Do Background Checks Make Sense For Startups?

By Author: Adrielle Even
Total Articles: 5
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In a word: yes.

Small business, especially start-ups, are understandably focused squarely on the bottom line: they've got to make every single dollar they spend count. And the upfront cost of background checks can scare people. Do I really need to do this? Aren't calling references enough?

Not quite. Money spent on background checks now can save you money and time in the long term. Let's take a look at what a background check is, for a small business, and why it's useful.

First, when we say "background check", specifically we're referring to a "consumer report" or an "investigative consumer report"; the terms are largely interchangeable. These are, essentially, reports culled from public records assembled in one place for the convenience of the person commissioning the check. Background checks can be as simple or as detailed as you like, but most standard reports include a credit history, a list of past places of residence, and a criminal or court history. An potential employee must consent, ...
... in writing, to any sort of background check.

Which brings us to our first advantage: if you make clear right from the start you'll be looking into their background, you can eliminate a lot of candidates you don't want right off the bat. If they know they'll fail the check, they probably won't apply, saving you time without spending any more.

The credit history is fairly straightforward; it tells you what the person owes, who they owe it to, and how current they are with their payments. For certain reports, a brief history of that person's interaction with the company are available...and these can tell you a lot. A person with a history of non-payment, or who owes a lot of money, might not be the best employee, and in fact, may make your business ineligible for certain contracts, depending on the business. The federal government, for example, won't accept individuals above a certain level of debt for any contract.

The value of a criminal check is fairly obvious; it lets you know whether a person has any outstanding legal problems. This doesn't just include criminal activity; many reports include tax liens, bankruptcies, civil judgments, and other details.

However, it's important to understand what the law does and doesn't include. For example, a consumer criminal background check will always include any convictions that person may have. But, after seven years, any arrests that may have happened will be removed from the report. Similarly, tax liens and other non-criminal court business will be removed from the report after ten years.

This gives you a sense of how stable their life is: the more stable things are personally, the better an employee they generally are. Similarly, it'll make you aware of possible problems you might run into, before you run into them.

So background checks are key to any small business' hiring process. It is important, however, to remember that the background check isn't the only tool you have for screening candidates. The interview is also key, for example; if they're honest about their problems, that's something to respect. But in terms of time saved, problems avoided, and long-term costs, background checks are a great asset for a small business.