The background screening industry is both highly profitable and intensely competitive.
As of this writing, the market for pre-employment background checks has grown by nearly 5% each year for the past five years.
But barriers to entry in this industry are collapsing. As more courts and law enforcement agencies make their records available online, it’s never been easier to conduct a criminal background check. Nearly 2,000 firms are jockeying for their slice of the $3 billion pie that represents the American background check market.
For CRAs, shrinking margins and customer churn have become facts of doing business. How can you chart a path to growth and profitability in this increasingly commoditized field?
In previous articles, we explained why we believe the answer lies beyond the pre-employment stage. While most employers run criminal background checks before hiring employees, very few monitor criminal activity throughout the entire employment cycle.
By offering Continuous Criminal Monitoring (find out how it works here), you can help your customers mitigate risk and create a safer workforce. And by doing so, you can create steady streams of predictable revenue that will propel your CRA business past your competitors.
Here are four reasons we’re confident Continuous Criminal Monitoring is the most promising opportunity for CRA growth in the 2020s:
1. The Market Is Demanding Continuous Criminal Monitoring
Safety is a driving concern for employers in the era of gig work and job-hopping. Employers and employees know less and less about the people who staff their worksites, provide their services, and interact with their customers.
In this climate, Continuous Criminal Monitoring provides a measure of reassurance to employers who see protecting the safety of their workers and customers as paramount. Periodic or one-time-only background checks overlook vast stretches of time in an employee’s life. (It’s like only screening an airline passenger before the first flight of their life and allowing them to board freely for each subsequent flight.)
The executive director of the Professional Background Screeners Association told SHRM her organization is seeing more industries embrace the concept of Continuous Criminal Monitoring, “particularly in industries with access to vulnerable people or where direct, one-to-one consumer access is a part of the employee's or contractor's scope of work.”
In certain industries, such as healthcare and financial services, Continuous Criminal Monitoring is evolving into a must-have. In these fields, unknowingly employing people with criminal records carries substantial risk.
The penalty for employing an individual with certain criminal activity in a healthcare field can be as much as $10,000 per employee per day. FDIC financial institutions can be fined as much as $1 million for each day they employ someone with certain criminal records.
During periods of high temporary unemployment, as we saw during the COVID-19 crisis, continuous monitoring can be extremely cost-efficient vs. redoing background checks for furloughed employees. There are a lot of factors to consider when estimating pricing, but a good rule of thumb is that one year of monitoring is about half the cost of a formal background check.
2. Continuous Criminal Monitoring Can Create Subscription Revenue
As we pointed out above, employers have come to see traditional pre-employment background checks as commodities. From a customer’s perspective, one screening report is as good as another; the only meaningful difference is cost. Most organizations choose the CRA that charges the least.
As a CRA, offering Continuous Criminal Monitoring is a way to insert your services into the way employers manage the employee lifecycle. While traditional pre-employment background checks bring in one-time-only fees, Continuous Criminal Monitoring allows you to enter into profitable long-term contracts with your customers to monitor their employees throughout the tenure of their employment.
You can charge using a subscription model, creating a predictable stream of revenue. On top of that, if you are already providing Continuous Criminal Monitoring, employers are more likely to choose you for their pre-employment screening, as well.
3. Continuous Criminal Monitoring Generates Higher Margins
As opposed to traditional background screening, Continuous Criminal Monitoring is still a premium service offered by only a handful of CRAs. That means you can charge a premium without worrying about being undercut by your competitors. This, in turn, will increase your company’s profitability and valuation.
But the sooner you enter the market, the better. More CRAs will almost certainly expand their services to include Continuous Criminal Monitoring as demand increases. There will be a significant first-mover advantage.
4. Continuous Criminal Monitoring Will Help You Expand Your Customer Relationships
Most CRAs deal entirely with their customers’ human resources departments. With Continuous Criminal Monitoring, you can extend that relationship beyond HR to departments such as compliance, legal, and risk management. Continuous Criminal Monitoring allows you to become an essential element in the way companies think about the entire lifecycle of employment.
A larger footprint within your clients’ organizations will give your company permanency as a trusted and essential partner.
Become an Expert on Continuous Criminal Monitoring
The technology that makes Continuous Criminal Monitoring possible is fairly new. This is an emerging capability for CRAs. The companies that understand and deploy this service first will have the most potential to profit and grow from it.
Get up to speed on Continuous Criminal Monitoring with our free ebook for CRAs, “Close More, Churn Less, and Create Subscription Revenue Through Continuous Criminal Monitoring.”
Click below for your copy.