mug strausserIn my last column I addressed the Stuck in the Middle syndrome many agencies are experiencing within the industry. Your organization may be large enough to survive the ever-changing collection landscape but your new business sources are drying up. I would like to continue this theme and address some distinct opportunities for growth in this middle sector of the collections industry. Over the past five years or so, there have been many very small agencies (one to five staff members) making the difficult choice to literally close their doors due to the current legal, regulatory, and business environments (our industry’s little cherries). They find they are not large enough to withstand the costs and change dynamics and need to find an easy exit. Unfortunately, for them, the typical collection firm eyeing growth through acquisition does not include these small players on their prospect radar. This creates a great opportunity for the middle-sized organizations.

As many agencies have seen their long-standing client relationships crumble due to creditor mergers, closures, and acquisitions, there has been a new found realization that forming relationships with many regional or state-based creditors may be healthier for your organization than trying to replace large clients with other huge relationships. The proverbial “putting your eggs in one basket” rings true for many agencies with a few mega clients representing 50% or more of their business. This is where the opportunity lies in helping very small agencies gain some revenue from a business transition to a larger company. Let me share my personal experience.

About four years ago a very small collection firm with whom I was acquainted in western Pennsylvania contacted me with a desire to transfer her clients to my agency as she was ready to close her doors. We worked out a modest split of commissions for a 36 month period, worked through the transition logistics with the clients, and obtained some great small to medium sized new clients that still are going strong today. The seller walked away with income she did not expect to see in the closure. We are currently involved in an identical transition of an agency in business over 50 years with only four employees remaining. Likewise, they are looking to give closure to their organization but would like to see some modest income in the process. We will transition their 50 clients over a 60-day period.

The concept is simple but I don’t want to give the illusion it doesn’t take a fair amount of work. Here are some dynamics that will take time, thought, and consideration in these transitions:

• What remuneration will you offer to the seller? A commission split for 12 to 36 months is typical. It can be as low as 10% of fees for the longer term or more front loaded with higher splits of 30% to 40% for a few months followed by 10% for remaining months up to two years.

• The seller’s business is most likely ceasing operations so these are your clients. You will have to sign service agreements and business associate agreements and go through an on-boarding process with each. This step is time consuming trying to reach the new client contacts, who can orchestrate the change in their office.

• Expect to receive some push-back from a set of clients. They may need to be sold on the transition and your collection organization. In our experience, many will gladly transition.

• Will you take only new accounts moving forward or will you do a data transfer of all historic accounts to keep the relationship complete and whole for the client? Transferring all data makes the sell to clients much easier. We have accepted all data in our dealings. This takes some IT costs and compliance considerations relative to how you will treat the historic accounts. You will also have to consider how old is too old to transfer.

• Will you acquire ownership of the seller’s name, and phone numbers including toll free listings? Do you have any interest in existing staff? Did the seller have a unique program, approach, or service you may have to consider?

• Chances are good your organization will have superior resources and will be able to offer clients better servicing, data access via your client portals (we use Client-AccessWeb from Applied Innovation) and increased consumer contacts based on your larger staff.

Although there is an upfront flurry of activity during the onboarding process, within a few months you will settle into a nice new group of clients. In our experience these clients have been in geographic areas new to us so the transition increased our agency’s footprint. We have also experienced an increase in liquidations over the seller’s agency by applying our internal processes, dialer campaigns, and account scoring.

Many organizations have continually been focused on finding new client relationships in traditional places. Along with industry challenges comes opportunity for some. Consider getting the word out stating you are interested in assisting small players, those valuable industry cherries, and find a new home for their clients. This can be a win/win experience and solid method for growth and continued prosperity!

We encourage our readers to submit a “best practice” idea for inclusion in this column. Until next time, I’m in a collection office near you!


Harry A. Strausser III is the President of Interact Training and Development. He can be reached at This email address is being protected from spambots. You need JavaScript enabled to view it..