September 1, 2025
Part 3 of 3: Evolving A Digital Forensic Business
"The man who moves a mountain begins by carrying away small stones.”
-Confucius
AUTHOR'S NOTE: This is the final iteration in a three-part series about starting, running and evolving a digital forensic professional services business. Earlier articles can be found on the main Philosophy of DF/IR page.
Full disclosure before we dive into the final part of this three-part series about building a DF/IR business: I’ve not grown my own business in the typical ways many might choose. Three years ago (to the day), I opted to go for acquisition and merge my client-base and expertise with a larger nationwide digital forensic services provider. That said, I keep a pretty close eye on the market. I generally know who’s just starting out, who’s a little stagnant, who’s in growth mode and who is ready to move onto other things, and who seemingly makes good decisions and ones that make me scratch my head. Some of this will be discussed in this article.
The Camaraderie of Entrepreneurship
In building a business, you’ll learn that there are others like you with similar experiences, lessons learned, questions asked and approaches shared. There is no other venture that you can undertake quite like building your own business. Creating it from scratch, nurturing it, helping it grow & become a solvent entity – these are all ideals and notions only shared by other entrepreneurs. And it doesn’t matter in which industry they’ve built their business – they all get it. They understand and appreciate the blood, sweat and tears that goes into the business daily. People who have only worked for someone else don’t get this. I’m not implying they don’t work hard. Many do. But there’s an intangible asset and unique personality type that can take on the banner of entrepreneurship and make it work.
Seek out these people. Go to the trade shows and find the ones that are roughly in the same space and place you are and talk to them. Not only have I been the beneficial recipient of a ton of useful tips and insight from others running professional services businesses, but I’ve also gotten many referrals. You’ll generally see them all at the same events, so establish those relationships too. They’ll serve you well.
It Ain’t All Gravy!
Building a business – ANY business – is very hard work. It’s grueling at times, it takes away much of your so-called “work-life balance” and sucks your energy in ways you may have never known possible. But it is extraordinarily educational and can be very rewarding, especially when the reputation you’ve built on the solid foundational principles starts to really bear fruit on the market. It’s also exciting.
Creating something from the ground-up is a claim that many in professional life simply cannot make. The “idea fairy” is great at coming up with ideas that sound great on paper, but then fail in implementation. If you’ve gone well beyond the idea fairy stage and have built something viable that has real cash-flow and a solid reputation, you should be congratulated. This generally takes years. It’s not an overnight process by any stretch. Even with the best amount of pre-planning and laying of groundwork, it can take a long time to establish a place in the market that is worth of repeat clients, growth or acquisition.
Growing Your Business
Growth is a natural evolution in business, but it’s not without its own set of heartaches and hurdles. The first question you should ask is, can you afford it? Hiring someone – even a part-time contractor – will cost money initially and likely take money out of your personal pocket. For contract workers, they still get paid a large chunk of whatever is billable in the cases they work. This is a viable option for many because the work of digital forensics can be painfully cyclical, and it’s hard to insulate from that. I experienced this every year as a DF business owner and see it still working with a much larger organization. The holiday season is generally a wash. Cash flow will be down and you’ll start to wonder when the next cases are coming in. This is one large reason why contractors are a very decent option for smaller businesses. With contractors, it’s not your responsibility as the boss to give up as much of what you need to survive and contractors can help with workload when it’s busy or sit on the bench when it’s not. A contractor sitting on the bench generally isn’t costly to your business, as long as you’re not paying for benefits while they’re idle.
Conversely, hiring full-time employees (FTEs) will impact your bottom-line from the start. You’ll make less and pay out more. It should only be considered if you have the capacity to support FTEs for a longer term of employment. FTEs should generally be considered as primary billers and should be utilized as such. But be careful. It’s theoretically great to say that a FTE can bill 40 hours per week and make you that much more money, but can they functionally bill 40 hours per week? Generally not. There’s a lot of administrative overhead that goes into DF work that FTEs will also be responsible for. Things like equipment maintenance, training updates, certifications and maybe even some business development activities all take away from billing, and that’s BEFORE they call out sick, take vacation, have a family emergency or get called in for jury duty.
The more important question is, do you have the billable work to keep them busy and, essentially pay for themselves? Making additional profits is a bonus for you, the owner.
A brief example: I recently saw a job posting for a senior DFE for a small company that offered “unlimited paid time off,” but also demanded a minimum of 1800 billable hours per year. Doing the math, this means that without any of the aforementioned reasons to be out of the office, the employee would have to bill over 34.5 hours per week. Bear in mind, that’s not working time, that’s billable time. Other admin work is over and above the 34.5+ hours/week. Factor in a nominal 2 weeks of vacation, a week for training and another week for sick or other leave (holidays, etc.) and it bumps up to 37.5 hours/week billable. That’s pretty unrealistic, and so much for “unlimited paid time off”! Side note: If that’s the minimum billable hours per person, then the company isn’t charging enough for their services… But I digress.
FTEs in a billable hour environment generally should be expected to bill a nominal 20-25 hours per week. If they are very experienced, perhaps more because experience begets more efficient case workflows. Financial incentives can be offered for average billable hours over and above the expected minimums.
Aside from expected workload, consider that in a competitive marketplace, FTEs should be offered benefits like health insurance (or reimbursement), retirement accounts with cash match and other fringe benefits. These will all cost you more money over and above the person’s salary and bonuses and should be considered as part of an overall compensation package. Plus, you have to manage these programs AND manage the personnel. It’s a huge decision, and one that should be considered carefully because it has a great impact on the future viability of your business.
Beyond personnel, there is the potential for additional physical locations, which can also be costly, but potentially a good investment in growth. Having brick-and-mortar location(s) affords you some legitimacy, but our particular industry calls for some special considerations like physical security, access control, video monitoring, evidence storage, forensic equipment purchase and upkeep, administrative equipment purchase and the boring stuff, like furniture, electricity, internet connections and other business necessities.
It all sounds great, but without proper planning and financing, it could be mismanaged into the ground, and if you’ve worked to this point, that would be a tragic turn.
A final note about growth: You likely can’t do it all. By that I mean, you can’t grow your DF business and be a hands-on doing the DF work at the same time. You’ll eventually have to pick a lane. Having DF expertise can mean you have the specific knowledge about how the business should grow and operate and thrive, particularly in our very niche markets. Having business acumen and expertise will greatly inform you about the right moves to make, when to grow, objective key results and statistical metrics, and what the best next moves are. Both are separate full-time jobs. In the beginning when you’re small, you can do both. As growth happens and the business evolves, you’ll likely have to pick a lane. Some will read this and think it’s entirely incorrect, but I’ve seen DF businesses start from the bottom and grow and the ones where the CEO is also the Lead Expert eventually find that both roles suffer. Do yourself a favor and pick one. PS, this doesn’t apply to solo or small DF shops with ~10 or fewer total personnel.
Selling Your Business
I know what you’re probably saying – “If I worked my butt off to build this business into something respectable, needed and viable, why would I sell it?” A very good question, and one that I’ve personally had to ask myself, my trusted circle, and explore internally as I was approached by two separate companies for acquisition at the same time. But before I explore the calculus that can go into the decision, let’s talk about the professional services market overall.
The digital forensic and e-discovery market nowadays is generally funded by private equity firms. I can almost guarantee that 100% of acquisitions you read about of smaller firms by larger firms are funded by private equity investors whose job it is to find smaller companies to gobble up to form a larger company to compete on the market. This means that, while you may be approached for acquisition, unless you’re willing to walk away and hand it all over, you’ll be working for a corporate entity, so you should be OK with that if you choose this path. Corporate entities don’t care about the same things you cared about when you grew your business. Sure, there’s some overlap, and asking the in-depth questions about the corporation’s philosophy, principles, future plans and operational guidelines is very important. But you’ll no longer be “President, CEO & Founder”. You’ll be an employee and you’ll likely be expected to demonstrate repeatedly the value you add to the company.
I’ll dispel another myth for you, particularly if you’re a small or solo shop – you won’t get a huge windfall from the acquisition of your company. Your company is YOU, even if you have a handful of employees. You’re not selling a product that can be valued at 5 times annual revenue. That’s how it works on Shark Tank, it’s not how it works with most professional services businesses. If your revenue is $1M per annum, don’t expect a $5M payout at acquisition. If you are, you’ll likely be disappointed. And if anyone offers you that, be careful. I’d suspect they’re not all that good at the financial piece of running the company.
But back to the decision to sell… It’s a very hard one. You’ve built this “baby”. You’ve run it. You know it inside and out. You know your clients and have likely built relationships with them that you don’t want to see change. Your billing and rates are probably vastly different than the company looking to acquire. And it’s hard to give all of that up on a leap of faith with someone else.
Another reality check if you’re approached about acquisition is, most of these things will change. Your relationships, your billing rates, your day-to-day, and how your (former) business is run will all change. It’s generally not a bad thing. But whether it is or not, it is also likely out of your control once you sign on the dotted line.
So why do it? All of the “reality checks” and math questions that have been posed in this article and the previous two are many reasons why. Again, I have only my personal experience on which to draw from this decision, but here’s some of the factors I considered:
- Growth was attractive, but debt wasn’t. It would have been impossible to grow without incurring debt. I wasn’t interested in incurring debt.
- Accounts receivable grew, but checks weren’t coming in. This is a problem I’ve heard from many over the years and an unfortunate reality. People will owe you money and not pay. There are policies you should probably implement (or have implemented) to avoid this, but if the fact is that your cash flow isn’t equaling your receivables, it’s a snowball problem that gets harder to fix as time goes on.
- See previous point about large tool vendors not wanting the “little guy” to have access to their tools. This is an industry trend that will only keep growing as time goes on. It’s also best battled (i.e, managed) by being with a larger organization.
- I would often tell people I worked every day. Maybe I didn’t work 8 hours every day, but I did something in furtherance of the business every day. From monitoring SEO, to new marketing approaches to client engagement to case work. Personally, I was tired of working every day, and I enjoy having my weekends back. Life is more than work.
- The ability to lead more, grow with another company and help build, without having to pay for all of it is attractive. You can still do good work and you won’t have to be responsible for every piece of it. The law of diffused responsibility can be an asset in the right circumstances.
Everyone who is in the position of deciding whether or not to be acquired has likely done some of these calculations and had these discussions. It’s a hard decision, but from a personal perspective I’ll say that it was probably one of the best decisions I’ve ever made professionally. Increased exposure, experience, status and opportunity were all attractive, and they’ve mostly all been seen to fruition.
Do the gut-check and make the best decision for you. At the very least, learn from the mistakes of others and correct with your business what you may need to in order to stay solvent for many more years to come.
There’s A Lot More
In my law enforcement instructor’s role, we push out a few notions that are at least partially applicable to starting, running and evolving your own digital forensic business:
- Only you can save you
- Know who’s a friend and who isn’t
- Know that not everyone is your enemy or “competition” – there’s plenty of work to go around
- Always be working
Granted, I’ve re-phrased some of these thoughts for a more business-friendly environment, but they are all very applicable across the board. It’s an impossibility to put down into three articles all of the possible permutations that your business might take and how to deal with them. Even if I could do that, I would be a charlatan for thinking I have all the answers and expressing that I do. That said, my hope in writing this series was that if you’re thinking about starting… Or already working… Or wondering about next steps with your digital forensic business, you’ve gained some insight into some decent practices and some more food for thought.
It's a thrilling challenge to run your own digital forensic shop. Some don’t fully realize what the challenge entails before they dive head-first into it. I know I didn’t. But one day, one move forward, one step in the right direction at a time, you can re-dedicate yourself to the principles that got you to where you are.
Always bet on yourself.
About the Author:
Patrick Siewert served 15 years in full-time law enforcement and investigated hundreds of high-tech crimes to precedent-setting results, Patrick is a graduate of SCERS & BCERT and is a court-certified expert witness in digital forensics, mobile forensics and historical cell site location analysis. He has published dozens of articles and is cited in numerous academic papers. He was the Founder & Principal Consultant of Pro Digital Forensic Consulting, based in Richmond, Virginia (USA) and currently serves as Director of Digital Forensics and E-Discovery for a Nationwide (US) provider of DF/IR and e-disco litigation support services, while keeping in touch with the public safety community as a Law Enforcement Instructor in multiple disciplines.
Email: Patrick@ProDigital4n6.com
Patrick Siewert on LinkedIn: https://www.linkedin.com/in/patrick-siewert-92513445/
Patrick Siewert on X/Twitter : @RVA4n6
Pro Digital (old) blog site : https://prodigital4n6.blogspot.com/