Consolidation of the background screening industry continues to create opportunity for smaller CRAs. Historically, some clients of these mega-mergers find this is a good time to make a change with their background screening provider. The CRAs that have the staffing, technology and breadth of services in place are better positioned to take advantage of the opportunity.
Given the direct relationship between the US economy and the background screening industry it is no surprise to see a solid background screening industry. The strong US economy backed up by 2.3% GDP growth rate in Q1 2018 and below 4% unemployment rate, is driving growth in the background screening industry. While industry sales volume grew by an estimated 60% between 2015 and today, acquisitions have caused the number of screening companies to actively decrease. This robust environment creates fierce competition among the background screening businesses, many of whom use mergers and acquisitions to fuel their growth and jockey for a leadership position. What does all this big player activity mean for small and mid-sized CRAs?
Big player mergers create a clear “fallout opportunity.” When giant companies merge, we have witnessed that some customers are lost in the transition process. Whether it be poor communication, changes in policy or simply a change in company contact, the giants simply will not retain every single existing account. What does this mean for the other CRAs? Let’s say that a company with $600mm annual sales loses a conservative 1% of its business during or after a merger. That translates into a $6mm opportunity! Where will these valuable customers go? Is your business ready to capture a piece (or all) of this?
The first step background screening businesses should take to seize the new business is to ensure you are fully and efficiently staffed. All of your teams: sales, account management, operations, QA, legal & customer service must be prepared to draw in and work with the new customers. Has your business leadership completed a competitive analysis to know which customers are in need of a new CRA? Does your team know the prospect’s reasons for leaving their previous CRA? Does the business have the skill set to fulfill this customer’s needs? What is your business’s point of differentiation? How will your CRA be better than the former CRA? Review each function in your business to ensure you are fully equipped to identify, approach, close and work with new customers.
The second step CRAs must take in order to win the fallout accounts is to assess technology expertise and readiness. Consider the following questions:
- What are the technology strengths of your business as a whole and by function?
- What are the technology needs of the available customers?
- Are your systems and IT staff ready to handle the required volume of the new customers?
- What are the system integration capabilities of your platform?
- Do you have an ATS you can provide to those customers in need?
- Is your background screening technology platform flexible and helping your customers? Third party platforms can be a critical consideration for CRAs looking to increase productivity. The build vs. buy decision is not solely about cost. You must do your homework to understand your business needs and those of your customers. Consider: ease of use, ATS integrations, investment, customer service, customization functions, and open sourcing of suppliers when choosing a platform. When one platform does not do everything you require, think about using multiple platforms (a growing trend).
Finally, CRAs who are best positioned to win the new clients will be those who provide a broad list of customer-centric services. Beyond the obvious CRA services involved with pre-employment screening, there are hundreds of other options to offer your customers. Listen to your customers and make note of their problems and frustrations. What can your business do to ease their pain? Perhaps a customer wants to reduce the amount of time it takes to receive reference checks. Do you have a solution for this customer? Did you know there are automated, applicant-driven and web-based reference check products on the market that will exponentially speed up the cycle? This is only one example of many options to expand your product line. Set up a complete menu of services.
Consolidation of the background screening industry continues. If you are not acquiring or being acquired you still have tremendous upside potential. Make the time to quickly optimize your staffing, technology and menu of services to grab these available opportunities.