Do you need help starting a collection agency? If YES, here is a sample debt collection Business Plan.
Credit is an essential part of doing business. Credit is to a company what fuel is to a car. At the same time, this is good for companies, many defaults on debt repayments.
This is where collection agencies come into the equation.
Here, I will be talking about the things that are required of you in opening a collection agency startup. A collection agency is a type of business that does not require experience or training and is quite profitable.
Many people and businesses need collection businesses that will stand on their behalf to collect debts from whoever owes them.
This is a thriving business you can decide to enter; you don’t need special qualifications or training to open a collection agency.
DEBT COLLECTION AGENCY BUSINESS PLAN SAMPLE
A collection agency is a third party in collecting debts on behalf of businesses; most times, the debt is collected from customers of that particular business.
Here is a sample business plan for starting a collection company.
STEP 1: FEASIBILITY STUDY
How do you become a debt collector? To open a collection agency, a feasibility study comes first.
It is research done to examine the market of the business you are about to start, the risks of the company, challenges you are likely to face in the industry, how to overcome them, and the company’s advantages.
You can also use a feasibility study to look into fellow businesses and to know companies and businesses that you need to create a relationship with regarding the success of your business.
With the help of a collection agency feasibility study, you can also get information on the best location for your business where demands for your operation will be very high.
Getting a good location for your business is very important and contributes to the success and profitability of the company.
You also get to know the state of the economy of the country of your business and how to make it benefit your business.
STEP 2: LEGAL REQUIREMENT
What licenses do you need to start a collection agency business? You must know what is required of you legally in the collection agency, such as understanding the federal and state collection agency laws.
Knowing the laws guiding a collection agency, especially the federal rules, is essential because each country has regulations on collecting debts from business owners or consumers.
Another important thing is obtaining a license, which can be quickly done by contacting the finance officer of the state where your collection agency will be established.
Contacting them (the finance officer) will help get more information about the registration details to know if there are more licenses to obtain.
STEP 3: FINANCIAL REQUIREMENT
You don’t need much capital to open a collection agency here. And you can even decide to operate from home; it is quite possible.
You will have to raise the capital needed for your business. You might decide to finance the project yourself, raise money from private investors, or get a bank loan.
The extent of how much you will be spending on starting your business depends on the size of your business. If the company is small, your capital will be a bit high; your expenses will be minimal if it is a small business.
STEP 4: BUSINESS PLAN
Writing a debt collection business plan for your business is also essential.
A business plan is a single document that comes in handy when looking for investors or when you want to borrow a loan from the bank.
Apart from that, it also serves as a guide in the operation of your business.
A business plan contains everything about the business, including financial cost, sales and marketing strategy, business structure, mission and vision statement, executive summary, business overview, possible problems encountered and how to solve them, and so on.
There are samples of business plans online for people to use as a guide in writing their collection agency business plan, which you can also use as a sample to make the task easier.
STEP 5: BUILD YOUR BUSINESS
This aspect involves securing a facility or constructing a building for your collection agency and buying the equipment and facilities needed for the operation.
You will have to put the location, size of the business, whether large or small, and spacing of rooms into consideration.
In building your business, you also need to know the people your business will focus on, which usually include hospitals, schools, book clubs, corporate organizations, etc.
STEP 6: GETTING INSURANCE
Getting an insurance policy for your business is advisable because of happenings beyond your control, such as a health issue or problem with a client.
Hence, you need to know the best insurance policy that will cover you and protect your business.
When you start your business, you should look into insurance policies and select the one that will work best for your collection agency. It is important.
You must note that all the points listed above help a lot in opening a collection agency business opportunity and even to succeed at it.
All these will build a solid foundation for your business.
DEBT COLLECTION AGENCY BUSINESS PLAN EXAMPLE
A collection agency helps lenders recover bad loans from debtors.
This collection agency business plan sample is provided to help entrepreneurs willing to start their collection agency businesses.
Often, problems arise when writing a plan. In some cases, this may be due to inadequate information about the business; in others, the entrepreneur may have no idea of the plan’s structure.
In other situations, both of these may apply.
Our sample will help you avoid these situations by giving you a model. However, knowledge about your business is essential.
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Executive Summary
Credit Restore is a credit collection agency. We provide professional credit recovery services for our clients, saving them the stress of recovering bad debt.
Similar businesses have been sued in the past by debtors. This is due to unprofessional debt recovery practices, which have caused an infringement on the rights of these debtors.
We are professionals who eliminate the unpleasantness of lenders dealing with creditors having difficulty paying their debt obligations.
We are located in Helena’s financial district in Montana. This is strategically situated as most of our clients are businesses in the financial services industry.
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Our Services
Our services include debt negotiation and collection services. When a client defaults on debt servicing or repayment, it becomes classified under bad debts.
This creates an unpleasant situation for most businesses trying to recover these loans. We are well-trained in handling such cases. We recover such debts for our clients using all legal means.
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Vision Statement
Our vision is the satisfaction of our clients. Debt collection, terrible debt, isn’t an experience our clients want.
We are committed to increasing the average debt recovery rate from 70% to 85%. We will use humane and legal means to achieve this with the help of law enforcement when required.
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Mission Statement
Our collection agency business is poised to offer the best services possible to our customers. We plan on ensuring that the parties we represent get value for their money.
We will offer flexibility in the way we do business. In other words, we will structure our business in such a way that it adapts to the needs of each of our clients.
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Financing
The financing for our full take-off has been raised from selling up to 35% shares of our company to 2 investors. These investors will each have 10% and 25% ownership, respectively.
This is not an indefinite arrangement, as these shares have a duration or tenure of 15 years. After this period, ownership will be transferred back to us through a buy-back clause.
We have raised the sum of $1,000,000.00.
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SWOT Analysis
We understand the importance and benefits of a SWOT analysis on our business operations.
This has led us to invite professionals to evaluate our chances. This has yielded critical information that will be used to improve our structure for greater efficiency;
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Strength
Our strength as a business is in our capacity to get the job done in record time. Most professionals on the management team have previously worked with significant and successful collection agencies.
The insights and experiences of these professionals count in giving directions to our business operations. We will use this strength most to reposition our business for increased productivity.
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Weakness
We are a small business yet to be fully recognized in the financial services sector. We are already working on that by building a reputation by ensuring that existing clients are thoroughly satisfied.
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Opportunities
The collection agency industry thrives on output. The more the results obtained, the better for our business.
By identifying this fact, we have streamlined our activities to have a uniform output that will result in a more significant impact through results that are very evident and exceptional.
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Threats
An economic collapse is not suitable for our business. This is because credit flow will cease.
This means that the clients we represent cannot function optimally due to the absence of credit. The effects are defaulting on already borrowed credit.
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Sales Projection
Sales for our business equal demand for our services.
As a new collection agency, we work tirelessly to attract the more significant financial institutions. The growth indicator for the financial services industry has shown a positive sign for the coming years.
With this information, we have made a sales projection for the next three years. It shows the following rise in profits;
- First Financial Year $300,000.00
- Second Financial Year $550,000.00
- Third Financial Year $900,000.00
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Target Market
Our target market is defined. We will be working closely with institutions in the financial services sector. Our specific market will be the lending industry.
We will help our clients, primarily banks, get back their debts from debtors. Our expertise allows these clients to concentrate on running their businesses while we help them repay debts owed.
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Competitive Advantage
There are other collection businesses, but our unique understanding of the industry is an asset.
Our professionals have put in many years of service and risen through the ranks to hold managerial positions in significant collection businesses.
Although we are a new business, we understand how the industry functions and will use this to our advantage.
SEE: Become a Notary Signing Agent
There you go! We have shown you the most essential parts every plan should have. We have tried to make this collection agency business plan sample as simple as possible.
We hope you find it worthwhile and will follow the format and simplicity. The better your understanding of your plan, the more meaningful it will be.