Taking an objective view of your skills can help you decide if debt collection is the right option for you. Having practical experience with credit and collections is a must to run a successful debt collection agency. In this comprehensive guide, we will provide step-by-step instructions on how to start a successful collection agency.
Business Planning and Costs
You must design a sound business plan outlining your goals, licensing requirements for setups, choose suitable business models and debt collection procedures, develop customer satisfaction policies, and secure funding.
The cost of starting a collection agency can vary depending on the size and scope of the business. Generally, start-up costs will range from $10,000 to $20,000. This includes the costs of licensing, marketing, and equipment. The ongoing expenses for a debt collection business include:
- The cost of collection letters
- Phone calls
- Legal action
- Rent
- Utilities
- Marketing costs
The Steps to Launch Your Agency
Here are the steps to start your collection agency:
- Research your market
- Determine fair pricing
- Get licensed
- Study debt collection laws
- Start small and get licensed in a few areas
- Grow your agency slowly
- Be prepared
- Don’t give up
- Build a customer base
Licensing and Growth Strategy
Most states require debt collection agencies to obtain licenses and to secure a collection agency bond. Don’t spread your business everywhere from the start, as this could lead to costly mistakes.
Collection Strategies and Profitability
The final step to starting a collection agency is to develop effective strategies for collecting debts.
Is owning a collection agency profitable? With proper planning, execution, and hard work, it can be very profitable. Importantly, a critical step in starting a collection agency is to complete your business plan and follow all debt collection laws closely.