A debt collection agency business plan is a document that describes a business’s goals, strategies, and operations that pursues payments on debts owed by individuals and businesses.
A debt collection agency can operate as an agent of creditors and charge a fee or percentage of the total amount collected. It can also purchase debt portfolios from creditors at a discount and pursue the outstanding balances for profit. Check our loan officer business plan for better understanding.
A debt collection agency business plan includes the following sections:
A business plan for a collection agency is essential for several reasons:
Here are some steps to follow when writing a debt collection agency business plan:
Step 1 – Describe the purpose of your debt collection agency, including your mission, vision, and values.
Step 2 – Describe the products and services you will offer, such as the types of debts, the collection methods, and the fees or commissions.
Step 3 – Analyze your target market, competitors, and industry trends, and define your unique selling proposition (USP).
Step 4 – Describe your operational plan, including location, equipment, software, staff, training, policies, and procedures.
Step 5 – Present your management and organization structure, including the roles and responsibilities of your team members and external advisors.
Step 6 – Estimate your startup expenses and capital needed, and state how you will raise or obtain the funds.
Step 7 – Forecast your financial performance for the next three to five years, using statements such as profit and loss (P&L), balance sheet, cash flow forecast, and sources and uses table. Refer to our tax preparation business plan for more details.
Let’s understand this process with the help of a collection agency business plan template of “Payup Partners.”
Payup Partners is a new US debt collection agency aiming to serve small and medium companies. With outstanding consumer debt at $17 trillion ($1.38 trillion delinquent), we see a major market opportunity. Our competitive edge comes from advanced technology, experienced staff, flexible solutions, reasonable fees, satisfaction guarantees, and exceptional customer service. Marketing will leverage digital campaigns, events, referrals, reviews, and more to promote our services.
Operationally, we will obtain licensing, purchase equipment/software, hire qualified staff, train employees, partner with vendors, and implement strict policies and procedures. We need $100,000 in startup capital and project $300,000 in first-year revenue and $60,000 in first-year profits, with annual growth thereafter.
At Payup Partners, we aim to provide professional and ethical debt collection services to small and medium-sized businesses in the United States. We aim to help our clients recover their outstanding debts promptly and cost-effectively while maintaining positive customer relationships. We strive to uphold our industry’s highest standards of quality, integrity, and customer satisfaction.
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Payup Partners is a New York-based limited liability company founded in 2023 by Andrew Moore (CEO) and Jennifer Lopez (CFO). The company operates a home office in Brooklyn and provides professional debt collection services to small and medium businesses.
Key services offered:
Key industries served:
Payup has 2 full-time employees and hires part-time collectors as needed. Payup Partners follows FDCPA regulations and ACA International’s code of ethics. The company respects debtors’ rights, treats them professionally, and maintains high data security standards.
The US debt collection industry is a large and growing market that offers significant opportunities for Payup Partners. According to IBISWorld , the market size of the debt collection agencies industry was $20.3 bn in 2022. The industry employs about 137,603 employees and consists of about 6,345 businesses.
Key drivers of growth:
Interesting stats regarding the U.S. debt collection industry:
Key challenges:
Our competitor analysis section of a debt collection agency business plan shows that the industry has several major players:
Our competitive advantage is our unique value proposition:
Payup Partners provides professional debt collection services to small and medium-sized businesses nationwide. Our services help clients recover outstanding debts efficiently while maintaining positive customer relationships.
Our key services include:
Payup’s marketing plan has two goals: to get new clients and to keep the old ones. It uses these strategies:
Our operational plan has two main aspects: workflow and resources.
1. Workflow – We follow a standard and efficient workflow for its collection process, which has these steps:
Step 1: Receive the debt – Verify the debt information from the creditor and check its validity and accuracy.
Step 2: Contact the debtor – Inform them of the debt amount, due date, and payment options. Send them a written notice of the debt as required by law.
Step 3: Negotiate the payment – Try to persuade the debtor to pay the debt in full or in part or to set up a payment plan. Offer them various incentives and settlements to encourage them to pay. Learn more in our payday loan business plan .
Step 4: Collect the payment – Accept the payment from the debtor and issue them a receipt and a confirmation letter. Update the creditor on the collection status and the payment amount.
Step 5: Close the case – End the case when the debt is paid or settled or either party requests to stop the collection. Report the outcome to the creditor and send them a final report and invoice.
Step 6: Report the payment – Report the payment to the credit bureaus and update the debtor’s credit history, if applicable.
2. Resources – We have enough resources to support its operations, such as:
Payup is led and overseen by a strong and experienced management team:
Our assumptions for the next five years for projection and financial planning are as follows:
Here’s an example business plan for a startup collection agency projection summarized in the following chart:
With over a decade of experience assisting collection agencies, our team at OGSCapital has the expertise to craft an effective collection agency business plan tailored to your agency’s specific needs and goals. Our consultants fully understand the complex regulatory landscape and best practices to highlight your competitive advantages. At OGSCapital, we leverage proven financial feasibility study and growth strategies to showcase your profit potential to investors.
To start your collection agency, you need first to understand how much does it cost to start a debt collection business, arrange finance, get licensed, set up your systems, hire staff, and market your services. Check out our collection agency business plan sample shared above for a better understanding.
The profit of a debt collection agency startup depends on the debt type and age, the commission rate, and the costs. Collection agencies usually charge 20% to 50% of the amount collected. The average recovery rate for a collection agency is around 20%.
To start a daily debt collection agency from home, you need to identify your market, establish a fee structure, have a secure method of collecting and transferring money, and maintain good records and follow-up.
Illustrative business plan samplesOGSCapital’s team has assisted thousands of entrepreneurs with top-rate business plan development, consultancy and analysis. They’ve helped thousands of SME owners secure more than $1.5 billion in funding, and they can do the same for you.
