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Subcontracting: Fortune or Curse?

By Kelly E. Riddle

For most private investigators, subcontracting assignments is like stepping off into the proverbial black hole. Many have bad experiences, while some have never subcontracted to other PI’s and instead simply turn away a client. There are several points of view that frame the idea of subcontracting, one being, “The best thing I can do for my client is to pass them on to a PI who will do a good job.” Another viewpoint often found circulating includes, “I hate to subcontract. The last guy I sent a client to ended up stealing the client from me.” Let’s face it, we are a world economy, and to play in the game your clients expect you to be able to help them wherever the assignment may be geographically located.

To get down to the basics of business, subcontracting is a practical method to help your clients while adding additional income into your pocket. You already spend a lot of time, effort and resources cultivating and marketing clients so why would you simply hand them over to someone else? Your client called YOU because you have built a rapport with them and have gained their trust. This is often where skeptics jump in and say, “Exactly, I don’t want to be blamed if something goes wrong with the case when I refer them to another PI.” In the unlikely event that does occur, you stand to lose anyway because you gave them the referral and they trusted your judgment and contacts. If you simply told your client, you are not comfortable making referrals, they will be disappointed and may feel like you threw them to the wolves by having to go out and find a PI on their own.

Marketing is an intricate part of any successful business. Whether by word of mouth, media advertising or other avenues, you have achieved your client list. Therefore, you should watch over your clients like a mother hen waiting for an egg to hatch. I have a good friend that is a claims adjuster for a large insurance company—he will often call me up and tell me that he had four or five PI’s market him in a single day. Why leave the door open for another PI to step in and sideswipe a client from you?

Unfortunately, not all PIs adopt to the proper etiquette of subcontracting fundamentals. When calling other investigators to arrange to subcontract, I often state right up front that my advertised hourly rate is $80 and follow that with, “But we always cut our rate for other PIs to $50 an hour. I hope you will extend the same courtesy so that we can all make some money.” I have had many investigators laugh and respond that they charge $125 an hour and aren’t about to discount their rates. Usually they follow that up with, “I would rather not work at all as to work for $50 an hour.” In this case, they most likely aren’t working.

You may be a semi-retired investigator and this view may fit your lifestyle better, but it is a short-sided view. A good salesperson knows that taking a smaller portion of a large volume of deals is often more lucrative than waiting on one large score. Statistics vary to some degree, however, based on numerous polls by trade associations, somewhere between 70% to 83% of investigative agencies are one or two-person operations. The obvious question is why? Does the majority not want to grow any larger, or are they still navigating the path to more business?

A common practice within the industry is to have part-time investigators that you can call upon when you have an overflow of business. If you are the principal of the business, it truly may not pay for you personally to work at a lower hourly rate. It may, however, be a good opportunity to assign the case to one of these other investigators. When you give them much appreciated work you can still take a portion of the hourly rate billed to the client.

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Another fundamental of subcontracting etiquette is the “turn-about is fair play” concept. If you call an investigator who agrees to work a case for you and they cut their rate, expect to do the same in return. Realistically, this is a great avenue in marketing. Once other investigators understand you can be trusted to not steal their client and you will provide a professional discount, you will be their point of contact for case assignments in your area. When working for other investigators, you should also provide a “Vendor Agreement” that details what you expect as part of the agreement. This should include:

• The hourly rate, mileage and other expenses agreed upon
• When the case is to be initiated and any deadlines for completion
• The method of supplying updates and reports
• Special instructions or circumstances related to the job
• Instructions pertaining to a “no contact” with client clause. Typically, your client should receive updates from you, not the subcontracted PI
• Obtain copies of the PI’s license and insurance

In some cases, the investigator in the field is asked to communicate directly with your client. In these cases, the investigator should never indicate that they work for anyone other than you and should not use this as a time to market your client. This is generally not a problem, but once your client

has a direct number for the other PI, they may feel that it is appropriate to call them directly with any additional assignments. Again, the proper etiquette is for the investigator to simply take the information and then turn around and call the original PI. All cases pertaining to the particular client should go through the originating investigative agency, no exception.

Of course, the originating agency should also advise their client that all assignments must originate in their corporate office to insure proper file handling and billing.
Once the investigation is completed, the investigator should email you the final report followed with a hard copy. The emailed report allows you to cut and paste into your report format that your client has become more accustomed to seeing and understanding readily. This brings you to the next topic of sales tax. In most instances, the investigator doing the actual case needs to provide a resellers certificate to the original PI agency, thus alleviating the need to charge the originating PI sales tax since it is their responsibility to charge and collect this from the ultimate client.

So, what about those times when something goes wrong? Although unlikely, a client may become disillusioned with the investigation. Often this is because the end results were not what they had anticipated. When this occurs, whether you subcontracted the case or not, all you can do is try to work through it and resolve the issue.

The process of investigations is not a mathematical problem where you can add A + B and get C. They hired a PI because the information they need could not be obtained any other way and although everyone involved made their best attempts, it just didn’t turn out to the client’s satisfaction.

Resolve it as best as possible, like you would in one of the regular cases you didn’t subcontract.

How do you go about finding other PIs to subcontract work? Look to state associations and their websites for a start. Many allow you to type in geographic areas and specialized investigations to find those adept at the services you require. Call, talk and agree. It is better to make $10–$30 an hour on work you don’t have to do than to not make any money at all.

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About the Author
Kelly E. Riddle is the President of Kelmar Global and the PI Institute of Education, training more than 7,500 PI’s since 1989. With more than 41 years of investigative experience and author of 16 published books he is only one of 50 PI’s who’s a Texas Certified Investigator. Riddle is also the founder and President of the Council of Association Leaders, Association of Christian Investigators, and a graduate of a University of North Alabama where he earned a Bachelor of Science degree in Criminal Justice.

We’re always listening: Send your story submission/idea to the Editor: kendra@orep.org.

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  • Kelly,
    Great article on subcontracting.
    I changed my business model many years ago.
    Instead of having employees on payroll, I have a network of trusted subcontrators to whom I try to keep busy. It has worked very well for me.
    Best regards,
    Jim Zimmer
    Benchmark Investigations

  • The key to making $125 an hour is to target market your service to corporate,legal and affluent private clients that can and will pay $125 an hour.
    Don’t worry about the scraps.

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