Before getting into any kind of contractual relationship, you need to do your due diligence. This includes getting as much information as you can about a particular business or person.
Risk mitigation is one of the most important aspects of business, and there is no better tool for it than a background check.
Today, background checks are easy to run, and there are several services that offer to do it online and in a few minutes. But where to start?
The first step is to determine the type of information that you need, as not all companies are allowed to perform certain types of background checks. Be thorough and clear on your expectations.
These sites rely on publicly available information, and their technology is fast and accurate.
Sometimes, what you find through an online background check can be enough to make a verified decision. You’ll get court records, addresses, online presence reports, and you can even verify property ownership.
However, if you find unclear data, or believe that you need to understand more, you may move to the next steps.
A financial or credit background check can only be performed by an accredited Credit Reporting Agency (or CRA). Make sure to ask for their license information before paying for any service.
Also, ask for a detailed timeline and a list of what you’ll receive.
Some things that you want to pay special attention to are: property tax records, lawsuits, and bankruptcies. There are two particularities that you need to know:
You need written consent from the owner or legal representative.
If the information you find through a credit report means you won’t continue the deal or business, you need to inform them.
Usually, business pages on social media include user reviews. This can also be helpful to determine if the business has a good reputation.
No social media presence or poor social media management are important warning signs.
Contact the Better Business Bureau (BBB).
The bureau rates companies from A to F, and make this information public to consumers. They consider facts such as business ethics, consumer education, fraud prevention, and dispute resolution.
A thorough and well-planned interview should always be a part of the process. Think about asking for financial statements and reports.
Ask about common problems, read their employee handbooks (when possible). A good sign of a company’s reputation and status is transparency.
Get legal counsel
Before signing a contract, talk to your lawyer. If you are unsure of the legal implications of a background search, always ask, as you can find yourself in a complicated situation.
Once you have all the relevant information, you should ask your attorney to review it and give an opinion.
Sometimes, facts that seem harmless to you may be grounds for a lawsuit or open doors to other litigation problems. An attorney will also be able to tell you what information are you legally able to use during the decision making process.
Remember that you will most certainly be background checked too. So if you have any “dirty laundry” you may want to be upfront about it during the interview phases.
Nothing can hurt a business deal more than your potential partner thinking that you are untrustworthy. If you are not sure about what can come up about you during a background search, you may consider running one on yourself as preparation.
Information is one of the pillars of successful businesses. Due diligence should never be overlooked, even in cases in which your potential partner is someone you already know.
Remember that it is always better to prevent problems than to try to fix them. In a society in which technology permeates most business deals, there is almost no excuse for being unprepared.
Protect your assets and your reputation and never agree to sign any contract before having a clear risk management strategy. Even the best background checks can overlook something that can cause problems in the future.