2021 ended super strong for the background screening industry. Tons of late acquisitions, mergers and key hires across the entire market. The landscape of our entire industry has changed, so many firms have been rolled up and a ton of capital has been injected into the space to facilitate rapid growth. The supply chain is shrinking as there have also been a few recent transactions there too. In the past few years many services we rely on such as The Work Number by Equifax have doubled and tripled their pricing forcing more innovation and alternative products in the market. 

As leaders and business owners, some of these things should be very exciting to you, some of you may feel uncertain about the future and how to compete. Rest assured that while change, especially at this scale may seem scary, it’s the natural course of economics and you too can thrive. 

I started out to write a 2022 predictions article but there are too many of those out there right now and frankly, do you want to read another? I decided to take a different approach, 2022 is going to be an arms race so rather than some predictions, I think I’ll just tell you what I think you need to do! This is a roadmap on how to compete if you’re interested in competing with the larger more sophisticated, and well-capitalized companies. 

  1. Dry powder – Venture capitalists and Private Equity have a ton of money to spend, and they have to deploy capital quickly.  They also know that not every investment will pan out, so they are very comfortable with risk. They know not everything will work and in some instances will lose their money.  Not having a financial partner forces you to be a lot more conscientious about risk but you still need to try new things and innovate.  If the private equity markets scare you it’s time to save some of your cash and invest it back into the business.  You will need to take on some risk and not be afraid to fail and try again. This is how companies find success, mostly through failure. On the other hand, taking on a financial partner can launch your business into a new realm. This is a big decision and not all partners are created equal. It’s an important decision to make and a scary journey to take but you should open your mind to some of these discussions and see whats best for your organization. 
  2. People – This is where the arms race comes in, literally. With your newfound cash (see above) it’s a good time to invest in the best people you can find. A lot of what I do personally is recruit top talent. Every time I place a top sales candidate with your competition you are losing the battle. Our firm literally exists to make your competition stronger…to compete against you. It’s time to flip the script! I have many small CRA’s as clients who have done just this and have had a ton of success.  It is probably time for you to do the same. Speaking in generalities, companies do not find success because of a great owner or leader, it’s who they surround themselves with. Finding great talent, listening to new ideas and sitting outside of your comfort zone every once in a while is how most organizations find true success. 
  3. Add Product – Your product offerings need to compete with the biggest and the best in the industry. Are you selling monitoring? Have you expanded your substance abuse testing offierings? Social Media Screening? Automated References? Identity Solutions? COVID products? There are so many products you need to have in your arsenal, you don’t have to re-invent the wheel, you can partner with one of several providers in this market and increase revenue easily. Just like your people strategy you need a product strategy, start thinking about how to increase revenue per candidate.
  4. Strategic Planning – What do you want to be when you grow up? Simply saying you want to grow your business without a plan on how to do it is not a good approach. A disciplined 1, 3, and 5-year plan is critical. It’s not a script you have to follow exactly and everyone needs to pivot here and there but you need to be disciplined on how you get to reach your goals.  Remember, failing to plan is like planning to fail.
  5. Automation – We have seen pricing pressures from clients for the past several years, all while having our pricing from our vendors increased.  One way to combat this is to find areas of your business that you can automate. It may be a simple software application or even re-looking at your platform to make sure you are taking advantage of the efficiencies they offer you. Look at each process, think to yourself why you do it this way, and see if there is a better more automated way to do it. Lowering your labor costs and giving your customers a faster and more accurate way to do something is a win-win for your customer and your balance sheet.
  6. Predictions – Ok, I lied. Here are are a few things I see happening this year! The largest 4 screening firms; HireRight, First Advantage, Sterling and Accurate will continue to grow. Two of those companies could combine but its more likely that there will be a bidding war to acquire Cisive, Universal and/or Global HR Research for one of the four to move up the list. Checkr will likely go public or be acquired (or possibly acquire others). More smaller CRA’s will take on capital and try to do some roll ups to re-stack the industry mid-market. Innovation will continue but most of it will come from outside the industry and big data will contine to gobble up the supply chain. The latter could reshape all of our offerings. I also stand by my past predictions but due to COVID I feel some of those initiatives have been delayed.

So much more I’d like to add here but at the same time would like to leave myself with some topics to write about this year. If you ever have questions, feel free to call me or email me. At IQubed Advisors we have all areas of your business covered and our team, as you know are the industry’s top minds. We don’t charge just to chat about your business and find ways to improve it. If you know me at all, and most of you do, you know that I love this industry, I want to see it and you succeed so hit me up and let’s chat.