Are you interested in starting a repo business? If YES, here is a complete guide to starting a repossession business with little money and no experience.
Okay, so we have provided you an in-depth sample repo business plan template. We also took it further by analyzing and drafting a sample repo marketing plan backed up by actionable guerrilla marketing ideas for repo businesses. In this article, we will be considering all the requirements for starting a repo business. So put on your entrepreneurial hat and let’s proceed.
Why Start a Repo Business?
When people default on their automobile loans or fail to return rental cars on time, lenders and car rental companies need someone to help them retrieve the vehicles from those defaulters. This is where a repossession business (or “repo” business as it is commonly called) comes in handy.
A repo business owner either gets the car himself (usually when the defaulter is asleep or very busy to avoid resistance), or hires others to do the job. If you are not intimidated by potentially tense situations and have a talent for organizing, then starting a repossession business could be a lucrative option for you. This business does not require much training or related work experience.
Before starting your own repo business, you need to acquire experience. In fact, some states or countries require that individuals seeking to start a repo business have one or two years of experience. You can get this by working for an established repo agency.
A repossession business is called in by lenders or leasing companies to repossess cars when owners default on their payments, or in the case of renters, when rental cars aren’t returned on time. If you’ve got a talent for organizing and aren’t intimidated by potentially tense situations, learning how to start a repossession business could provide you with a way to open a lucrative company. Read the following steps to find out which legal and organizational measures you need to take in order to make your repossession business a success.
Starting a Repo Business Successfully – A Complete Guide
- Industry Overview
Repossession specialists, better known as “repo men,” are suffering a nationwide decline in business. There were about 1.3 million auto repossessions in 2012, down from 1.9 million at the height of the recession in 2009, according to Tom Webb, chief economist for Manheim Auctions. Data from Experian Automotive shows a one-third drop in repossessions over the same time period.
- Interesting Statistics About the Repo Business
As the economy recovers, more Americans have been able to keep up with their car payments. The percentage of Americans more than 90 days late on a car loan declined to 4% in the fourth quarter of 2012, down from 5.3% in the fourth quarter of 2010, according to data from the Federal Reserve Bank of New York.
Within the United States, there are more than 5,000 companies that specialize in the repossession of vehicles and personal property. In each of the last five years, the industry has aggregate generated $1 billion of revenue while providing jobs for almost 20,000 people. Payrolls in each of the last five years have exceeded $2 billion. Currently, this industry is booming as many people have continued to default on automotive and personal loans over the last two years.
This trend of explosive growth is expected to continue for at least another 12 to 18 months as the credit markets complete their correction. As stated above, repossession companies are typically immune from negative economic changes, and once the economy begins to expand again, there will always be a group of people that are not current on their bills.
The primary revenue center for the business will come from the repossession of vehicles on behalf of local banks, finance companies, and collection agencies that are seeking to reacquire vehicles (and from time to time, other merchandise) that has been financed.
The debtors who are subject to repossession will have missed several payments for their vehicles (or other items), and as such, are now subject to having their vehicles/property repossessed. For each repossession, management will ensure that its repossession specialists remain within the letter of the law regarding all reacquisition of property.
The Company’s employees will be instructed to obtain the vehicles while the debtor is at work or while the vehicle is outside of the person’s home. Most state laws do not allow repossession agents the right to enter into a person’s home in order to reclaim property.
Starting a Repo Business Successfully – Market Feasibility Research
- Demographics and Psychographics
The demographic and psychographic composition of those who need the services of repossession companies cuts across the public sector, the organized private sector, and individuals from all walks of life. Below is a list of the people and organizations that need the services;
As a repo firm, your client base will consist of;
- automotive finance companies
- credit collection agencies
- And other lenders that are seeking to reacquire financed vehicles and property.
As such, it is difficult to determine the exact profile of clients that will use the Company’s services as they will range from large banks to small local automotive finance companies. However, the common trait among these clients will be that they hold title to financed vehicles which are now in the collections process. The Company will not perform repossessions for individuals that have financed purchases during private automotive sales.
List of Niche ideas Within the Repossession Industry That You Can Specialize in
- Automotive repossession
- Furniture repossession
- Loan repossession
- Boats repossession
- Motor cycle repossession
- Electronics repossession
- Property repossession
- Airplane repossession
The Level of Competition in the Repo Industry
The key to a strong competitive analysis is that you do your research on the local competition. Find out who your competitors are by searching online directories and searching in your local Yellow Pages. If there are a number of competitors in the same industry (meaning that it is not feasible to describe each one) then showcase the number of businesses that compete with you, and why your business will provide customers with service/products that are of better quality or less expensive than your competition.
List of Well-Known Brands in the Repo Business
- Payback Repo Inc.
- Roquemore and Roquemore Inc.
- City Recovery services
- DFW Financial and recovery services
- American lenders services Inc.
- National recovery
- Night owl recovery
- Metro investigations
- B G Lenders s v c
- Empire Recovery
- Essential Towing
- Nocturnal Towing
- Extreme Auto Recovery Inc.
- J and N Liens
- Super Towing
This section of the analysis will detail the economic climate, the repossession industry, the customer profile, and the competition that the business will face as it progresses through its business operations. Currently, the economic market condition in the United States is in recession.
This slowdown in the economy has also greatly impacted real estate sales, which has halted to historical lows. Many economists expect that this recession will continue until mid-2009, at which point the economy will begin a prolonged recovery period.
However, repossession companies operate with a great deal of economic stability as during deleterious economic conditions many people fall behind on payments due on vehicles and other property. Additionally, the current credit crisis has caused an all-time record in financing delinquencies, and the Repo Company should have no issues with generating top line income as it begins its operations.
Is a Repo Business Worth Starting from Scratch or is Buying a Franchise Better?
Although there is the possibility of buying a franchise from a successful repo company or even partnering with a big finance, leasing and hiring company if you are considering owning an investment in the repo industry.
One thing is certain, people are motivated to start a business based on various factors and incentives. If you are looking towards building a business that you intend controlling, a business brand that you hope to one day transfer ownership to your children and perhaps also sell franchise in future, then starting from the scratch should be your best bet. But if you only interested in making money and multiplying your wealth, then you may as well buy the franchise of a successful repossession company that is willing to sell its franchise.
Starting a Repo Business Successfully – Legal Issues
- The Best Legal Entity to Use for a Repo Business
No doubt starting a repossession company is indeed a serious business which is why the legal entity you choose will go a long way to determine how big the business to can grow. Choosing a legal entity for a business such as a repossession company is some worth straightforward especially if you decided to grow the business big.
When it comes to choosing a legal entity for your repossession company you have the option of choosing from a general partnership, a limited partnership, an LLC, a “C” corporation, or a “S” corporation. It is important to clearly state that these different forms of legal structure for business has its own advantages and disadvantages; which is why you must weigh your options properly before making your choice on the legal structure to build your repossession outfit on.
These are some of the factors you should consider before choosing a legal entity for your repossession company; limitation of personal liability, ease of transferability, admission of new owners and investors’ expectation and tax issues.
If you take your time to critically study the various legal entities to use for your repossession company, then you will agree that limited liability company; an LLC is the most suitable. You can start your repossession company as a limited liability company (LLC) and in future convert it to a ‘C’ corporation or even a ‘S’ corporations especially when you have the plans of going public.
Upgrading to a ‘C’ corporation or ‘S’ corporation will afford you the opportunity to grow your repossession company so as to compete with major players in the repossession industry; you will be able to generate capital from venture capital firms, stock market, you will enjoy separate tax structure, and you can easily transfer ownership of the company; you will enjoy flexibility in ownership and in your management structures as well.
Catchy Business Name ideas for a Repo Business
When it comes to choosing a name for your repossession company, there are no hard and fast rules to follow. This is so because repossession companies are not like other business who hopes that their names can help them attract passersby who may just walk in to want to do business with them; there is no rule of thumb.
Here are some catchy business name ideas you can choose for your repossession company;
- Hide and Seek Inc.
- Fumble Repo
- Midnight movers
- Sleeping Recovery
- Repo to Recover
- Adjusters Inc
The Best Insurance Policy Needed for a Repo Business
In the United States and of course in most countries of the world, you can’t operate a business without having some of the basic insurance policies that is required by the industry you want to operate from. Besides, the nature of the repossession industry requires that you have the proper insurance cover in place or else you will be forced out of business if anything goes wrong with the repossession contract you are handling.
So, it is important to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best insurance policies for your repossession company; it is their duty to help you assess the risks involved in the type of repossession business you intend running and then advice you accordingly.
One universal requirement is liability insurance. Before a bank or other lender will consider hiring you to repossess vehicles, you must carry about a $1,000,000.00 liability insurance policy to protect yourself and the lender in case there is damage to the vehicle or other property. Depending on your state and your history with insurance companies, expect to pay $1,000.00 to over $5,000.00 per month for insurance on your company and tow truck.
INTELLECTUAL PROPERTY PROTECTION AND TRADEMARK
If you are considering starting your own repossession company, then you should consider filing for intellectual property protection. Filing for intellectual property protection for a repossession company goes beyond protecting your company’s logo and other documents, but also protecting your software applications and of course the name of your company.
If you want to file for intellectual property protection and also register your trademark in the United States, then you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.
Is Professional Certification Needed to Start a Repo Business?
Training for repossession agents varies by state, and those interested in the field should check with their state licensing department for requirements. One option may include taking a collections agent training course, which teaches repossession laws, telephone techniques, and computer skills. Students also learn skip-tracing methods so they can use databases and public information to locate individuals holding the sought-after property.
Another option may require completing the Certified Asset Recovery Specialist (CARS) national certification program. In the program, students learn about state and federal laws, the recovery and post-recovery process, contract law, skip-tracing, personal and property crimes, defensive driving, ethics, and insurance.
List of Legal Documents You Need to Start a Repo Business
In The United States of America and of course all over the world, the repossession industry is amongst the industries that is highly regulated so as to avoid costly repossession breaches in the country. If you are considering starting a repossession company, then you are expected to meet the legal documents requirements as stipulated in the constitution of your country.
These are some of the basic legal document that you are expected to have in place if you want to start a repossession company in the United States of America;
- Certificate of Incorporation
- Repossession Clearance Certificate
- Business License
- Business Plan
- Non – disclosure Agreement
- Memorandum of Understanding (MoU)
- Employment Agreement (offer letters)
- Operating Agreement
- Company Bylaws
- Operating Agreement for LLCs
- Insurance Policy
Writing a Business Plan for your Repo Company
If you are looking towards starting a repo company, then one of the first steps that you are expected to take is to consult experts to help you write a good and workable business plan. The truth is that, in order to successfully run a repossession company, you would need to have a good business plan in place.
A Business plan is the blue print that is needed to successfully run a business; with a workable business plan in place, you will reduce the trial and error approach of doing business. You will be able to manage your business with purpose and perhaps precisions; you will know what to do per time and how to handle challenges, growth and expansion.
So if you want to start your own repossession company, you are required to write a detailed business plan that can pass reality test when subjected to it; you should work with the facts, figures and other indices in the repossession industry as it applies to the country you intend starting the business.
The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detail guide on how to effectively run your business from the scratch. Your business plan should outline and cover strategies on how you intend to manage and grow your repossession company.
The rule of thumb in writing a business plan is to try as much as possible to be realistic and never to over project when putting figures on income and profits et al. As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in.
A Detailed Cost Analysis for Starting a Repo Business
The repossession business is by no means a cheap business to be in. There are many costs that come to mind immediately and then there are some costs that I really have to think about. Those costs tend to add up quicker than you think. If you are going to be in this business, you need to keep costs down and shop around for the best deals on everything.
One of the largest expenditures in the repossession business is your wrecker. The prices for wreckers have shot up year after year and the pay per repossession has not gone up much. You are looking at spending close to $55,000 for a new truck.
You need to decide if you are going to buy a new or used wrecker. The new truck will cost more per month, but a used truck may be broke down often and be costly to maintain and repair. Don’t forget, that along with the cost of your new truck, you will be paying a hefty insurance bill to cover your new investment.
Another cost that you are going to have is you storage lot and office rent. Make sure you shop around and find a safe and secure storage lot at a decent price. This is a bill that you will be paying every month and not a onetime thing, so you will want to keep you costs down. You will also have to pay bills for heat, electric, phones and maybe even a repossession system.
As you can see, owning and operating you own repossession business can be costly. Before you take on this financial investment, I would advise you to figure out if it makes more sense financially to work for a company or start your own.
- Financing your Repo Business
If you choose to start your repo company on a small scale, you might not need loads of resources to launch the business, but if you decide to start on a large scale, you will sure need to raise the required start – up capital to launch the business.
If you are starting your repossession company on a large scale, you will need a decent office facility, office equipment and furniture, and money budgeted for the payment of salaries and utility bills for at least a period of 3 months and you will also need money to purchase essential repossession equipment, vans, bikes and gadgets et al. In essence you are expected to generate your start – up capital.
When it comes to financing a business, one of the first thing and perhaps the major factors that you should consider is to write a good business plan. If you have a good and workable business plan in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business.
Here are some of the options you can explore when sourcing for start – up capital for your repossession company;
- Raising money from personal savings and sale of personal stocks and properties
- Raising money from investors and business partners
- Applying for loan from your bank / banks
- Pitching your business idea and applying for business grants and seed funding from donor organizations and angel investors
- Source for soft loans from your family members and your friends.
Choosing a Suitable Location for your Repo Business
Choosing a location for your business is not what you should do without due consultation. The truth is that if you get it wrong with the location where you have decided to pitch your business tent, you are more likely going to struggle to make headway with the business. One of the major reasons why businesses struggle, fail and eventual close shop is the fact that the owners decided to choose a wrong location for the business.
Nonetheless, if you are able to build a successful brand, you can pitch your business in any part of the world and still make success out of the business- especially if you run a repossession consultancy and advisory business. Conversely, if you are just starting out; especially if you are a newbie in the repossession industry, it is important that you locate your business in an area with healthy business activities.
These are some of the factors that you should consider before choosing a location for your repossession outfit;
- The demography of the location
- Accessibility of the location
- The numbers of repossessing companies in the location
- The local laws and regulations in the community / state
- Traffic, parking and repossession et al
Starting a Repo Business Successfully – Technical and Manpower Details
Hire employees with care. Each state has laws that govern conduct and safety during repossession, and you will need employees who are capable of remaining calm and in control even in difficult situations. Check each prospective employee’s background and provide training.
- The Service Process Involved in a Repo Business
It should be pointed out that almost all state laws require that repossession be done in a peaceful manner. Since most people get very upset when they see a repo man repossessing their vehicle, most repossessions are completed in the middle of the night or while the debtor is working without the owner’s knowledge. It’s really a legal steal. This gets around the “peaceful manner” state laws. The old term “possession is nine tenths of the law” applies in auto repossession.
Normally, the repossession is not complete until the vehicle is off of the debtor’s property. It is usually unlawful to enter a closed garage in order to complete the repossession. In such a case, the repo man usually waits until the subject is at work or he’ll follow him to the grocery store or something. That way, the repossession can be completed in an easy manner.
Before the repossessor attempts to repo the vehicle, he must first make very sure he is repossessing the right car. He will match the VIN number he obtains from his client to the VIN number on the vehicle. The VIN number is usually located on the dashboard on the driver’s side. The repossession agent has a number of methods in which a vehicle is removed or taken into possession, and they include;
- Key codes
Just about every vehicle that has been sold in the last five or six years has a key code. Key codes can usually be obtained from the title slip. A copy of the key code is usually kept on file at the car dealership. In more recent times, it has become the practice of many banks to obtain the key codes for each loan file and they will have a record of it.
Some banks even go as far as having a set of keys cut and kept with the file. A key code is simply a code number used to cut the keys. The repossessor either does this himself with a key cutting machine or has a locksmith do it for him. Although many repo men have become auto locksmiths themselves, this is really not a requirement.
Many repo men use towing as a means of repossession. Many start out making a deal with a local towing company who will give them a discount price. Later, the repo man can purchase a used tow truck if he likes this method.
- Lock picking, Lock pulling, Picks and clicks
You can purchase a small metal rod called a slim Jim that is used to place down the door which catches the lock part that pulls up the door lock so you can open the car door. Another method is the coat hanger method. People do not know this but glass will bend somewhat.
Starting a Repo Business Successfully – The Marketing Plan
- Marketing Ideas and Strategies for your Repo Business
Repossession firm is not a business that you have to retail products which is why you must do all you can to maximize any opportunity that comes your way.
So when you are drafting your marketing ideas and strategies for your repossession company, make sure that you create a compelling personal and company’s profile which must include the profile of your board of directors and management team. The truth is that if you have highly qualified, trustworthy and successful repossession professionals in your board and core management team, it will definitely give you leverage in the market place.
Here are some of the platforms you can utilize to market your repossession company;
- Advertise your business in relevant business magazines, TV and radio station and also make yourself available for repossession related talk shows and interactive sessions on TV and Radios)
- List your business on local directories / yellow pages (both online and offline)
- Attend repossession related expos, seminars, and business fairs et al
- Leverage on the internet to promote your business
- Join local chambers of commerce around you with the main aim of networking and marketing your repossession company.
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, community leaders, schools, hospitals, hotels and government offices in your target area.
- Promptness in bidding for contracts
- Create different packages for different category of clients in order to work with their budgets.
- Engage in direct marketing, referral marketing and also email marketing.
Possible Competitive Strategies for Winning your Competitors in the Repo Industry
It might be challenging competing as a newbie in the public repossession industry especially in a highly organized market like that of the United States of America, which is why you must be deliberate in choosing your board members and your core management team.
As a repossession company, if you have the required expertise and equipment to carry out a repossession contract, then you are likely not going to struggle to compete in the industry. Hence, ensure that you put in your best whenever you have the opportunity to handle any repossession contract. You should be known for delivering excellent repossession services at all times. Creativity, excellence and attention to minute repossession details should be our signature.
Lastly, ensure that your organization is well positioned and if possible form strategic partnership with other key stakeholders in the repossession industry; it will sure give you competitive advantage over your competitions.
Possible Ways to Increase Client Retention for your Repo Business
When it comes to business no matter the industry you choose to pitch your tent in, one of the easiest ways to increase customers’ retention and perhaps to attract new customers is to satisfy your customers always. If your customers are satisfied with your services delivery, they can hardly source for alternative service provider or products.
Statistics has it that one of the major reasons why customer’s source for alternative service provider or product is when there is a drop in quality. Another reason is poor customer service. If you can continue to improve on the quality or your services and your customer service delivery, then you won’t struggle to maintain your loyal customers.
Strategies to Boost your Brand Awareness and Create a Corporate identity for your Repo Business
When it comes to creating brand identity for a repossession business, the caliber of clients you have worked for and the nature of repossession contracts you have handled is always a major brand booster.
It is pretty important to work with your consultants to help you map out publicity and advertising strategies that will help you walk your way into the heart of your target market. First and foremost, you should ensure that your brand is visible and well communicated which is why you should make provisions to work with different class of people in the society. All your publicity materials and jingles should be done by some of the best hands in the industry.
Below are the platforms you should leverage on to boost your brand awareness and create a corporate identity for your repossession company;
- Introduce your business by sending introductory letters alongside your brochure to all the corporate organizations, community leaders, schools, hospitals, hotels and government offices in your target area.
- Advertise your business in relevant magazines and websites
- List your business on local directories / yellow pages (both online and offline)
- Promote your business on satellite TV stations and radio stations.
- Attend repossession related expos, seminars, and business fairs with the aim of creating awareness and promoting your brand
- Engage in direct email marketing
- Leverage on the internet (social media platforms and your official websites) to promote your business
- Ensures that your workers wear your branded shirts at all times during working hours and also make sure you brand all your company’s official vans, trucks and cars et al.
Creating a Suppliers / Distribution Network for your Repo Business
The nature of the repossession industry gives room for repossession companies to network amongst themselves and also network with government owned repossession agencies. This is so because the issue of repossession cannot be handled in isolation. It is the practice for repossession companies to get regular repossession updates from the government repossession agencies.
It is important to state that there will always be room for a repossession firm to form strategic alliance with one another which is why it is important to maintain a good network within the industry. For example, you may have need for the supply of repossession dogs, bodyguards, escorts and bouncers et al; it is not mandatory for your organization to specialize in these areas of repossession services.
Tips for Running a Repo Business Successfully
The truth is that, irrespective of the kind of business you run, your ability to get all the members of your team on same page at all times is one of the keys you need to successfully run the organization.
As the chief executive officer or president of a repossession company, it is you responsibility to give direction to the business. Part of what you need to do is to ensure that you create time for office meetings; a time where challenges, feedbacks, projections and relevant issues are discussed. The meetings could be daily, once in a week, twice a week or once in a month. The bottom line is that there should be consistent meetings in your organization.
Carrying out appraisals on a regular basis and training your employees will help you run your organization effectively. Encourage your employees to pursue certifications in their various areas of specialization; it will help your organization’s profile and of course it will help the individuals. You can choose to fully or partially sponsor some of the certifications.
Lastly, you should keep your doors open for suggestions from members of your team and your clients. It is very important to reward excellent performance in your organization; it will go a long way to encourage healthy competition in your organization.