SHRM
2005 Annual National Trade Show
Well,
sorry for the delay in getting out this update, but after the SHRM conference, I spent some time meeting with seven successful
California based CRAs and court researchers and moved on to AZ and NV and TX for further meetings and got home on July 1. (Part of the NV trip was to celebrate with my wife our 40th wedding anniversary. Good times!!). It was a great opportunity
to meet face to face with so many good business people in our industry.
At
the conference there were about 45 different pre-employment screening companies exhibiting.
Compared to last year, eight new background-checking companies exhibited and 9 others chose not to repeat. Attendance was off a little but 12,000 is still a lot of people and more importantly, the exhibiters I
spoke with seemed very pleased with the quality of the leads. Of course, these
are only “leads” and the real work in landing these accounts comes when you get back to the office.
Some news items
First Advantage unveiled their new branding program, moving all their acquisitions under the First Advantage
name with a new logo (a stylized eye from the First American logo eagle). The
word was this re-branding was at a cost of about $2,000,000. While parts of their
new exhibit booth did not show up, thereby decreasing the impact thereof, the consensus was that the impact was less than
anticipated. Regardless, the lesson to be learned is that First Advantage is
committed to doing the things necessary to build a strong company with a strong brand image. Their $2,000,000 investment demonstrates
that this company is very serious. How much are you spending (even proportionately
to your sales) to help your growth? Note: As of First Advantages 7/26/05
SEC filings, they reported that the re-branding was “only” $290,000.
Attendance
at these conferences also gives the owners of these companies a chance to exchange ideas.
We saw lots of CEOs talking to CEOs at their exhibit booths and in private.
We
also held a NAPBS micro meeting in the aisle about a new member package and the value of a monthly educational webcast to
HR/Security managers.
There
was a buzz also about a large CRA offering a 7-year crim off social (along with the address info), including AKAs for $26.00. One person couldn’t believe that they could make money at this price. I advised him that it was not only possible, but the gross margins could exceed 50%. I don’t think he believed me. I later spoke to
someone who was bemoaning the fact that this same company was selling this same deal for only $19.00, again not believing
that they could be making a profit. Figure it out. For a male applicant there are seldom AKAs and a 7 years address history may average 2.5 counties. For a female, if about 50% will have an AKA this equates to 3.75 counties to search. Assuming 50% of applicants are male, this averages 3.125 counties per applicant. At a cost of $.20 for the address data and a cost of $2.75 per county searched, the
cost for this service is $8.80. Throw in another county for good measure and
the cost is under $11.70. Even at $11.70 the gross margin is 40%. The key is automation; I would bet this provider does not touch the customer order or the request out to
the field researcher or the court results or the communication of the information back to the client. While there is no reason
why you have to sell at such a low price, if your costs are higher than this, you need a consultant (read: me).
At least twice CEO’s of major companies stopped me to ask when NAPBS was going to engage a professional
lobbyist. I told them that this was being worked on diligently. They wanted to be sure that NAPBS knew they would be willing to kick in extra money to help fund this need. This is a most important function of NAPBS.
A couple of TALX competitors popped up. They are part of
background screening companies, but are offering this service to their clients.
The
second most sought after item was background-checking companies for sale. From
my M&A work, it seems there are more buyers than sellers. This should make
for a good market if you are ready to sell. On the other hand, it seems that
most companies are doing very well this year, growth wise, and see the future as bright so they are not interested in selling
today because they think their valuation will be higher next year. This is, of
course, always a gamble. Those that were riding high in 1999-2000 found their
value drastically reduced when their customers stopped hiring in 2001 or went bankrupt in the recession (as in dot-coms). When is the right time to sell? Only
when you are personally ready.
The
first most sought after item was salespeople and sales management. If you have
good ones, keep them happy. They have lots of options.
During
these “good times” look to invest your management efforts in two areas, sales and marketing and in driving your
costs down. If business gets better this will result in better profits; if business
gets worse, you are prepared for the downturn.
Berg Consulting Group services are limited to the Screening Industry:
Mergers and Acquisitions
General Consulting
Cost reduction
County Criminal Savings ($1,421,234
saved by our customers since 2003)
