Start a mystery shopper business by following these 9 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.
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 long it will take you to break even?
- 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 very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your mystery shopper business is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
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?.
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.
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: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
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.
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.
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%.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
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.
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.
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.