How to Start a Profitable Background Check Business: The Ultimate Guide

Are you interested in starting your own background check business? It can be a lucrative industry, but you have to do it right. Conducting accurate background checks and staying on the right side of the law requires specialized knowledge and experience.

In this guide, we'll walk you through the essential steps to start your own background check business. We'll cover how to get properly licensed and certified, build your business plan, establish your company infrastructure, market your services, and conduct background checks legally and ethically.

If you're ready to dive into the background check industry, keep reading. This could be the opportunity you've been waiting for to start a successful business helping both companies and individuals make important hiring and safety decisions.

The Background Check Industry Market

The background check industry provides background screening services to both businesses and individuals. The target audiences for a background check business include:

- Employers: Conducting pre-employment background checks to evaluate job candidates. This includes most industries but especially those in healthcare, education, transportation, and finance.

- Property managers: Screening potential tenants with background and credit checks.

- Individuals: Providing personal background checks for dating, volunteering, adoption, etc.

The background check industry typically serves a mass market, though some firms specialize in certain niche areas like government or executive-level screening. Most background check companies operate locally or regionally, though some large firms work nationally or even globally.

Overall, the background check industry is a large market with steady growth. As long as you target the right customers, focus on accuracy and compliance, and provide great service, a background check business can be very successful.

Your Background Check Service

The core product for a background check business is, of course, background check reports. However, to stand out, you need to provide accurate, comprehensive, and legally compliant background checks. Some key points for your service:

- Focus on accuracy. Double-check all information and use multiple data sources. Inaccurate reports can damage your reputation and lead to legal issues.

- Follow all laws like the FCRA to the letter. Stay up-to-date with regulations and best practices to avoid penalties or lawsuits.

- Offer different levels of service at varying price points. This could include basic, standard, and premium background check packages with different types of information. Cater to both high-volume and specialized needs.

- Provide reports and tools that are easy to read and understand. Give your clients clear, actionable information, not just raw data.

- Build a user-friendly online platform for ordering, paying, and accessing background check reports. Make the entire process as smooth as possible for your clients.

- Develop a solid vetting process for your data sources and records providers. Work only with reputable, compliant companies to get the most accurate and up-to-date information.

- Consider offering additional services like drug testing, credit checks, and monitoring services to increase revenue from your clients. But only expand into areas where you can provide the same high quality.

If you focus on these key points, you can develop a background check service that provides real value to your clients and stands out in the market. But never stop emphasizing accuracy, compliance, and customer service—that's the foundation of a successful background check business.

Economics and Finances of a Background Check Business

To run a profitable background check business, you need to understand the economics and set the right financial foundations. Some key things to consider:

Cost of Goods Sold: Your primary costs will be obtaining records and reports from data providers and government agencies. Fees can range from under $1 to over $100 per record depending on the type of information. You'll need to factor in these acquisition costs when determining your pricing.

Pricing Strategies: Most background check companies charge per report or offer monthly subscription plans for high-volume clients. For per-report pricing, conduct a competitive analysis of your target market to determine typical price ranges. You'll want to price slightly below the competition initially to attract new clients. For subscriptions, consider the average number of reports a client will need to determine a competitive monthly rate. You can also offer bundled packages at a discount for clients who need various types of background checks.

Additional Costs: Don't forget the other overhead costs of running the business like office space, technology, marketing, and employees. As a general rule, aim for your total costs to be less than 50-60% of your revenue.

Profit Margins: According to recent estimates, background check companies typically see profit margins of 20-30% or more. Subscription-based models usually have higher margins. Focus on controlling costs, optimizing your pricing, and maximizing client volume to increase your margins over time.

Pricing Increases: Once you have established clients, you can consider small price increases of 3-5% per year to account for increasing costs and maintain strong margins. But be careful not to increase too quickly, or you may lose clients to the competition.

For any business, understanding the financials is key to success. Make sure to do thorough research on costs and the economics of the background check industry. And once you launch, continually evaluate your pricing and costs to maximize profits while providing strong value to your clients. With the right financial foundation, your background check business can thrive.

Marketing Your Background Check Business

To build a successful background check business, you need to market your services to attract new clients. Some of the top strategies include:

Search Engine Optimization (SEO): Ranking high in search engines like Google is key for a background check business. Focus on keywords like "background check" and your location. Optimize your website content, page titles, URLS, image alt text, and more to improve your rankings.

Pay-Per-Click Advertising (PPC): Run targeted ads on search engines to reach people searching for background checks. Google Ads and Bing Ads are top platforms for PPC ads. Only spend what generates a positive ROI.

Social Media Marketing: Build profiles on sites like LinkedIn, Facebook, and Twitter to raise awareness and engage your target audiences. Post updates about your services, industry news, and other useful content. Also consider paid social media ads to increase traffic.

Content Marketing: Publish helpful blog posts, videos, and other content about background checks, screening services, compliance issues, and more. This establishes you as an expert and helps with SEO and social media marketing.

Email Marketing: Build an email list from your website visitors and social media followers. Send regular newsletters and promotional emails to stay in touch with potential clients. But be careful not to spam—only email with relevant, valuable content.

Direct Outreach: Personally contact employers, property managers, and other potential high-volume clients in your area. Explain your background check services and how you can meet their needs. This one-on-one outreach can be very effective, especially when you're first starting out.

Partnerships: Team up with related businesses like recruiting firms, security companies, and drug testing labs. Promote each other's services and cross-sell to shared clients. Look for partners that serve your target audiences but don't offer competing background check services.

Advertising: Place ads in industry publications, on local radio stations, and other media outlets that reach employers and your key demographic groups. Carefully track the results of each ad to optimize your campaigns.

Sales Strategies for Your Background Check Business

To close more sales and bring in new clients, focus on the following strategies:

- Consultative Sales: Don't just pitch your background check services. Meet with prospects to understand their specific needs and challenges. Then explain how your solutions can address their pain points. A consultative approach builds trust and shows your value.

- Free Trials: Offer free basic background checks or a free month of subscription service. This allows potential clients to see the quality and usefulness of your reports firsthand with no obligation. Many will convert to paying customers if they have a good experience.

- Upselling: Once you have a client using your basic services, upsell them to premium background checks and monitoring services. Explain the additional benefits and offer an upgrade at a discount. It's much easier to upsell existing happy clients than find new ones.

- Account Management: Assign a dedicated account manager to each client, especially larger corporate accounts. The account manager's role is to ensure clients are satisfied, address any issues, and look for opportunities to provide more value. Strong account management leads to higher retention and more sales.

- Referral Programs: Offer incentives like discounts or cash rewards for any referrals that turn into new clients. Referrals are one of the best ways to get high-quality leads since the potential client already has a trusted recommendation from an existing customer.

- Case Studies: Develop case studies highlighting how you solved problems and provided value to other clients. Share these case studies with prospects to build credibility and help them visualize the benefits of working with your company.

- Educational Resources: Provide resources to help educate prospects on background checks, screening best practices, and compliance issues. Things like guides, checklists, webinars, and videos are all useful. This approach establishes your expertise and keeps your company top of mind, even if a prospect isn't ready to buy yet. When they are ready, they will likely contact you first.

Operations and Execution

To properly execute a background check business, you need efficient processes and systems in place. Some key operational considerations:

Compliance Program: Develop policies and procedures to ensure you follow all laws like the Fair Credit Reporting Act (FCRA). Conduct regular staff training and audits to identify any issues. Compliance is essential to avoiding lawsuits and penalties.

Data Security: Implement strong data security measures like encryption, access controls, and routine vulnerability assessments. Background check information is highly sensitive, so data breaches can be disastrous.

Staffing: Hire background check specialists, account managers, researchers, and compliance experts. Conduct thorough background checks on all staff that will handle sensitive data. Provide ongoing training to keep skills and knowledge up-to-date.

Technology Infrastructure: Use specialized software to manage client orders, source records, analyze reports, and more. Options include Inflection, Sterling, and GoodHire. You'll also need a secure client portal for accessing and sharing reports.

Service Delivery: Develop efficient processes for client onboarding, background check ordering, record retrieval, report writing, quality assurance, and client follow-up. Automate as much as possible while still providing great customer service.

Quality Control: Implement multi-level quality control reviews of all background check reports before delivering to clients. Double check all information against original source records to verify accuracy.

Information Sources: Maintain relationships with various data providers, courthouses, law enforcement agencies, and other entities that provide the records and information for your background checks. Ensure all sources meet strict compliance standards.

Ongoing Monitoring: Stay up-to-date with changes in laws, regulations, and best practices. Conduct regular reviews of processes and technology to identify any needed improvements. Monitor KPIs like client satisfaction, sales, costs, and turnaround times to optimize operations.

Scalability: Choose a technology infrastructure and operational model that can scale as your business grows. The systems and processes that work for a small local firm may not sustain a large national company. Plan ahead for future needs.

Disclaimer

Starting a background check business requires in-depth knowledge of laws and regulations like the Fair Credit Reporting Act (FCRA). Be sure to research all federal, state, and local requirements before launching your business. Failure to comply can result in significant legal penalties. We recommend consulting with a lawyer who specializes in background screening and consumer protection laws. They can review your business model, service agreements, consent forms, and other documents to ensure full compliance before you begin providing services to clients.

Start Your Background Check Business Today

If you want to build a successful business helping companies and individuals make important hiring and safety decisions, starting a background check company could be an ideal opportunity. By following the recommendations in this guide, you can establish a legally compliant business, provide accurate and useful reports to your clients, and grow a profitable company.

Develop a solid business plan, invest in the necessary tools and staff, build strong relationships with data providers, and market your services to attract new clients. Focus on compliance, accuracy, and customer service above all else. And keep optimizing and improving to better serve your clients and gain a competitive advantage.

While starting any business is challenging, the background check industry continues to expand. If you gain the required experience and skills, establish a reputable brand, and work to understand client needs, your background check business can thrive. So don't wait—start putting these steps into action today to launch your business.