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Collection Companies: How to Manage the Business's Growth Successfully
Collection Companies' Growing Pains
In their article, The Five Stages of Small Business Growth*, Churchill and Lewis identify four business factors that determine success or failure when an enterprise grows. Although these factors describe challenges in a small business environment, scaled up versions apply equally to larger ventures.
Successful Growth in the Collection Service Industry
1. Financial Resources
No matter how quickly potential new revenues are forecast to arrive, the money needed to fund growth will be required before cash flow alone can deliver it. And nobody knows better than a collection service what happens when income arrives too late to pay the bills.
Collection companies must have either sufficient cash reserves or credit in place before undertaking a rapid expansion program.
2. Human Resources
What is the key similarity between doctors, nurses, social workers, and collection service employees? In order for any of them to do their jobs properly, they must all first achieve an appropriate level of professional detachment. And not everyone can do that.
Right now, there are many very talented, unemployed individuals out there looking for jobs, almost all of whom are willing to say virtually anything they think a prospective employer wants to hear. They are desperate. That makes attracting, selecting, and training the sorts of people who really can work well in collection companies extremely difficult. These are challenges that should not be underestimated.
3. Systems Resources
Collection companies--in common with all other companies--need to develop increasingly sophisticated financial systems as they grow. Managers cannot make informed decisions unless they have a comprehensive, and up-to-date, understanding of what is happening across the business.
That may mean introducing or upgrading management accounting systems (budgeting, forecasting, comparing forecasts with actuals, and so on), which could involve the deployment of new IT solutions, and/or the employment of people with specialist expertise.
4. Business Resources
To grow successfully, a collection service has to identify, monitor, and control all the elements that make up its business resources. Churchill and Lewis define these as all the things that "give the company a position in its industry and market."
They go on to give some examples, including the company's reputation, its market share, how it works with customers, and suppliers, and its business processes.
Should a Collection Service Want to Grow?
Time was when almost everyone assumed that there was an unbreakable link between market share and profit. The wisdom was that, if a company grew bigger, it would automatically grow more profitable.
Then, back in 1997, a book called The Profit Zone shattered that illusion. It showed that many big companies that acquired large market shares--or even market leadership--were not actually all that profitable. Think General Motors.
The book's authors, Adrian J. Slywotzky, David J. Morrison, and Bob Andelman, suggested strategies by which companies could, if appropriate, grow in ways that are profitable. Or could just become more profitable without growth.
And, next week, this column will explore how some of their ideas can apply to collection companies.
Source
* First published as a chapter in Small business: critical perspectives on business and management, edited by D.J.Storey. Taylor & Francis, 2000
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