August 28, 2020 | Automated Research

4 Reasons Background Check Companies Struggle to Scale

If you were to take a 20,000-foot view of the background screening industry, you would notice that many companies are stuck in a holding pattern. They have the work, and they’re bringing in revenue, but one thing or another prevents them from growing.

It seems as if there’s an upper limit on how much business a background check provider can handle before succumbing to unprofitability.

Except — there is no upper limit. Background screening companies that think differently about how they run background checks, where they get their data from, and how they relate to their customers can break out of their holding pattern and start growing again. We’ve seen it happen.

The key to scaling your background check company is to identify the factor or factors that are holding you back and then remedying it through better processes, better strategy, and better technology.

In our experience, there are four common reasons background screening companies struggle to scale:

1. Fighting a talent war...and losing

A background screening company relies on the expertise of its researchers to succeed. But there are only so many people out there with the right combination of skill and experience.

The competition for talent is fierce in the background screening industry. If you try to attract the best of the best with higher salaries, your expenses can quickly spiral out of control.

The solution: Retain your best experts for the most challenging jobs and outsource what you can. Enter into a partnership with a trusted outsourced provider of criminal records search and court data.

At first, it may seem as if outsourcing will cost you more than keeping all your work in-house. But the advantage of outsourcing is you only pay for what you consume. The outsourced model will give you the flexibility to scale quickly and adapt to variations in demand. (In other words, you won’t end up paying people for a less-than-full workload.)

2. Relying on old-school manual processes

Open the door to a background screening firm that is struggling right now, and you’re likely to find a roomful of 60 researchers or more running background checks.

Until recently, the only way to run a background check was manually: open up a browser, visit a court website, run a search, extract the data you need, and format it into a report.

Manual background checking is tried and true, but it’s also time- and labor-intensive. When you’re reliant on manual research, as the volume of your orders increases, so will your labor costs.

The solution: Create a system for automating criminal background checks or utilize automated criminal background checks from a reliable vendor. Automated background screening software “scrapes” court websites for the data you need without the involvement of a human operator. The software can then arrange the information into whatever format you require for reporting. And a reputable provider will only automate where their research meets or exceeds the quality standards of manual research.

(Read more about the advantages of automation in our recent article.)

3. Expecting another boom

A few years ago, the gig economy exploded onto the U.S. labor market. The demand for background screening skyrocketed. It was a great time to be in the background screening business, but the boom didn’t last forever.

Since the gig economy took off, more firms have entered the background screening industry. Demand has leveled off. Churn and shrinking margins have become major problems as companies compete for the same contracts at lower and lower prices.

The solution: Don’t wait for another boom to get your business in order. If you’re not investing in your customer service organization and keeping your clients happy, you may lose work to your competitors.

Automation can lessen the sting of customer churn. If you’ve automated as much as you can, you won’t be hit as hard when you lose a client.


4. Inefficiency

When margins are tight, and new customers are hard to come by, you need to wring every bit of value out of every background check you run. Unfortunately, it’s never easy to change your ways. Too many background screening companies leave their inefficient processes in place because “That’s how we’ve always done it.”

The solution: Get serious about efficiency and look for opportunities to cut excesses and run as lean as possible. For example, are there services you’re offering your customers for free when you could be charging for them? Do you typically run searches that cover 25 years of convictions when you only need seven?

If you work with vendors, ask your vendors to do less for you (no more than you need) in exchange for a price break.

This is another area where automation can help. Automated background screening software can detach records at seven years, 10 years, or whatever cutoff you require. This reduces the time it takes to format reports.

Ready for a partnership?

Can a partnership with a best-in-class automated background screening vendor help your background check company scale? Get in touch with us today to talk about it.