Background Check Services
Business for Sale Industry Economics
2004 - 2020
2020 - 2026
Companies in the Background Check Services business provide tenant and employment background screenings to customers, landlords, corporations, and other organizations. Over the next five years, the industry will have grown at a 2.2 percent yearly pace to $2.8 billion. However, because of the COVID-19 (coronavirus) pandemic’s subsequent economy-wide regulations and recession, the industry is anticipated to shrink 1.3 percent in 2020.
For the majority of the time, however, record-breaking labor-market gains and a decrease in rental vacancy rates raised the demand for background check services as more individuals were granted employment and the rental market grew more competitive. However, vacancy rates are predicted to rise in 2020 as a result of the pandemic, resulting in a temporary fall for the business.
Over the last five years, the Background Check Services sector has grown steadily. In reality, the internet has been the dominant engine of industrial development during the last decade. Historically, background check services were mostly completed manually, but the internet has streamlined and automated many of the activities that were previously done by hand.
The expansion of internet services has made it easier for start-ups to enter this business; yet, a greater number of conventional operators have been driven out of the market due to their delayed response to the changing environment. As competition heats up and the business faces extra pandemic-related pressure, industry profit (measured as profits before interest and taxes) is predicted to fall to 3.8 percent.
Research forecasts that industry sales will grow at a 2.5 percent yearly pace to $3.2 billion in the five years to 2025. During this time, industry operators are likely to gain from the labor market’s recovery as well as a lower unemployment rate, which will drive revenue as higher hiring drives enterprises to consume industry services.
This expansion will be aided by a growing number of towns and counties enacting legislation prohibiting firms from asking applicants whether or not they have been convicted of a crime, however, they are still permitted to employ industry services to obtain this information. Strong growth, however, may be dampened by predicted rises in vacancy rates, which may reduce demand from apartment leasing firms.
Although there has been some volatility, the Background Check Services market has increased throughout the five years to 2020. As macroeconomic conditions improved, industry income increased and recorded excellent overall results during the five-year period, especially as the unemployment rate fell to 50-year lows.
However, as a result of the coronavirus pandemic, which resulted in further controls of firms’ working environments and a subsequent recession, the industry has faced some pressure in 2020, resulting in an expected 1.3 percent fall in sales. Nonetheless, research predicts industry sales to expand at a 2.2 percent yearly pace to $2.8 billion in the five years to 2020.
Strong growth, however, may be dampened by predicted rises in vacancy rates, which may reduce demand from apartment leasing firms. However, as a result of the pandemic, hiring freezes, furloughs, and layoffs caused the unemployment rate to rise to 10.1 percent in 2020, up from 5.3 percent in 2015. Nonetheless, increased economic activity in the remaining years of the era has increased industrial demand.
For the most part, steady drops in unemployment suggested that more positions were available, increasing the regularity with which companies used background check services. Similarly, rental vacancy rates have fallen from 7.1 percent in 2015 to an expected 6.8 percent in 2020, fueling need for background checks on potential renters. As vacancy rates fell, so did the number of rental applications, fueling demand for industry services from landlords.
The internet has also provided additional areas for the industry to search for information on an individual’s background. Historically, background checks relied mostly on criminal records, driving records, and reference checks.
In recent years, industry participants have become more interested in researching the internet behaviors of background check subjects. Social networks, such as Facebook Inc., can, for example, give valuable information on how a job candidate interacts with others and the extracurricular activities in which they participate.
The sector is likely to profit over the next five years as the labor market improves. Although the unemployment rate increased due to company closures during the COVID-19 (coronavirus) pandemic in 2020, research predicts that the national unemployment rate will rebound to relatively low levels by 2025, hitting 4.8 percent.
As the national unemployment rate is predicted to virtually reach the previous five-year lows, industry demand is projected to rise as companies aggressively examine job applications. Furthermore, good macroeconomic conditions will allow enterprises to afford industrial services more easily.
However, this expansion will be hampered by reduced demand for tenant services; growing rental vacancy rates are likely to stymie a large increase in demand from apartment leasing firms, as more apartment renters are likely to buy homes rather than rent. According to research, the rental vacancy rate will grow to 7.5 percent in 2025, up from 6.8 percent in 2020.
The sector has benefitted from a rise in the percentage of business undertaken online during the last five years. This tendency is projected to continue over the next five years, backed by greater work-from-home arrangements and social isolation as a result of the coronavirus pandemic.
Research predicts that by 2025, 33.5 percent of consumer and commercial services will be delivered online, up from 29.6 percent in 2020. While the online migration of background check services offered a considerable boost to the sector, the ensuing expansion has virtually hit capacity.
As a result, industry players are expected to link their services with other systems, such as application tracking systems and human resource information systems. As a result, industry operators will be able to develop a one-stop-shop for screening and employing job prospects, while also assuring legal compliance throughout the process.
The Background Check Services sector has reached the mature stage of its life cycle. The current consolidation among firms and price-based competition across the sector demonstrate the sector’s maturity. Furthermore, the industry is predicted to increase in accordance with the general economy during the next ten years, until 2025.
Research forecasts that the industry’s contribution to the entire economy, as measured by industrial value added (IVA), will grow at an annualized rate of 5.1 percent during the next ten years. GDP is predicted to expand at an annualized pace of 1.9 percent for the same time period.
The growth of internet services has lessened the industry’s entry barriers for new market entrants, resulting in increasing rivalry, particularly among small players. As a result, profit margins for industry participants have shrunk. In order to enhance market share, economies of scale, and brand awareness, larger firms have acquired smaller operations.
Over the next ten years, the number of industry firms is expected to grow at a moderate yearly pace of 2.8 percent, as competitive pressures compel small operators to consolidate or abandon the sector. Consistent consolidation shows that the industry has reached maturity.