Pre-Employment Screeners 2008 Conference

Pre-Employment Screeners 2008 Conference

Congratulations to Steve Brownstein and Phyllis Nadel of The Background Investigator for anothersuperb conference. Everyone in attendance or exhibiting that I asked, said while they missed the typicalhigher number of attendees, it was a very worthwhile conference from all aspects: Networking, educationalsessions, hotel, location and exhibitors.

So if the quality was there, why the lower attendance? In my estimation, this is due to the worsening economy and to the fact that NAPBS held their mid-year conference just four weeks prior. The mid-year NAPBS conference began as an administrative meeting in conjunction with ASIS International annual conference but has expanded to include two days of educational sessions. Not only were there fewer people from each company, many companies were not there at all.

There were 42 exhibitors and Steve told me there were 20 on the waiting list. Again, the feedback I got from the exhibitors was they were pleased with the exhibit hours and the chance to spend significant quality time with their prospects, and the conference was worth it to them.

Steve Brownstein did tell me that he is going to take it up a notch next year by running dual simultaneous conferences, the traditional one for CRAs and researchers and a second conference across the street at the Marriott for Human Resource end users. While most of the sessions will be geared toward each specific audience, he plans to have some joint meetings between the groups.

Exhibitor Highlights:

  • 17 CriminalRecords/Data Providers (12 last year)
  • 5 Court Researchers(local or local area)
  • 6 Software/ASPs(10last year)
  • 1 MVRs (1 last year)
  • 2 Drug TPA
  • 3 Publishers
  • 7 Misc.
  • 1 Consulting Firm

The Sunday evening cocktail party was a big hit, as always, and the conversations continued into the lobby, the bar and even into the city of Clearwater Beach. Note: the exhibit booths were not part of this cocktail party because they were going to be open all day Monday and all day Tuesday so there was time at the cocktail party for the exhibitors to just schmooze and plenty of time over the next two days for the attendees to visit the exhibits.

People News

  • Todd Salmi is gone from deverus. Todd was a great supporter and dedicated part of NAPBS.
  • With the departure of Dawn Standerwick from BIS to AI a few months ago, John Carranco is nowExecutive VP, Stacy Severance is now Ops Manager and Vince Pascarella has joined BIS as VP ofSales.
  • Bill Whitford, ChoicePoint CEO, will depart ChoicePoint and the end of November. By the way,ChoicePoint will be the surviving name for the commercial services background screening part ofLexis-Nexis.
  • Kim Kerr is leaving Lexis-Nexis.
  • Teresa Alicea, former FADV, is now with Pre-Emply.com as Manager of Bus Development.

Presentations

While I couldn’t attend all the presentations, Ted Moss did give a nice presentation on NegligentHiring/Retention. He reported that there has been a 92% drop in workplace violence since 1992. While thereis no proof, this directly correlates to the huge increase in background checks in this 16-year period.Employers almost always lose negligent hiring lawsuits; 79% are lost, with an average award of $1.6M.

This is still a great motivation for doing background checks. He did note that 38 states have shield laws protecting the employer so they can provide factual information to a prospective employee without fear of being sued.

Wayne Tollemach (FADV) spoke about the ever-increasing use of background checks in the Asia Pacificmarket. Are you ignoring this market? First Advantage has 1500 employees there. 1500!! He listed one of hisstandard searches as “conflict of interest.” When queried, Wayne explained that this was for senior level executives to make sure they didn’t have an economic interest in a competing company, customer or majorsupplier to the employer. Is this a new search for you to add to your list? He also reported that on-lineassessments are done routinely in this part of the world.

Cherie Homa, from KPMG talked about the state of the market for background screening. She pointedly laid out the economic statistics that got everyone really depressed. We are sitting here in this nice conference ignoring the failing economic world and she really painted a glum picture, but maybe that is what everyone needed. She says the growth markets are in government employment and in healthcare.

As to valuation, it was kind of a shock that FADV had a market cap of only 0.9 times sales and 5 times cash flow, as they reported decreasing sales. The other public company, Kroll reported sales down 8%.She presented a great example of how decreasing sales can devastate your cash flow*. This is serious stuff. Cherie also commented on the importance and value of strategic partners and this was part of the reason for the very high valuation achieved by Hire Right when it sold to USIS.

Jay Levinson, the author of Guerrilla Marketing www.gmarketing.com, gave a presentation that got a great roundof applause, even after 2 hours. Some gems:

  • Commenting on the economy, he said he could understand business cutting back, but he stressedthat while you shouldn’t avoid saving dollars, what is keyis to make the most of the dollars you haveavailable to spend.
  • Purchase decisions, regardless of all the “logic” and “research” we apply to a decision, are made inthe unconscious mind and are made on emotions.
  • Recognizing the role of emotions can help you make the right decision. One example that appliestoday is the emotional attachment you may have to one of your employees, yet you know that that person needs to be terminated for the good of the company.
  • “Soft steps make the hard steps easier.”
  • Try to make each customer feel that they are unique.
  • Your sales and marketing time and efforts should be invested as follows:

o    Marketing to the entire universe of prospective customers, 10%.

o    Marketing to real prospects, 30%.

o    The remaining 60% should be invested building relationships with

your existing customers and selling them more things.

o    “Apathy after the sale is the enemy of marketing”.

Another highlight of the conference was Michele Stuart, owner of Jag Investigations. Michele is a PI that really, really, really knows the internet and databases. She gave a phenomenal presentation on how to find out about anyone on the internet for free or for very little cost by accessing non-traditional public records as well as social networking sites. While this historically does not relate to an employment background check,maybe, just maybe…just maybe, it should.

Other presentations were given by Mike Worthington (Resume Doctor) on resumes, Jay Eidelman on marketing, including pod casts, better writing techniques and e-newsletters, Craig  Caddell – ReferencePro,  Jon Kramer  – Charge Card Systems and yours truly on Buying or Selling a company.

Thanks again for a quality conference:

Bruce, Evan and Don

* KPMG furnished example of forward looking re: your cash position

Given the realities of the economy out there, it is only logical to:

Assume revenues will decrease

Assume your customers will extend their payment terms

Evaluate whether gross margins will contract

So look at the example below with respect to your cash position

AssumedDecrease in Sales 

Prior Results

(000)     10%    20%   30%

Revenues$5,000 $4,500 $4,000 $3,500
Gross Margin %**40%     40%    40%   40%
Gross Profit$2,000 $1,800 $1,600 $1,400
 

Operating Expenses***

 

$1,300 $1,300 $1,300 $1,300

Operating Income$ 700  $ 500  $ 300   $ 100
Operating Margin14%     11%      8%     3%

 

Now, if customers extend payments to you by 30 days, your cash flow will be

decreased by:$ (375) $ (333) $ (292)
= Cash generated$ 125   $ (33) $ (192)
Difference from prior results$ (575) $ (733) $ (892)

 

Thus, with a 20% decrease in sales and no action to reduce your expenses and/or to push hard on your accounts receivable, you will need to borrow $33,000 to keep the company afloat.

 

**This assumes your gross margin percents remain the same. They may actually shrink as your customer’spressure you for lower prices. Try to offset this by lowering your costs (see Better Vendor Program).

 

***Assumes you take no action to reduce operating expenses.