What made you decide to stop purchasing your own paper and start working paper owned by other people/companys?

I actually never ended up purchasing any paper of my own. My original reason was that I couldn't afford to purchase it. My reason now for not purchasing it in the future is twofold. The first reason is I have very good clients, and one of them is VERY VERY good; to the point where I just ask for the type of paper I want and they get it for me. I get a good split, and right now I don't want to complicate things any more than they are.

The reason for not purchasing paper in the future when I am (hopefully) bigger and more profitable is because I have no plan for the paper after I work it. If I purchase paper myself, and work it in my own shop for 3 months, I have no plan for what to do after it. I don't have connections to any other agencies that I would trust to work it after me, and I can't get a good resale value by buying and selling after just 3 months. To purchase and get a good profit on your paper, you have to have a strategy for what to do with it after you work it, and you need a good exit strategy. I have neither. Maybe in the distant future I will change my mind, but for now I plan on putting my profits back into my agency and growing that rather than trying to purchase paper.

Sebastian or anyone else, would appreciate if you'd take a look and give me your thoughts

http://forumserver.twoplustwo.com/30...redit-1292816/

need_help,

I would be careful, Sebastian may give you a call to give you some "advice" with that bill pretty soon!

jk, great to hear this is working out, I have followed this thread from the beginning.

First profitable month officially in the books as of 6pm eastern today when we closed. Final tally; profit of $4,100 in January.

awesome. please keep updating with stories. this has been a great thread.

If you were doing this over planning to start this summer, what would you do differently? I assume you'd have a little more starting cash than you went in with, I mean besides that.

Are you contacting consumers solely by phone or using some sort of lettering or other strat too?

Besides going in with more cash, I would do two main things differently. I assumed that I would cover my overhead much more quickly than I did. When I first opened, I had 7 employees the first day. I started to big and I had to cut down to four. I assumed that more money would be "green money," or money that is NOT postdated. A much higher percentage of our collections are red (postdated) rather than green. So I would start with less employees.

The other thing I would do is plan my infrastructure better. I bought computers because they were extremely cheap, but they froze all the time and I had to replace them anyway. I should've spent the extra money right off the bat because I had to spend it anyway.
I also would've gotten VoIP phones immediately. Verizon blows for landlines and businesses, and Volalocity has been awesome. My phone bill went from 700 including internet to 450 including much faster internet. The phones were an easy investment and the only reason I didn't do them off the bat was that my dad heard they weren't as good as landlines. lol to that.

I also should have started at a different time. Going in with as little money as I did, starting in October was a big disadvantage. Holidays make Nov. and Dec.the worst months of the year to collect, so having them be your first months open is tough.

We only dial for dollars. Lettering and other things are good, but with Pay day loans the debtors are so transient that mailing to the address they signed up for is silly. We do mail letters when we have contact with debtors as required by law, but until we contact we've figured its a waste of money. With credit cards and other higher quality debt, it is totally different, but we don't collect on those.

Good to see this is working out for you so far. Early on I got the sense you were getting in over your head a bit.

Your sense was 100% spot on. I was in way over my head. I had obly the vaugest ideas about how to run a business. Had I not had a pretty decent job to support me things may have turned put much differently. Thanks for the well wishes.

Very interesting read. I'm looking to start my own business after this last year of poker and this sounds like a good option. I'm from the UK and have no experience in collections as all I have ever done is poker. My cousin has done collections for afew years so could possibly go into business with him. Can you give me some pointers please

The thing that strikes me the most is that January is generally a super hard month to get people to pay. Christmas spending just happened and no tax refunds yet. Glad to read the positive update!

Andy,

This is an interesting blog. What kind of liquidation rates are you experieceing and on what type of assets are you collecting on? Lastly, you mention networking being one of your hardest endeavors ..do you have any advice on that? Hope your bank account is growing this month good luck to you and your young ones.

Have you been experiencing much of an increase in payments now that we are in Q1? If not do you think the increase in payroll taxes is having an effect?

Bank account is indeed growing. I am taking my first paycheck a week from Friday at a rate of 750 per week until I get a better idea of how much I am actually profiting.

My liquidation rates vary on the age of paper and where it comes from. We normally hope to liquidate between 5 and 7 percent of the paper we get over a 3 month period. It really depends.

Networking is the most difficult part. Collections and the debt industry is very secretive, and there are a lot of untrustworthy people out there. I would suggest just speaking to as many people in the industry as possible, and make yourself valuable to them by making it seem like you can make them money. If you seem like you know what you're doing and like you aren't a theif, you are well on your way.

We started in q4. Because of Christmas, q4 is always the hardest to collect in. Q1 is always the best because of tax returns. I do not see the increase in payroll taxes having an effect because the low balance and subprime nature of he loans does not lend itself to the type of people who are affected by many tax increases. I doubt it is really affecting any agencies honestly.

Anybody with a job was affected by the payroll tax reverting to the normal rate. Average Joe (employed) is now making 2% less than last year, guaranteed. He can never get that money back via refund either.

Many of the people I am collecting from are either unemployed or paid under the table. I guess the direct answer to the previous question is that the payroll rate change has not affected my liquidation at all IMO so far.

My manager hit me up for a raise yesterday. He's one of my best friends and I would have failed without him. It was a really adult conversation and nobody went away mad, which was good. He wanted a piece of the business and I told him no. He stated (correctly) that I never would have gotten off the ground if it wasn't for him, and I reminded him that at the beginning I offered to go 50/50 with him but he couldn't go that long without a salary.
I told him I was not giving him any of the business, but I would give him a monthly bonus of 1.5% of gross money collected. I also told him that if/when we open another collection agency I will let him buy into it at the time of opening. All told we are both happy with how things went.

Are you working any paper owned by any other debt buyers or just stuff still held by the original lender?

That's a bit rude. He takes no risk and puts up no capital (in fact using up your capital with his salary), and once the business is successful, he wants a piece for nothing.

Good on you for sticking to your guns. Although a percentage of monthly profit would seem like a better option, you don't want to be paying this guy out on months where you're losing money.

Nothing by original lender, all by debt buyers. For PayDayLoans, I don't know of any original creditors that try to place it themselves.
I didn't look at it as rude at all, I looked at it as a guy trying to get ahead in life. I think he knew I wouldn't just give him a piece. He took the "no" pretty graciously, and although he didn't really take any risk, I couldn't have done it without him. The bonus structure we worked out actually works in my favor for now, as I would have had to give him a straight salary raise in the next month or so higher than that anyway. It will only start to work in his favor when I get to profiting 10k a month or so; and if he can make that happen while I'm only there 15 hours a week then I feel he deserves it. I'm actually very happy with how that turned out.

Andy

Way to hold your ground and come up with a good resolution for both of you guys. Read your post from the previous email about you buying debt. Have you changed your mind now that you have a feel. Also do you really need a resell strategy if your liquidating at 5-7 with 3 months. I think you would increase/double your monthly profits buying directly from a sellers. You also can use your debt buyers files as kind of a base line for getting start or learn how to evaluate a portfolio. Any thoughts on this?

As we've been doing better and making money in the past few months, I can't help but jump ahead of myself and look down the road to see how we are going to make more money.

Our liquidation numbers have fluctuated depending on age and quality of the package from a low of 5% to a high of 9.0 percent. The type of dept we are working costs about 3cents on the dollar for our client to purchase, and normally we get 45% of that and the debt buyer gets 55%.

On the face it seems like a no brainer to start buying debt. The problem is, that 5-9 percent is liquidated over 6 months or so. We WORK the debt for 3 months, but that doesn't mean it is all collected in three. There are other problems too. For example, we work about 1mm in debt per month give or take. at 3c on the dollar that costs me 30k per month. I don't have that. I would also need to come up with that month after month in order to keep the debt coming in while I start liquidating. I could keep one of my clients and supplement that with debt of my own, but we're still looking at a liquid amount of 30k minimum to buy debt for 3 months. And at 7 percent liquidation, we're looking at 38.5k on an investment of 30k over 6-8 months. That is a great return, but it is also very time intensive to manage that debt. That time would be better spent right now increasing my liquidation rate and improving the collection aspect of my company.

The other thing that I'd like to do before I venture into debt buying is open another collection agency. Debt is kind of like a car as far as value is concerned; the more OWNERS it has, the more it decreases in value. If my debt buying company can place with my first collection agency, then have the debt unworked for a few months and then place it with my 2nd agency and THEN sell it, I get more liquidation out of it, and the resale value does not go down signicantly more than if just one agency worked it. Even though it has been with two agencies it has only had one additional owner; my debt buying company.

I have been spending time trying to learn how to evaluate portfolios, but honestly, it is probably 2 years down the line before I start buying debt.

Whats the advantage of having the debt worked on by two different agencies (both controlled/owned by you), instead of just having one agency work it again after a couple of months?