Do you want to start a background check business online? If YES, here is a complete guide to starting a background check business with NO money and no experience.
Okay, so we have provided you an in-depth sample background check business plan template. We also took it further by analyzing and drafting a sample background check marketing plan backed up by actionable guerrilla marketing ideas for background check businesses. In this article, we will be considering all the requirements for starting a background check business. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Why Starting a Background Check Business Online?
- Starting a Background Check Business – Market Feasibility Research
- Starting a Background Check Business Online – Legal Aspect
- Is Professional Certification Needed to Run a Background Check Company?
- Writing a Business Plan for a Background Check Company
- A Detailed Cost Analysis for Starting a Background Check Business
- Starting a Background Check Business Online – The Marketing Plan
- Tips for Running a Background Check Business Successfully
Why Starting a Background Check Business Online?
In this modern world, the need to run a background check by corporate organizations and private individuals is now inevitable. These small and big corporations do not really have the time to run extra background checks on their intended employees or customers.
Also, private individuals have the need for background check when employing a nanny or a babysitter to make sure the person doesn’t have a history of drugs and violence or that the person doesn’t do drugs, so there is a high need for businesses that offer background check services.
When starting a business offering background check services, your line of duty include: checking out criminal records or history of violence, credit card records, confirmation of professional licenses, educational records confirmation and past employments.
Starting a background check services is not as hard as people think. You can even start and run the business from home for starters and move into an office space once you make enough money from for lease and handling projects.
This industry is a very good one to launch into if you know you want to launch out in a field that isn’t too competitive and over saturated as may be the case with some other industries. You will also need to be really familiar with the terrain that you want to go into.
That is why you have to be willing to take on some good feasibility studies so that you can learn and grow as you look at starting the background check business. If you want to start a Background check business, here is a full detail on how to do just that;
Starting a Background Check Business Online – A Complete Guide
- Industry Overview
The background check industry will always be an interesting one. Why? This is because of the analytical manner and approach at which information and details are being handled. Businesses in the Background check industry offer tenant and employment background screening to consumers, landlords, corporations and other organizations.
- Interesting Statistics About the Background Check Industry
The Background Check Services industry enjoyed encouraging growth over the past five years. The industry performed poorly in the wake of the economic downturn and recession. However, declining unemployment increased the need for businesses to screen for job candidates.
In the coming years, the industry will benefit from an improvement in the labour market. However, strong growth will be checkmated by an increase in vacancy rates, which will diminish demand from apartment leasing companies. The Background Check Services industry has low barriers to entry.
Although major players in this industry have considerable computer and database infrastructure, most small firms have minimal capital costs because only basic computing power is required to aggregate data from public records. In addition, smaller fishes in this ocean can choose to source data from free sources, which further costs. As a result, prospective firms looking to enter this industry can easily enter and participate in this industry.
The industry is trending towards one-stop shopping, offering pre-employment drug and alcohol testing as well as education verification, fingerprinting, credit and driving history reports, INS verification, and background checks for criminal or terrorist activities.
Events of the past 20 years have created a sort of “perfect storm” for the employee screening industry–notably the 1987 crash of a train driven by a marijuana-fogged engineer in Maryland, the rise of identity theft, and 9/11 and the ensuring terrorist alerts.
Starting a Background Check Business – Market Feasibility Research
- Demographics and Psychographics
According to a study by the Society for Human Resource Management, 87 percent of employers now opt to conduct criminal background checks on intending employees, a figure that has grown tremendously over the past two decades.
And while this has been a huge boost for the background checking service industry, it has also led to many companies within the industry getting it wrong as regards the information they provide these employers and this has caused people their jobs or resulted into class action lawsuits against the background check companies where the wrong information was provided from.
The background check services industry annual revenue’s worth is $2 billion and it experienced a 1.3 percent growth between the years 2011 and 2016. In the united states, there are more than 5,400 back ground checking businesses employing more than 14,800 people. The industry is one that has experienced growth between the periods of 2011 and 2016.
However, in the wake of economic downturn, the industry experienced a poor performance because less companies and businesses felt the need to employ anyone and so didn’t need the services of a background checking business. The decline in unemployment rates has caused a turn-around for the industry as businesses feel the need to screen job candidates.
The primary services provided by background check services in the industry are criminal and credit background checking which are usually demanded by employers and landlords. Another service performed is the reference background checks which most employers outsource to a background checking business.
Landlords use the checks on credit history to assess the tenant’s ability to pay their rent on time. Results from background checks usually contain information that usually touches on the individual’s criminal and credit history, causing stability in market share for each of the services performed in their different segments.
It is being predicted that the background checking services in the United States will grow annually at a rate of 2.2 percent over a 10 to 15 year period. Operators in this industry are expected to benefit from the slow improvement in the labor market. A 2015 report by the Bureau of labor Statistics revealed that the more than 210,000 jobs were added to the U.S economy in November of that year, thereby helping the background checking businesses who thrive on declining unemployment rates.
There is a high demand for the services of a background check firm as long as people and organizations continue to recruit new intakes, making the business a lucrative venture. First and foremost, businesses run background checks to help keep their clients, their employees and their business safe. Lack of background checks, or poorly done background checks, can lead to horrific crimes. The sad fact is that people rape, people murder, people steal.
They don’t want anyone to experience that, and they have a responsibility to protect their clients and their employees. Protection of employees is imperative in any business. A 2005 survey found that 2.3% of all businesses experience some form of co-worker violence, ranging from .6% to 8.1% for businesses with up to 250 employees and up to 34.1% for businesses with 1000+ total employees. In addition, a 2006 survey discovered that 13% of all workplace fatalities were caused by assaults and violent acts.
- List of Niche ideas in the Background check industry
You don’t need to have a special skill or a college degree to start a background check firm; as long as you can carry out an extensive research and compile a detailed information on each individual you are assigned to carry out a background check on, then you have what it takes to run the business. The Background Check industry has many niches which you can choose to focus on as you start, then pick up more as you grow. They may include:
- checking out criminal records or history of violence
- credit card verification
- home based background check
- Small business background check
- drug testing
- confirmation of professional licenses
- educational records verification
- past employments confirmation
- Travelers Background Checking
- Tenant Background Checking
- Franchise Background Checking
- Level 2 FBI Background Checks
Level of competition in the Background Check industry
Competition in this industry is very high, because the majority of industry operators provide similar services. The U.S. Background check industry is forecast to earn $2 billion in yearly revenue with an annual growth of 2.2 percent over the next 10 to 15 years.
Judging by the number of background check firms being bought and sold in the past few years and the number of new start-ups entering the background check business, the industry will continue to both expand and consolidate simultaneously.
With the growing economy and tight competition, we are seeing larger firms showing a renewed emphasis on attempting to acquire market share by acquisitions. New entrants with a business or technology background see Background checking as merely moving around data and figure how hard can that be.
There are also firms and investors in the human capital space that see Background check services as an easy adjunct to what they are already doing. Since there are few barriers to entry and nearly anyone can call themselves a Background check firm, new firms will continue to pop-up. But all those don’t displace the fact that the industry is lucrative and will continue to be competitive.
List of Well Known Background Check Businesses in the Industry
Every industry has big players who have done so well for themselves; this is the same with this industry. Some of these brands have been around for a very long time and so have been able to pay their dues over the years. Here are some well-known brands in the Background check business;
- Instant Checkmate
- Core Logic
- US Search
Background checks of prospective employees help to choose the safest candidate and most qualified. The Pre-employment checks offer a guarantee that the person is who he says he is, and has the experience and qualifications to perform the role they have requested.
No matter the size of your business, the investigation of pre-employment is a practice of hiring necessary to avoid lawsuits, costly hiring mistakes and mitigate any damage to reputation. The instinct itself is not only sufficient to protect the reputation of the company. In addition, and in order to comply with law (Penal Code / Criminal Liability Company) is one of the required steps for any company.
Among the many economic benefits of this service are:
- Reduce the economic costs of redeeming image among your employees and dishonest people.
- Reduced labour costs by reducing the dismissal of problematic employees. Improve the profitability of the company by avoiding these costs.
- Immediate deterrent effect on those candidates who want to distort their resume or having a problematic history.
Is a Background Check Business Worth Starting from Scratch or is Buying a Franchise Better?
There are two ways which you can venture into business full time. You either start from the scratch or buy into a franchise. In this case of background check business, it is advisable you start from the scratch.
Background check has become the norm in the hiring process and many companies, and especially small businesses, don’t have the time or the means to adequately check up on all their job candidates. This leaves an opening for you to start your own background check company from the scratch.
A background check service has relatively low start up costs and low barrier to entry — you don’t need a special degree for this service, but you do need a firm understanding of federal, state and local laws. Starting from the scratch offers you this few advantages.
- It allows you to Determine what services you will provide and pick a niche
- You have control over your marketing strategy
- You choose your speed and scale of business
- IT gives you control over your business
Possible Threats and Challenges of Starting a Background Check Firm
Starting a background check business is not capital intensive, because you don’t need to purchase expensive machineries and equipment to run the business. On the aspect of labour, you can get few employees to run the business with you. But there are few challenges and barriers you might face when starting your background check business and they may include:
- Choosing a niche for yourself
- Registering your business as a company
- Renting an office space
- writing a business plan
- Choosing a suitable marketing strategy
Starting a Background Check Business Online – Legal Aspect
- Best legal entity for a background check business
Since you are going to be working with corporate organizations both big and small, you need to incorporate your business as a legal body because it may be difficult for you to get clients to use your services if they know you are running the business as a private individual, not a corporate firm. So, you will have to register your business as a corporate entity.
Catchy Business Name ideas for a Background Check Business
There are several business names that you can adopt. It is necessary for you to go for names that will strike potential clients as one that is worth dealing with. Here is an idea you can adopt;
- American Data Bank
- Argus Services
- M & M Screening
- Background Solutions
- April Search
- Certifix Live Scan
- Data Quest
- Centre Backgrounds
- Edge Information
- FasTrak Services
- Klink Checks
- Lighthouse Information Services
- Nation Check
- Paper Trails
- People Check
- Smart Start Employment Screening
- Sterling Infosystems
- Super Eye
- USA Fact
Choosing the Best Insurance Policy for your Background Check Company
Background check business as we know by now offers their investigative skills to employers and businesses that want to hire the best candidates and work with trustworthy companies. From screening employment references and character references to scoping out education and employment history, criminal history, professional licensing, and credit.
When you work from home to offer background screening to your clients, the worries of lawsuits and liability claims may seem like a remote possibility. But in truth, your line of business exposes you to unique risks – some of which come with price tags high enough to bankrupt a small-business owner.
And though you run your business from home, your Homeowner’s Insurance will not cover these losses. To protect your background check business, you need adequate business insurance coverage that can address your most pressing risks. They may include:
- General Liability Insurance.
- Property Insurance / Inland Marine Insurance.
- Business Owner’s Policy.
- Workers’ Compensation Insurance.
- Errors & Omissions Insurance.
- Cyber Liability Insurance.
- Umbrella Insurance
Is Intellectual Property Protection Needed for a Background Check Company?
If you are considering starting your background check business, then you should consider going for intellectual property protection to be able to protect your intellectual property. Filing for intellectual property protection for a Background check business goes beyond protecting your company’s logo and other documents, but also protecting your investments, patents and of course the name of your company.
If you want to file for intellectual property protection and also register your trademark in the United States, then you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.
Is Professional Certification Needed to Run a Background Check Company?
It is indeed true that You don’t need to have a special skill or a college degree to start a background check firm; as long as you can carry out an extensive research and compile a detailed information on each individual you are assigned to carry out a background check on, then you have what it takes to run the business, but also having a professional certification can boost your business and increasing cooperate identity.
- Association of Professional Background Screeners
- Certified Background
- ESR Online Safe Hiring Certification
- Professional License & Certificate Verification
List of Legal Documents Needed for a Background Check Firm
It is always very important to run your business with the right legal documents. Why is this important? This is vital because of the need to not risk being clamped down upon by the necessary authorities involved in the industry you operate in. So, here are the documents you need to operate with;
- Request for Reservation of Corporate Name
- Articles of incorporation
- Corporate bylaws
- Minutes of First Meeting
- Stock certifications
Each State or even country has different terms for issuing out such licenses, make an inquiry of the requirement for the State you are planning to run your business and get the license. Or better still, you can use the services of a lawyer to fasten up the process.
Writing a Business Plan for a Background Check Company
Starting an employment background checks business can get you on the path to a secure financial future if you do it right. Writing a business plan can be a daunting task for a new entrepreneur. Learning how to write an employment background checks company business plan isn’t difficult.
If you can get past the mystique, you’ll see that a business plan just describes where your employment background checks business is headed and how you intend to get there. When you compose a business plan, you formally document the rationale behind your entrepreneurial vision.
The information in your plan (and your rationale) is essential for lenders, investors and other people who have a stake in your company. You should also consider looking into the ideas listing below before compiling your business plan.
- Take a Look at Competitors
- Learn from Others Who Are Already In This Space
- Be open to ideas and corrections
A Detailed Cost Analysis for Starting a Background Check Business
Starting a background check business is not capital intensive, because you don’t need to purchase expensive machineries and equipment to run the business. On the aspect of labour, you can get few employees to run the business with you.
You just need few things like a computer, a printer and develop marketing strategies that will attract customers. are starting out on a tight budget, you can run the business from home; that will mean that all official appointments for projects will be held in your client’s office space or in a public place like a coffee shop or a restaurant.
At this stage, everything is ready for your firm to start business, but you need clients to get started. The estimated cost of starting a small scale background check business is believed to be $2,300, a medium scale and large scale background check business is estimated at $46,963 and $92,563 respectively.
- Financing your Background Check Business
Finance is very important for business organisation. Finance includes planning of financial resources, making of optimum capital structure and effective utilization of financial resources by deep analysis of cost of capital and capital budgeting tool. Ways to finance your background check business may include…
- Debt Financing
- Personal savings
- Raising money from investors and business partners
- Applying for Loan from your Bank / banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
Choosing a Suitable Location for your Background Check Company
You can start your Background check business from home but the commercial building you choose will have a big impact on your business. Its size, layout, location and appearance should all enhance your operations while respecting zoning and environmental regulations.
Buildings come in a wide variety of shapes, locations and prices, so you have to know what your needs are and how much you can afford to pay. If you’ve worked on a business plan, you probably know the amount you can spend on rent or a mortgage, utilities and taxes. A cash-flow analysis will help you determine whether you can afford to purchase a commercial property or if renting is your only viable option.
Renting may allow you to keep more of your working capital for business operations. Still, don’t forget to take future rent increases into account. When you own your property, you know what your monthly mortgage payments will be and you are building equity for your business.
It’s always a good idea to seek the advice of an independent commercial real estate advisor who can help you set criteria for choosing the right building. This advisor should know the area and be familiar with zoning regulations and any potential issues concerning the building, its location or uses to which it may be put. Things to consider when choosing a suitable location for your Background check business include;
- If it’s the right location
- Does it require modification?
- Tax and infrastructure
- Allowing for future growth
- Separate your needs from your wants
Starting a Background Check Business Online – Technical and Manpower Requirements
Checking into the history of a prospective employee or even a new acquaintance or love interest is easy in this digital age. A simple Internet search can net substantial and interesting results. Better yet, working with a third party service ensures all reporting and disclosure rules are followed to the letter of the law. Either way, background information helps paint a picture of the person based on past habits.
Computers and software can certainly be helpful during the background check process, but the information gathered by a computer is not necessarily as reliable as the facts that can be obtained by a human. In an ever changing compliance landscape, automated adjudication may aid and assist in the screening process, but it shouldn’t be the only means by which you “clear” candidates or employees.
A number of industries, especially those that require the handling of other people’s personal and private information, require background screenings. These include the home healthcare, financial, and insurance industries among others. But even if your business does not operate in or provides services to these industries, there are still enough crucial reasons to run them.
If you want to order and review any kind of background check in order to determine somebody’s eligibility for employment, you need to ask their permission. Two forms specifically must be completed by the applicant, the authorization and the disclosure.
There is no standard background check package because different industries, and even different companies within the same industry, will have different criteria regarding what constitutes an eligible candidate. Your company should have packages set up based on business necessity, packages that should be different for different types of jobs. Any executive position should be subject to more stringent testing than a basic minimum-wage employee.
The depth of your screening should reflect the risks arising from criminal misconduct in each specific position. When creating the packages, remember that if screening guidelines are too lenient you may hire criminals and welcoming unnecessary risks to your business, but if screenings are too stringent you may miss opportunities to hire well-qualified applicants who pose no threat – and you may even run afoul of the EEOC.
Documents and sources accessed during a background check would include Social Security numbers, driving licenses, vehicle registration, driving records, credit records, criminal records, education history, workers’ compensation records, bankruptcy records, character references, medical records, property ownership, military records, state licensing records, drug test records, past employers, personal references, incarceration records and sex offender lists.
The depth of the background check will depend on the nature of the job. It is critical, for instance, that someone who has a history of fraud not be employed as a cashier, or a possible terrorist employed in a defence facility.
The Service Delivery Process in the Background Check Business
Background check can take anywhere from one to five days in most cases. This often depends on the type of background check an employer is running and myriad other circumstances. While many employers want the quickest possible turnaround, it is more important to be both thorough and accurate. This helps to mitigate risk at a later date and ensures that employees will reflect the value of the company.
There are multiple aspects to a pre-employment screening. Depending on the organization, industry and job responsibilities, checks can include elements such as a criminal background check, reference checks, employment verification, education verification, driving record, drug testing and, or social media research. All of these aspects are important, and all can take time.
The best method for conducting criminal background checks is to research any county court/s where an individual has resided over the course of their adult life. There are about 3,000 counties in the United States, and unfortunately there is no reliable centralized database of criminal records. One bottleneck that can occur is when a court mandates that the research must be conducted by one of their own clerks. In some cases, this can take a week or more and there is no reliable alternative. Other delays can occur when a record is found.
If your background screening company is doing their job properly, then you will use methods to ensure the record they are reporting belongs to the person you are screening, is accurate and up to date and is legally reportable. When it comes to resume verifications, results can take anywhere from one to three days.
However, delays can occur if a past employer doesn’t respond to a request in a timely matter. It is also not uncommon for delays when verifying high school education during summer months or holidays when the schools are not appropriately staffed to respond to such requests.
Industries with high turnover rates such as hospitality tend not to do many background checks. Most other industries, however, conduct in-depth background checks on job candidates because they will be liable for damages for things the employees might do during their employment.
Employers conducting background checks will go through publicly available records, most of them generated by the government. They will also scan social media and other digital spaces where people generally let their guards down and air their views.
Starting a Background Check Business Online – The Marketing Plan
- Marketing strategies for a Background check business
Multiple marketing factors can affect bottom line profitability. Yet one feature seems to be part of the shared DNA of all effective marketing programs. Seasoned entrepreneurs usually have a solid foundation in marketing. But to achieve your goals, there are some other things you also need to learn about marketing your employment background checks business.
- Marketing Expertise
- Measurement & Evaluation
- Price Matching
Finding the Right Pricing for your Background Check Business
Over the past decade, the consumer reporting and background check industry has seen significant growth. With growth typically comes competition, and with competition usually comes aggressive pricing. With certain background checks, jurisdictional and data access fees are charged by select counties, states and data providers. So in other to get the right pricing that will cover your expenses and suit your prospective clients, you should consider the following details.
- Type of background check
- jurisdictions (location) in which you must search
- Access fees been paid for the information
- Competitors price
- Information needed by the client
Possible Strategies for Winning Competitors in the Background Check Business
Today success is about making friends. It’s about finding a common ground with your competitors. It’s about collaborating with each other to collectively get more customers. If you want to take your Background check business to the next level, understand the power of partnerships.
Stop seeing your competition as your enemy. And learn to embrace it, instead of fighting it. By joining forces with your competitors you’ll worry less about losing sales and be able to focus more on growing your business.
Now, the question is, how do you create joint ventures that give results – without hurting your own profits? For starters, make sure you do your homework before you jump into any kind of partnership with a competitor. You need to understand and know them before jumping into bed with them, find a gap and make the best out of it. Effective ways to leverage your competition to boost your Background check business include:
- Conduct Free Value-Driven Webinars
- Create branded pdf reports
- Refer Service to Get Services In Return
- Give 100% Commission on a Front End service
Strategies to Increase Client Retention in the Background Check Business
The only way for a company to become profitable is for its customers to purchase their products or services. Historically, companies have spent the majority of their marketing budgets on customer acquisition. The thought was, if companies reached more people, they could sell more. Today, as companies use data to determine customer motivation and behaviour, they are realizing that customer retention is where they should be focusing their marketing efforts.
retention requires a serious commitment to long-term relationship building. But often, retaining existing customers is more cost-effective and even more profitable than acquiring new customers. With every company having its own unique customers and target audience, it can be difficult to pinpoint that one strategy that fosters trust and, ultimately, brand loyalty.
In fact, many times it’s a combination of tactics and strategies, along with real-time adaptations to each customer’s individual needs that facilitates lifetime customer loyalty and allows a business to achieve customer retention goals. Loyal customers are often those that lead to referrals. In other words, the lifetime value of your existing customers extends far beyond the obvious. Ways to increase customer retention in your Background check business include…
- Set and meet customer expectations
- Nail the first impression
- Always be adding value
- Improve competitive advantage
- Build ‘sticky’ customer loyalty
- Let clients know what you are doing for them
- Focus on becoming a dependency
- Listen to them
- Keep your eyes open for external environment changes
- Know your weakness
Strategies to Boost Brand Awareness and Create a Corporate identity in the Background Check Business
Corporate identity actually refers to the overall image of a corporation/ start up/ business in the minds of its audiences: customers, its own employees, partners, competition, etc. Your company needs to be recognizable and stand out from the rest.
Corporate identity allows your brand to speak with a unique and consistent voice. In time, you begin to grow in people’s minds and you start creating a particular impression in them. In a world completely flooded by advertising, this is extremely important! You can adopt the following modes;
- Send Out Proposals
- Word Of Mouth Advert
- Create an Online Presence
Creating a Supplier/Distribution Network for your Background Check Business
It is not enough to simply state a firm’s goal as maximizing the present value of total profit since this does not differentiate it from other firms and says nothing about how this objective is to be achieved. Instead, a business and marketing plan should suggest how the firm can best put its unique resources to use to maximize stockholder value.
Your firm’s distribution objectives should ultimately be highly related—some will enhance each other while others will compete. For example, it should be more exclusive because higher service distribution will generally entail less intensity and lesser reach. Cost has to be traded off against speed of delivery and intensity.
In view of the need for markets to be balanced, the same distribution strategy is unlikely to be successful for each firm. The question, then, is exactly which strategy should you use? It may not be obvious whether higher margins in a selective distribution setting will compensate for smaller unit sales.
Here, various research tools are useful. In focus groups, it is possible to assess what consumers are looking for which attributes are more important. Scanner data, indicating how frequently various background checks are being checked and facts whose prices correlate with each other may suggest the best placement strategies. It may also, to the extent ethically possible, be useful to observe clients in the field using services and making decisions.
Then you can observe factors such as:
- How much time is devoted to completing your research?
- How many checks are compared?
- What different kinds of checks and accesses are compared or are substitutes (e.g. Drug checks and license Verification?
- What are “complementing” facts that may cue the Background check of others if placed nearby. Channel members—both clients and prospective individuals —may have valuable information, but their comments should be viewed with suspicion as they have their own agendas and may distort information.
Tips for Running a Background Check Business Successfully
A background check is an essential part of the candidate selection process. A background check is the most accurate way to verify the credentials of a candidate. It also allows hiring managers to learn about any less than desirable information that many candidates won’t share on their resumes.
Every hiring manager wants to make sure that they find the right candidate for the job. A candidate’s credentials are only one piece of that puzzle. Employers want to hire people that they consider responsible and trustworthy. While background checks are a great way to confirm a candidate and prevent any hiring mishaps, hiring managers must follow a set of guidelines to protect both the candidate and your company.
There are many local and national laws in place to protect the privacy of people who are looking for jobs. Background checks should be reasonable and are best done when they are aligned with both the job profile and local laws. So in other to run your background check business successfully, you need to adhere to the following.
- Be reasonable and open
- Be detailed and economical
- Create good marketing strategies
- Insure your plan
- Never underestimate the power of customer feedback
- Be patient
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