In our latest installment of SBC’s small business spotlight, we meet Steven Smith, chairman of Credential Check Corp., a workforce screening services-company based in Troy, Michigan. In a recent interview with business writer Susan Caminiti, Smith speaks about how the company got started, the role technology played in its early success, and why in business it’s important to keep an open mind.
by Susan Caminiti.
In his long career as an entrepreneur, Steven Smith has learned not to dismiss those seemingly outlandish ideas that come his way. “When I’m ready to have a visceral reaction to some crazy request or business idea, I’ll stop and think it through first before making a decision,” he says.
That strategy has served him well. As chairman of Credential Check Corp., Smith has built his workforce screening services company with deliberate decision-making when it comes to people and ideas. It’s a method that has enabled him to attract nearly 1,000 corporate clients—Fortune 500 companies among them—and post annual revenue of nearly $5 million.
In the mid-1990s, Smith was running several businesses, including Smith Security, a company he founded to provide corporations with uniformed security guards for their headquarters. A local business acquaintance in Ann Arbor, Michigan named Jerry Wright approached him one day with an idea: Would Smith like to buy his security assessment and workplace violence prevention business?
Wright’s company was successful, but as an Ann Arbor police sergeant, he had no interest in overseeing the administrative side of his growing business. “When Jerry asked me, my first thought was ‘Why on earth would I want to buy your company?’” Smith recalls. But after his initial resistance, the idea began to make more sense. The businesses were complementary, and the purchase would allow Smith to spread his security company’s substantial IT, legal, and back-office expenses over a greater base of revenue. “Plus, I knew Jerry and had the greatest regard for him,” Smith recalls.
The arrangement proved successful and over the next few years the combined businesses flourished. However, it wasn’t until an annual budget meeting in early 1998 that the seeds of Credential Check were actually planted.
At the time, databases for pre-employment screening were just beginning to come online. Wright had been doing about 10 background checks a month for different clients, Smith recalls, but the process was slow and involved mainly phone calls to track down the information needed. Wright requested $15,000 to purchase PCs to access the databases electronically.
“Again, it was another one of those moments when my visceral reaction was to say, ‘No, we have a Unix computer system, we don’t need to spend money on PCs,’ but I listened to him and waited before responding,” Smith says. He eventually approved the purchase and the company that would later be renamed Credential Check, was born. Says Smith: “We didn’t agonize over the name. It says what we do.”
Today, the Troy, Michigan-based company does over 10,000 pre-employment background checks a week for clients in a variety of industries including defense, energy, staffing, entertainment, manufacturing, and healthcare. Smith says clients can receive a full report on a potential new hire within 48 hours to 72 hours in an easy-to-read format.
“We deal with the human resource professionals who don’t have the time to do the kind of background checks we do,” Smith explains. Depending on the type of job responsibilities involved, Credential Check can do criminal and civil records searches, access consumer credit report and driving records, and arrange for substance abuse testing.
Michael Pachuta, who joined the company in 1998 and was named president in 2001, says one of Credential Check’s greatest opportunities for expansion is with a service it offers called CC-Verify. “This service allows clients to manage the training, testing, and validation of suppliers, contractors, and sub-contractors who have routine, yet unescorted, access to their facilities,” he says.
Credential Check’s growth has required additional real estate and technology financing, says Jason Baroni, the company’s Bank of America small business banker (SBB). “Down the road, we can also handle financing for any acquisitions they choose to make,” he says. “Credential Check is a really interesting client because they’re a direct indicator of how much—or how little—hiring is being done in the economy.”
Like all growing businesses, Credential Check’s path has not been without its challenges. In 1999, a year after prompting Smith to make the move to electronic databases, Wright suffered a heart attack at age 53 and passed away. “It was a horrible time,” Smith recalls. “Jerry was so young and within a week my wife had me in a cardiologist’s office to have my heart checked.”
The profile of the business also changed. Shortly after Wright’s death, Smith decided to sell the uniformed security guards portion of the company. “I realized I wanted to step away from the daily CEO role and this part of the business was the biggest user of my time,” he says.
He and Pachuta agreed that the best course of action for Credential Check would be to concentrate on background checks, the part of the business that provides a steady, recurring revenue stream. Pachuta handles the new business development and client relationships, while Smith oversees finance, accounting, and human resources. And although he splits his time between Credential Check’s Michigan headquarters and a home in South Florida, Smith says he and Pachuta typically talk “several times a day.”
“The beauty of my role now is that I don’t have to be in the office everyday, but I can communicate with Michael whenever we need to, from wherever I am,” Smith says. “Technology is just unbelievable.”