How to Start a 95% Margin Collections Biz

How to start a 95% margin collections biz:

My buddy worked for an HOA management co & the HOAs had 2 BIG problems:

1. TONS of homeowners were delinquent
2. The insane HOA collection costs were passed down to the good homeowners. Lose/lose

Hmm...

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He asked the obvious question:

"Why are the good homeowners having to pay for the sins of the bad ones?"

His boss simply said, "Because we make a ton of money on collections."

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Hmmm...so now he realized he needed to:

1. Shift the burden of collection costs to the delinquent homeowner

2. Help the HOA management company make more money

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He went to work by doing the following:

1. Downloaded years of collection data to determine how much was collected at 30 and 60+ days.

2. Determined how much they made by billing in advance for collections.

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He now had a game plan:

1. Increasing late fee charges by 50%

2. Only collect those amounts from the delinquent homeowner AFTER they paid their full HOA dues.

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In doing this they could:

1. Eliminate the "collection" expense from the HOAs P&L as the collections would be paid by the homeowner instead (BIG savings)

2. Increase revenues from the collection service line by 20%.

3. Improve "stickiness" with their HOA clients by offering them a product not available on the market

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The risk: none of the revenue was guaranteed.

He asked his boss if they could try it out with 5 HOAs, and he agreed.

The pitch was easy - He showed them their P&L with their collection costs, crossed it out with a sharpie and wrote "$0.00."

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He told them that they would take the risk and would only collect when they were made whole.  

"We are partners - if we do our job, we will get paid, otherwise... why should you pay us?"

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Perfect alignment of interests.

He built a simple program to scrub the data and populate late letters and templates to upload into the billing system for tracking.  

The program would scrub for payments received and determine how much money was collected for the HOA and due to them.

The program also built reports showing the HOA exactly how much they were saving and assessments collected.

It took one of his collection people 1 hour per day to run (at $15/hr), send letters, and upload the data.

It was a HUGE success.  Clients loved it.  They were making a TON more money. WIN-WIN.

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They expanded the service to all of our clients with nearly a 70% conversion rate.  At the end of year 1, they had one employee, $2m in revenue, and a lot of happy clients.

His only regret?  He should've done it as a separate company that he owned...

But guess what? Anyone with a phone and some excel skills could start this biz. The model is proven.

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Why not you?

THERE ARE 350,000 HOAs IN THE US!

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The man that did all this? None else but the brilliant @HCareAdvisorGuy. He deserves your follow and your love.

You can direct any questions to him. He coaches my son's basketball team and won coach of the year out of like a zillion other coaches.

And his calves are super just ok.

And then follow me too so I don't get jealous @mhp_guy