From the customer’s perspective, using a retainer gives them a certain amount of control over my investigation. They can take comfort in the fact that they won’t receive an unexpectedly high bill, because I tell them clearly that I won’t work beyond the retainer amount they provide.
Many of my customers are criminal defense and civil lawyers. They never push back against my retainer requests because they understand and use the same system themselves. Customers who are personal injury attorneys don’t usually accept retainers from their own clients because they get a substantial percentage of any monetary award at the end of each successful case. They do, however, understand that retainers are a customary instrument lawyers use to conduct business, so they have no problem giving me a retainer either.
When private citizens hire me for background checks, domestic surveillance, or skip tracing, I also charge them retainers. Some of them initially bristle at the idea of paying in advance (especially the cold-callers). But some are willing to accept my terms after I explain that I run my investigation business like a law firm.
If they’re not persuaded by that argument, I ask them to recall the last time they put their credit card in the gas pump after they filled up their tank instead of beforehand. Usually that example resonates with them, and we can proceed.
For the small percentage of private citizens who remain unwilling to provide payment in advance, I am candid with them. I explain that, like many small business owners, I don’t have time to spend trying to collect debts. Additionally, I have a part-time employee investigator who I pay every two weeks even when I don’t take a paycheck myself. Retainers ensure that I always have money available for her compensation.
If that sincere explanation doesn’t convince prospective clients to provide a retainer, I wish them good luck and end the call without taking the job. Experience has shown me the value in being as careful picking new clients as they should be when choosing an investigator.
When another investigator asks me to subcontract, I request a retainer. If they agree to provide one without discussion, it’s usually because they got a retainer for the job themselves. If they disagree, it’s often because they can’t afford to front that money for their client. I take the opportunity to try and convert them to the retainer-only way of doing business.
I will occasionally subcontract small jobs from another PI without a retainer, but only if it was a referral through an investigator or lawyer I already know and trust. I don’t subcontract for insurance companies, so I’ve got no advice to offer for converting them to the retainer system on typical worker’s comp surveillance.
My non-contract work for corporations, as well as municipal and county governments, functions on retainers too. In fact, those entities tend to request that I keep their retainers even after a job is complete, in the event that they want more work done later in the fiscal year. I’m not sure if that’s easier for them than processing my refund and creating a second retainer if they need more work in the future, but it doesn’t matter to me. Their money sits in my bank until I earn it or they finally request that I send it back.
Handle Retainers With Care
These are the rules I follow, which are spelled out in the retainer fee agreement of every engagement letter I craft. If you think they closely resemble the American Bar Association’s Model Rules of Professional Conduct, you’re right. Retainer money is never commingled with my own. Each retainer is kept in a trust account, separate from my operating and tax accounts.
The retainer is not earned upon receipt. It remains the client’s money until I perform work to earn some portion or all of it. I bill for work in 6-minute increments, like many law firms. The client gets a weekly statement showing the time I’ve billed against the retainer. When I have used 90% of the retainer, I notify the client and stop working until I receive an additional retainer payment that we agree is reasonable for the amount of work remaining. When the job ends, any balance is refunded within three business days by cashier’s check or wire transfer.
The Takeaway
Using retainers to eliminate the risk of non-payment has improved my business and literally helped me sleep better at night. Like many of the best lessons in life, it’s one I learned the hard way. The first time someone didn’t pay me, I was a victim, but the next time I was a volunteer. I’m fortunate that it didn’t take too long to realize customers who don’t pay are stealing from me. My work product is valuable, and yours is too.
The first time someone didn’t pay me, I was a victim, but the next time I was a volunteer.
We are now living in the most difficult and unpredictable economic climate of our lifetimes. While much is beyond our control, we can influence how we get paid. Ask for your money up front. Put the terms in writing. Protect a client’s money like it’s your own until it actually is. Under-promise and over-deliver.
Retainers provide security — for me, for attorneys, for subcontractors, and for clients. And they can also provide security for you.
Start taking retainers.
About the author:
Sam Petitto is a licensed investigator, K-9 consultant, and retainer evangelist. Prior to embracing the PI lifestyle, he was a professional hide-and-seek player for the Durango Police Department in southwest Colorado. In his spare time he practices competitive writing, travelling absurd distances on foot, and trying to get his kids to acknowledge that he’s almost as smart as they are. You can email Sam@DiscreetDetection.com or tweet to @SamPetitto.