Max Wesman is Vice President of Product Management at Checkr, a B2B people infrastructure software company focusing on background check solutions. Starting his career as a consultant at Deloitte, he transitioned into product management at companies like Microsoft and HP. Max then founded GoodHire, an employment screening services company, and spent nearly 10 years building it before its acquisition by Checkr in 2022 for $400 million.
In our conversation, Max details the challenges of scaling his business past its initial market of SMBs to larger customers, including knowing how much attention to give to high-revenue enterprise opportunities versus the majority, core SMB segment. He also shares how starting with SMBs and later building up toward enterprise customers allowed his team to prioritize and focus on creating an unobtrusive user experience.
Checkr’s mission is to enable the future of work. We evaluate the traditional ways that work is supported and build tools and solutions to make them better. For example, Checkr looked at the way companies do background checks — it used to be slow and manual, but it was also screening out people who had backgrounds that were impacted by the criminal justice system. Our focus is on providing fair access to employment and enabling fair hiring practices. Our background-checking initiatives focus on opening employers’ eyes to opportunities that they may otherwise be closed off to because of someone’s background check findings.
Beyond that, Checkr is expanding to other areas too. We’re pushing for fair payment, especially for gig workers. Once they complete a shift, how can they get access to those earnings without having to go to a payday lender, for instance? Checkr Pay is a solution that helps grant instant, free access to funds to gig workers and hopefully other workers going forward. We also have an onboarding solution that helps bring people onto new platforms in a fair, efficient, and fast way.
If you think about the hiring journey, you first start with sourcing candidates from a pool. Applicant tracking systems help with the interviewing process and then the vetting process, and there might be some types of evaluations done. Then, when the employer is ready to make an offer contingent on a background check, that’s done through Checkr. Once the person passes the background check, they begin onboarding. It’s an all-integrated experience. We’re focusing on how we can connect the recruiting to actual onboarding to the job while doing so fairly and efficiently.
I started GoodHire within a slightly bigger company called Inflection, which was a people data company focused on consumer use cases. GoodHire was our first B2B use case. I started GoodHire to help small businesses gain access to background checks. At that time, there were several background-checking services out there, but there was no solution that could return the background check on the same day. All the available services required you to go through a sales process and get vetted by one of these organizations. Usually, you have to be hiring at least 100 people for them to be willing to work with you.
I saw an opportunity to leverage automation and intuitive design to make background checking more consumer-like. You could come to our website, put in your information, and we would handle everything behind the scenes. For small business owners with no knowledge about background checking, it was a good opportunity to guide them through the process around compliance rules and industry standards for hiring. We hit a nerve because we had thousands of businesses using GoodHire by the end of our first year.
To scale GoodHire, I thought about how I could take a nascent B2B business within a B2C-focused company and build it. When we got big enough to have custom packages and pricing, we needed teams that were dedicated to helping bigger customers get their accounts set up. That was the natural growth process. Eventually, we needed a customer success team as we started getting more toward mid-market and larger companies. What started as a small business, self-service, automated solution started to look more and more like a traditional B2B company. We then joined forces with Checkr.
One of the biggest challenges was where to put focus and investment because initially, we were hyper-focused on SMBs. Through the success we had with SMBs and word of mouth, bigger opportunities started coming in. They wanted bespoke things, like account hierarchy or different methods for invoicing. It was challenging to assess the amount of attention we put on these bigger customer opportunities within the mid-market versus our core customer segment of SMBs. There was always that tension between the volume of small business customers with revenue from the big players. We just had to organize the team, business, and product to support these use cases without sacrificing usability or focus on any one of them.
Because we started at the lower end of the market with a simple solution and added complexity on top of that, we grew and scaled much quicker than if we started at the other end of the market, i.e., with enterprises and a complicated product that had to be stripped down for smaller companies. That was an unintended advantage of starting small and building up toward enterprises. It allowed us to maintain a clean and unobtrusive user experience and only add things when we deemed them 100 percent necessary.
That was a valuable lesson, because, with limited resources, you always have to be intentional about where you make investments. Some very large Fortune 500 customers would come in and say, “We’re going to give you millions of dollars, but you have to completely cater to our needs.” We made a conscious decision not to pursue that. Ultimately, that was right for us. We weren’t ready to be beholden to one or two customers at the time, even though it was a difficult decision.
Joining a B2C-focused company where everything was focused on funnel metrics and lifetime value was a great lesson for me. A lot of it came down to conversion and the classic 3:1 lifetime value (LTV) to customer acquisition cost (CAC) ratio. We were trying to improve that. A lot of it was optimizing the funnel, so bringing in traffic and finding the drop-off, and we were running lots and lots of A/B tests. We ran them on our calls to action, titles of our pages, one-time offers, etc., to hone in on the conversion rate that would bring us that positive LTV to CAC ratio.
Funnel metrics are super important, especially in an SMB-focused product where every conversion can lead to a certain LTV. You want to get these prospects excited about the product and make sure that you’re maximizing the value of those customers. Are you serving up the right product offerings based on where they are in the market, their segmentation, the types of people they’re hiring, and the industry that they’re in?
International is a smaller portion of our business, but it supports a lot of the larger, US-centric companies that have a big international presence. Most of our customers are based in the US and may have operations in other countries. As a result, we have a full set of international offerings to allow those companies to screen individuals being hired in other countries, so location is a factor to a degree. Most of the traffic comes from US-based visitors, but we want to display the global reach of Checkr solutions.
A lot of companies, especially as they get bigger, want to have a single-vendor solution that works in different countries. This is part of how we position the product — we’re not just great for your US workers, but we provide services no matter where you’re going to hire. That helps with conversion, especially because we have a lot of customers who come and say, “We’re hiring 1,000 people in the US this year and five people in Canada. Can you support us?”
I’d say the biggest one within background checking in general is data. That’s at the heart of a background check. And this applies to most businesses. AI has been part of what I’ve been doing for a while, but with the leaps forward with generative AI, it’s been really interesting to see how back-office operations have gotten more efficient. That’s what I’m seeing as the next stage of the evolution of most businesses — how do you leverage tools to make work and scaling teams more efficient? In previous years, it was about hiring more people to take on the manual tasks that are part of the fulfillment process of a background check. But now, with AI tools, you can hire fewer people and get a lot more done.
Yes. A lot of that has been getting on the phone or Zoom with customers and understanding how they work. We’ve seen a lot of value in going on-site to customers. We recently did an on-site exploration where we spent several days at a customer’s office looking over the shoulders of the people using the Checkr product. We brought back all sorts of really insightful feedback, such as that they weren’t using a traditional desktop computer. They’re actually using a touchscreen tablet.
For our design team, that created all sorts of new and interesting challenges. How can they design an interface used on a mobile device, on a traditional desktop, and also on a touchscreen tablet? Those are great insights that you would never get unless you actually sit in front of a customer and look over their shoulder.
The customer success team, as well as support and operations teams, have always been great sources. I’ve always stayed very close with my ops teams because they’re on the front lines. They hear things on the daily. Mining not only qualitative but quantitative data from our ops team in terms of the dispositions of contacts, hot-button items, prospect data, where are we winning deals, where are we losing deals, where there are product gaps, etc., has been vital. Same with the customer success team — which accounts are red, are there trends among those accounts, etc.
That’s very helpful because you don’t want to rely on anecdotal feedback from one or two customers, particularly when you’re thinking about product investments. It’s important to be able to justify why you’re investing, the deals that we lost, and the deals that we could potentially win or the customers we could save through investments. That’s why we’ll also run customer surveys all the time using pop-ups within the application. I’ve found that in context pop-up surveys are much more effective than email surveys.
You want to look top-down at the company and growth rate and move toward profitability. Ideally, you’re profitable, but you want to try to get toward a certain target EBITDA percentage. Before we sold Inflection and GoodHire to Checkr, that’s how we were looking at ourselves. What were our ideal top-line goals? We were trying to get over the $100 million revenue target, but we were also trying to get to the 10–20 percent EBITDA margin. We looked at that as well as our overall general growth rate. Those were important indicators.
You hear about the rule of 40, which is now becoming the rule of 56 these days when profitability is even more important. It’s those top-line indicators because you’re always going to be compared from an investor perspective to other companies within the space, so you want to have attractive high-level metrics. Those are the fundamental signs of a healthy business. Those are the high-level output metrics, but what leads to those are all sorts of important input metrics.
Are you able to acquire customers profitably and get the most value out of each customer, and how has your LTV to CAC ratio been improving over time? How is your retention? What’s the average length of a retaining customer? Are you actually increasing net revenue retention? Ideally, you want to go over 100 percent with customers. Revenue churn is a big deal that you want to be looking at.
Lastly, I always like to dive deep into the operations metrics. Are we being efficient with how we’re supporting customers? Are we having to hire people in line with how we’re scaling the business? Ideally, the costs are not growing at the same rate as revenue. Those are some of the indicators that there might be places to dive in and be a little more efficiency-minded so that your business can scale.
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