Collections Agencies: Growing Rich, Not Just Big

Collection Agency Articles

If you are a collection agency author and would like to submit your collection agency articles, Click Here.

Collections Agencies: Growing Rich, Not Just Big

Focusing on the Money

Bill collection companies are owned by people who want to get rich. The trouble is, many of them are going about it the wrong way. Too many managers in collections agencies still think that winning new business automatically leads to worthwhile profits. And it simply doesn't.

Big Isn't Always Best

In their book, The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits, Slywotzky, Morrison, and Andelman identify many companies--huge household names--who were very successful in building market share, but who took their collective eye off the profit ball.

The authors point to IBM, DEC, GM, Ford, United Airlines, US Steel, Kodak, Sears, and Kmart. By the early 1980s, these were all market leaders, but were beginning to see their profitability fall sharply. According to the book: "Despite their strong market position, these market share leaders significantly underperformed the S&P 500 from 1985 to 1995."

Some of these companies were lucky enough to have smart managers who turned them around by changing their strategic focus from revenue growth to profit growth. Others were less lucky.

Growing Smart

Of course, this is not to suggest that building market share by winning new business is a bad thing. In fact, it's vital. No, what is being questioned is the chasing of new accounts regardless of how much benefit they might bring to the bill collection company.

Collections Agencies and Crippling Competition

One of the problems facing bill collection companies is the near commoditization of the business. Sure, some collections agencies have loyal customers who are willing to pay a small premium because they like and trust the service they receive. But most creditors see credit agents (and pretty much all debt buyers) in purely financial terms, and award contracts exclusively on cost.

All of this is only made worse by two factors: the current economic climate and new technologies. Serious, professional, skilled, stable bill collection companies are losing business to unqualified, untrained, inexperienced, and inappropriate people in start-ups who see the collections agencies industry as a way to make an easy buck during difficult times. And all these newcomers need is a persuasive Web site and a sharp line in sales patter.

The Business of Bill Collection

There is no way around the fact that most creditors see bill collection as a commodity and make decisions based exclusively on price. However, smart managers in collections agencies are looking at their business models more closely.

They start by becoming more customer-centric. In other words, they look at the business from the customer's point of view and refine their offerings (services and products) to make them as attractive--and valuable--to creditors as possible.

Adding Value

This value element is essential. Customers pay for the value that a supplier adds in the value chain. It is only by understanding what value collections agencies can add that a bill collection business can know how and where to refine and extend its offerings. And it is only by maximizing that value that profit margins can be grown.

For example, many customers are very keen to reduce their head counts, and manage costs. A smart bill collection business might propose that a customer outsource all or part of its delinquent accounts department (including any first party collections work) to the agency. By taking on extra functions the agency is adding more value and can charge a real premium for its expertise and service performance.

Collections Agencies and Targeting

As bill collection businesses refine their offerings, and expand their service portfolios, they should also more closely target their customers, and prospective customers. There is no point in wasting scarce resources pursuing, recruiting, and servicing a new customer who will not provide an appropriate return on the agency's investment.

Instead, they should target their sales and marketing activity only at those customers who need--and will pay for--the value that the agency can add. And once more profitable new customers are in place, they should consider weeding out old and unprofitable ones.

Making Bill Collection Pay

Collections agencies can easily build revenues during an economic downturn. Any fool can do that--and quite a few are.

But smart managers will use this opportunity to enhance profitability, strengthen, and extend relationships with key customers and position their companies to thrive during--and after--the forthcoming recovery.

Source

The Profit Zone: How Strategic Business Design Will Lead You to Tomorrow's Profits

---

If you would like to add this collections agency article to your website, you must add the follwing code:

Collection Agency Article courtesy of /

Here is the code you can just copy and paste: <a href="articles/Collection_Agency/page_1/">Collection Agency Article</a> courtesy of <a href="/" >/</a>

Get A Free Collection Agency Quote Now!
Collection Agency services can also go to First Data Alternatives and get a rate reduction quote for your credit card processor fees. See website for details!