Start a mystery shopper business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your mystery shopper business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a mystery shopper business?
If you already have a smartphone, a computer/printer, and a car, then that’s usually enough to get started. You may also want to invest in a better camera than the one that’s on your phone to get more detailed photos. Your state may require you to get a private investigator license before you start, with fees varying from state to state. You may wish to hire employees at the beginning, but this doesn’t necessarily require any money to start. Employees are generally compensated only when they visit a store, and they’re compensated by the clients as opposed to your business funds.
What are the ongoing expenses for a mystery shopper business?
There are few ongoing expenses for a small mystery shop owner, though needs can grow substantially if you add more complex data analysis.
- Equipment costs
- Data software
- Office space (potentially)
- Employee salaries
Who is the target market?
The best clients are owners, CEOs and Presidents with multiple stores or locations. These can be for commercial businesses, healthcare companies, even potentially government services. Any decision-maker or owner who cannot monitor all activity happening under their umbrella is a potential candidate.
How does a mystery shopper business make money?
Mystery shop owners make money by charging clients a set fee for sending out a quality shopper to the site. The secret shopper needs to be able to accurately record the good and bad parts of an interaction with every employee, as well as document other details about the general quality of their time at the location.
How much can you charge customers?
It truly does depend on the nature of the site visit. If it’s a hotel stay, then the shopper will be spending a significant amount of time and energy on the assignment. Some owners may charge up to $30 flat rate for a simple visit to a fast food place (plus the cost of reimbursement). Others may charge more based on the details of the report they prepare.
Companies should be charged more if they require specialized knowledge. For example, you may charge $100 if the site visitor needs to understand specific state rules about cleanliness or they have to memorize a script before entering the premises. Check your competitors rates for the types of visits you would like to conduct to determine the benchmarks.
How much profit can a mystery shopper business make?
Considering the overhead is so low, the profits can be extremely high. If you’re starting out on your own, you can make almost 100% of the profit (minus the cost to maintain equipment). In addition, the odds are that you already have a phone plan and a Wi-Fi connection, meaning the maintenance fees will be reasonable.
How can you make your business more profitable?
Companies now use mystery shoppers for far more services than shopping. If you have the right employees with the right skills, you can perform audits or odd jobs like merchandising or testing the interview process. The best way to increase your services is to find out what companies are looking for. Ask what type of services a company needs to maintain their quality, and then do everything possible to fulfill the client’s requests.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Mystery Shopper Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your mystery shopper business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate a mystery shopper business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Mystery shopper businesses should require clients to sign a services agreement before starting a new project. This agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions, service level expectations, and intellectual property ownership. Here is an example of one such services agreement.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market a mystery shopper business
The best way to promote is to be absolutely relentless. This doesn't mean an owner should be obnoxious, but it does mean they should be willing to go the extra mile to establish relationships. The best thing to do is to physically visit the clients they wish to be in business with. Cold calling or e-mailing is a good start, but it’s also very easy to ignore. By visiting decision makers, you put your business in their mind, and hopefully have a better chance at swaying their minds to choose you for their mystery service needs.
How to keep customers coming back
The best way to market and retain customers is to show them why their business will be more profitable if they choose your business. Companies may (understandably) be hesitant to spend money and give away free good and services only to receive generic feedback that does little to spark change in the organization.
As you grow, you should hopefully be able to show real results that help potential clients understand what they’re paying for. For example, you may be able to tell a client that after you started working with a particular client, their customer service scores went up 25%.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start A Mystery Shopper Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
Those who have an eye for details will do well in this industry. Owners will also need some experience in sales, as clients will need to be convinced they need these services.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at a mystery shopper business?
Owners will need to find and conduct business on a regular basis.
- Cold call businesses to gain clients
- Present statistics and past successes to market services
- Conduct site visits or hire employees to conduct visits
- Prepare reports for business owners about the details of the visit
What are some skills and experiences that will help you build a successful mystery shopper business?
Salespeople will do well in this business to build clients. You’ll need excellent verbal and written communication skills, as well as a good sense of what customers are looking for at each business they frequent. A person visiting an electronics store may be much more concerned with the knowledge of the employee rather than whether or not they’re greeted with a huge smile when they walk through the door. Owners of a secret shopper business will also need to be flexible, as certain businesses may make odd or unusual requests about when they want to be visited, how quickly they want their reports, or the specifics of what they want done at each business.
What is the growth potential for a mystery shopper business?
There are many potential clients who will need this service, but you may be limited by your geography. For example, if you’re not in a major city, then you may only have so many businesses in the area that require mystery shoppers. The more you can prove you can genuinely strengthen other people’s businesses, the more likely you are to grow. Become reputable enough and you can expand your business to other locations, hiring employees in other parts of the country to conduct site visits.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting a mystery shopper business?
The owner of a secret shopper business may want to do some work for free at the beginning, though you always want to tell the owners your normal rates before offering this. Owners need to be incredibly precise when it comes to presenting and selling their services, and ideally, they should be able to give charismatic presentations. You will also want to prepare detailed contracts for each and every client you have, stating the length and terms of service. Consider joining the Mystery Shoppers Providers Association to provide formal credibility to your business.
How and when to build a team
It isn’t strictly necessary to start off with a team as you can do the first few visits yourself if you wish. As you build up your base, however, you will need to find employees who can pitch in. While mystery shopping isn’t the most demanding job in the world, it does take time and effort. Your employees will also need to have excellent communication skills, and they’ll need to be comfortable with saying negative things about unsuspecting employees (and even potentially getting them fired).
Should you land a large client with many locations early on, you should definitely hire several employees. Otherwise, you will be recognized quickly and your services will become completely useless to the parent company. Never charge employees to sign up for your mystery shopper business, as there is a lot of noise around scams in this industry. Becoming a member of the Mystery Shoppers Providers Association can help provide legitimacy to your business too.