by Chris Borba
By the end of 2017, I’d been in business for almost four years. There was plenty of work, but things were not coming together the way I thought they would. I let go of some employees because they cost us money and clients; I was writing monthly checks to pay off marketing expenses that didn’t produce a return; I was spending too much time correcting employees’ mistakes; and I found myself working constantly and putting little money in my pocket.
The stress of running a business was getting to me. So when I came across an opportunity to work for a large insurance company, I took it. Relieved of the pressures of keeping my business afloat, I had the time to look back on all the mistakes I made.
It wasn’t the stress of running a business that got to me; it was the stress of improperly running a business.
I came to the realization that the business had failed, and it was no one’s fault but my own. It wasn’t the stress of running a business that got to me; it was the stress of improperly running a business.
A year of looking back really put things into perspective. Here’s what I learned:
1. Don’t overspend on startup costs.
In this industry, you don’t have to spend a lot of money to make money. Count on some startup costs and some basic marketing materials, i.e. business cards, brochures. But overall, it doesn’t take much.
2. Change the math.
The equation of (revenue – expenses = profit) is better said as (revenue – profit = expenses). If you get paid a thousand dollars, pay yourself a percentage, save a percentage for taxes, and save the rest for expenses. One way to do this is 60% to yourself, 30% to taxes, and 10% for operating expenses.
3. Don’t buy gear until you can afford to.
Have a budget and stick with it. If you want to buy a new camera or laptop and don’t have the money in your budget, then don’t do it. Unless you are experiencing massive growth, there is no reason to spend money you don’t yet have.
4. Be strategic about fees.Charge the right rate.
Establishing your billable hour is not as easy as it seems. Find out what others are charging, and then charge accordingly. What I mean by “accordingly” is are you equal, below, or above their level?
Be honest with yourself. Are you aservice business or a professional service business? There is a difference. Are you the investigation equivalent of WalMart, Macy’s, or Neiman Marcus? They all make a lot of money.
The hourly rate where my business is located is between $50 to $75 per hour, but I charge more. Presenting yourself as Neiman Marcus and charging a WalMart rate is a quick way to lose a client, and advertising to WalMart shoppers with a Neiman Marcus rate is a quick way to go out of business.
5. Do one thing, and do it well.
Specialize in one area of service. I see a lot of investigation firms offering everything they can possibly offer. I am sure they get business. But if you need heart surgery, would you ask your family doctor to perform the surgery? Of course not.
Limiting your services also prevents you from wasting time on less profitable work. With us, those time-consuming less-profitable services were process serving and pre-employment screening.
6. Specialize in the work you like best.
Make certain the services you offer are something you enjoy. If you hate surveillance, you will waste time and energy on it and be miserable and stressed. If you love doing surveillance, do that and not much else. If you are in business doing something you don’t enjoy, you won’t be in business long.
7. Define your customers.
Know your market. I remember starting off and being asked what my target market was. My answer was always, “Anyone is a potential client.”
If this is your answer, it is wrong. Do you provide surveillance? Litigation support? Or something else? Your market could be married people who think a spouse is cheating, businesses for background checks, insurance companies, criminal defense attorneys, personal injury attorneys, family law attorneys, etc.
8. Don’t fall prey to B2B marketers.
If you weren’t looking for it, you don’t need it. A lot of people will call, email, and reach out on sites like LinkedIn to sell you something (usually marketing), but do you really need it? Most likely not. I’ve had many, many people call trying to sell advertising (which I wasted money on) and others selling items like printer ink.
Do not buy into it. If you want to pay someone to run an online marketing campaign or anything else, ask around for a referral.
9. Hire with care.
If you hire employees, hire slow and fire fast. Employees are rarely in it for anything more than a paycheck, and there is no bigger headache in a business than managing employees. It’s not fun firing someone, but it’s even less fun closing your business.
10. Remember the mission.
The most important thing to remember is that you are in business to make money. I know this should be obvious, but sometimes it’s easy to forget: You are not in business to run free background checks for friends and family or give clients a break because you feel bad for them. It’s a privately-owned business, not a nonprofit or charity. If you are not making money on a project, don’t do it.
In case you’re wondering, I did go back into business for myself. Fortunately, after almost a year, my clients returned. I now work from home. I have little-to-no overhead, and no employees to take up my time and energy. I’ve increased my rates, and I am devoting all my efforts to one particular service.
I’m happy to be back, equipped with much more knowledge — and more motivated than ever to make it work this time around.
About the Author:Christopher Borba owns Emissary Investigative Group, a Roanoke, Virginia investigation firm specializing in legal investigations.