Stepping into the Startup Storm? Make Sure to Budget for Background Checks!

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The idea of starting your own business hasn’t lost its appeal, as is evident by the growing number of startups popping up not only in Silicon Valley, but all over the world. On top of that, two out of three startups believe that 2018 will continue to be a productive year, with the number of startups hiring at a five year high. With fundraising easier than ever (according to the 2018 Silicon Valley Bank Startup Outlook US Report), it’s easy to see why many entrepreneurs are choosing now to launch their new businesses. But when the whirlwind of starting your own business begins, remember to make room in your budget for background checks.

The risks that startups face are significant. Recent statistics state that over half of businesses fail in the first five years, and over 70% fail after ten. It’s not hard to see why. Most startups are self-funded, or at least rely largely on the personal funds of the founder. Put that on top of shoestring budgets and highly competitive markets and suddenly every misstep matters.

Selecting the Background Check Provider that Delivers the Greatest Value

So which misstep is the most costly? When looking at lists of common startup failures, one aspect shows up across the board: bad hires. Some studies call it “disparity amongst teams”, others “incompetence” or “employee incompatibility”, but what it boils down to is that the startup brought the wrong people on board.

According to SHRM estimates, bad hires can cost well-established companies as much as $240,000, which we’ve previously discussed on our blog. Imagine how a loss that size would affect a brand new business.

How Startups Can Stop the Problem Before it Starts

Make absolutely certain that your startup budget includes a background screening program. The good news is that background checks don’t have to be difficult, or even expensive.  A robust and practical screening program can help you hire the right people at the right time.

Startups especially need to be able to trust their hires. A foundling company needs the best support possible, and hiring someone with falsified education or made-up work experience can land you with an employee who has no idea what they’re doing at a time when competence is essential. Couple this with the risk of litigation should hiring negligence become an issue, and background checks become a cost-efficient way to protect your startup during its most vulnerable years.

Some Products to Consider

  • Criminal History Check: This product is the skeletal structure of the vast majority of screening programs. Know the history of your potential employees and evaluate the risk they may pose to your startup. Not only will you be protecting your business, you may be able to avoid costly mistakes.
  • Motor Vehicle Records (MVR): Are you planning to have anyone drive anywhere in a company vehicle for business reasons? Don’t find yourself in a situation where your company is responsible for damages because of negligence. An MVR can uncover DUIs and other concerning indicators that an applicant may not be the best fit for a job.
  • Education/Employment Verification: We mentioned earlier that startups in particular need to be able to trust that an employee has the knowledge and experience they claim to possess. Just recently, a candidate running for the Florida state House was caught in an elaborate lie about her education and was forced to drop out of the race. If someone seeking a position with such public visibility is willing to lie, gambling on a new hire’s transparency may be a sucker bet.
  • Reference Checks: If you’ve turned on the news in the last year, you’re aware that issues of behavior and ethics in the workplace are in the spotlight like never before. Particularly for a company just getting off the ground, getting first-hand info on a candidate’s work ethos and productivity from a former boss or peer can be invaluable.
  • Drug Testing:  This one is pretty self-explanatory, especially when Googling “opioid crisis” puts even the hardest of us on edge. But make sure that your drug testing program is up-to-date and that you aren’t wasting money testing for substances that simply aren’t in circulation anymore.

These are exciting times for entrepreneurs, but when your company is in its fledgling stages, make sure that the folks you’re bringing in to support it are properly screened – including your c-level executives. This simple step can save you not only a lot of grief, but also money and time. You may even find that your background screening program is the best investment you’ve made for your company to date.

Find more free information at our Resource Library



HireRight is a leading provider of on-demand employment background checks, drug and health screening, and electronic Form I-9 and E-Verify solutions that help employers automate, manage and control background screening and related programs.

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