Hello everyone, it’s been a while since my last blog. I apologize that you are now forced to read another! I have been busy for the last few months and unfortunately had to drop writing to not fall behind. The good news is that this one is definitely one to pay attention to. A lot is happening in the industry; much of it you likely don’t know about and won’t find out here. However, it’s creating some serious changes to the future of our industry. In order to not get too confusing and to not allow you to fixate on current events, let’s talk about the future. Here are my predictions for the (near) future of background screening.
- CRA Consolidation – There are no fewer than 7 screening firms currently testing the waters and seeing what their value is in the market. I’m not talking about small <10 MM companies (but I’m sure there are plenty), I’m talking sizable, market shaking acquisitions that will reshape the entire market. Multiples are at an all-time high and private equity continues to be very bullish on the industry as a whole. In the mid and smaller markets, you will continue to see consolidation. Ministry Brands and a few others are leading the way and there have been several acquisitions. From what I hear there are way more in the hopper.
- Vendor Consolidation – Appriss acquiring Innovative Enterprises was a highly strategic move for Appriss. Since they themselves have a new financial partner, look for a large roll up of vendors in the space. Not all their acquisitions will be data plays, I think they are smart to continue buying into the supply chain and find new products to create. Appriss has some great forward thinking talent in-house and I can hear the gears turning in Louisville all the way from Cleveland. See the next prediction for a peak at where I really see them making waves!
- Subscription Based Screening – You heard it here first (or perhaps on my LinkedIn last week) but the financial model will change, significantly. A la carte and package pricing will be the exception in a few years, monthly subscriptions will reign. I predict that Checkr and possibly a few others buying into the screening supply chain. Checkr buying Themis a few weeks ago tells me there is going to be some major market disruption. Checkr now owns much of their data, testing and selling a subscription-based model is next. Others will be forced to follow as the big 3 will quickly adopt the same strategy. Not sure how this fits into your business model? It’s time to figure it out and be ready for it!
- Blockchain – Big buzzword for the past few years and more recently in the screening world. I’ve been pretty vocal about it not having any sort of revenue model to make it work. However, I do believe someone will figure it out and find a way to integrate it into current process allowing the consumer, not the CRA to own their data. There are a few startups in Silicon Valley trying to figure this all out, I predict the successful winner of this product to come outside of the industry; someone in the industry should strive to beat them to it.
- Automation – CRA’s need to figure ways to continue automating processes. Many have automated some or a good portion of their criminal products but there is a lot more to do. CRA’s must cut costs by automating, the days of throwing people at process is over. In order to compete you must drive the change needed internally to use artificial intelligence and machine learning. Are you still walking into more than 50% of the courts? Are you still faxing verifications? Are your adjudications still manual and run by people? If you answered yes to any of these then you are way behind, I won’t bother throwing out the other 5-10 places you can automate.
- Product – Companies grow by adding product, period. CRA’s have historically been absolutely terrible at adding and marketing new products for their clients. While you are dragging your feet, some really cool things have entered the market. For example, have you checked out crosschq? Crosschq has developed a way to automate references and has just raised 4.1 million dollars to do so. There are 5-6 other companies innovating right now. It might be time to add a product manager to start figuring these things out. Over the next few years you will begin to see more and more CRA’s productizing their businesses, will you be the last?
The landscape is changing. The competition is getting better and more disruption is ahead. I will be at the NAPBS conference on Saturday and leaving Tuesday afternoon. Shameless plug to come see Les Rosen and me speak on Tuesday at 11:30AM and learn more about how to become an expert witness! Lastly, anything I said here of interest to you? Are you looking to improve your operation and/or looking to add some top talent? If so hit me up at the show and we can chat.
Best,
Jason
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