Do you want to start a debt collection agency from scratch? Or you need a sample debt collection agency business plan template? If YES, then i advice you read on.
Sometimes, businesses can hardly do without offering credit to their clients but there are times when it becomes very difficult to recover these debts that the company has to seek the services of debt collection agencies and recovery specialists to help with recovering debts owed to the company.
Debt collection agencies not only help the company to recover bad and doubtful debts, they also help with debt prevention and management. Some of the reasons why companies hire debt recovery agencies include-:
Why Debt Collection Services are in High Demand
- Chasing debts is a very daunting and time consuming task and companies would rather focus on running their business successfully than chasing debtors all around.
- Another reason why companies hire debt collectors is because they do not want to destroy the relationship they already have with their customers and at the same time, they do not want to lose their money. So, instead of chasing the customer themselves, they hire recovery specialists to do the dirty job for them.
- Debt collectors are skilled and trained professionals and they possess the knowledge needed to help you recover your debts. They are aggressive and would use techniques that the business owner might not use such as reporting to credit bureaus, repossession of property or dragging the debtor to court.
- They are flexible and can tailor their debt recovery techniques and program to suit your specific business needs.
- There are illegal ways of collecting debt and if you use one of these methods without being aware that it is illegal, the debtor may sue you but debt recovery specialists understand the laws, recognize illegal debt collection strategies and would stay within legal limits to help you recover your debts.
- Debt recovery specialists also have means of recording and documenting all communications with the customer as evidence in case of law suits.
You can start your own debt collection agency either as a home-based business or from a designated office. Here are the steps to take to start your own debt collection agency-:
Starting a Debt Collection Agency – Sample Business Plan Template
1. Acquire the knowledge-: First, you need to know what the law says about debt collection in your country and state where you wish to operate. This would help you to avoid running into trouble for collecting debts through illegal methods.
Also, you should learn all the principles and skills that debt collectors use. You would find a lot of information on the internet, in industry publications and when you attend events and seminars organized in the industry.
2. Work for a debt collection agency-: You might skip this part but it would be helpful in ensuring that you get all the knowledge that you need to run a debt collection agency successfully. Consider working for a debt collection agency for a year or two to increase your knowledge and experience.
3. Obtain license and insurance-: Each state has its own unique licensing requirements. So, you should find out the requirements in your state and comply accordingly. You should also comply with tax regulations by obtaining your tax identification number and filing your taxes correctly and regularly.
4. Business Plan-: Write your business plan. You should have all your goals carefully written and spelt out in your business plan. All the future plans you have for your business and how you intend to get more customers should be included too.
5. Marketing plan-: This is very important in debt collection business. Before you start, you must get a grip on your marketing strategies and how you would get customers for your business. You have to figure out who your prospective clients are and how you would reach them. Don’t waste them before you start contacting companies and informing them of your services and how you can be of help to them. You can also create a website to reach your potential clients.
6. Networking: You would need to learn the art of networking to succeed as a debt recovery specialist. Networking would help you to make the right contacts and people who would help you succeed in this business.
You would need to make contacts with people who work in or own financial houses, credit management companies and the financial industry generally. These people can easily recommend you for jobs. Also, you should find out if there is a trade union for debt collectors in your area that you can join; as you can also get referrals from there.
7. Promotional materials-: You would need promotional materials like business cards, flyers, brochures, letter headed papers and other marketing materials that you would need to promote your business.
8. Buy Equipment-: Thankfully, you don’t need much equipment. The most important thing you would need to be equipped with is your knowledge. Then, you would need an office space, a computer, printers, telephone, stationery and general office supplies.
9. Skip tracing-: Skip tracing in debt recovery is an art of finding people who creditors have lost contact with. For instance, a debtor might have moved to some other place that the creditor doesn’t know about. As a debt recovery specialist, you would be required to trace these people and recover debts from them. You should decide on how you would be handling the skip tracing part of your business. Do you want to handle it yourself or outsource instead?
10. Set fees-: Next, you should determine how you would like to be charging for your services. You can decide to charge on percentage basis. However, you should note that debt recovery specialists charge higher for debts that are older than six months. You can charge anywhere from 20% on the value of the debt or recovered amount or a flat fee or you can even charge a combination of both to make it easier on your clients.
11. Decide on collection strategies-: Also, you would have to decide on the debt collection strategies that you would use to recover debts. I already mentioned that some methods are illegal. Therefore, you have to come up with strategies that are effective yet legal.