Start Your Own Collection Agency

by Alice Seba

What is a Collection Agency?

A collection agency helps businesses collect money from past due accounts. As a collector you would contact people who owe money to your clients via mail and telephone, in order to ensure payment. No, you’re not the "break your arms and legs" guy if people don’t pay… You are an investigator who finds people who have seemed to gone missing before paying their debts. You are a negotiator that arranges for payment plans that suit the needs of both the debtor and debtee. You are a person who helps businesses make sure that they receive the money they are entitled to.

This is a low overhead business. You don’t need to keep inventory, you don’t need to ship items. It is ideal for a home office.

Collection Agency Supplies

  • Business cards & brochures for distribution to potential clients and contacts. In your brochure, be sure to include your services and why you are a unique collection agency.
  • A word processing program and lots of paper for all the letters you are going to be writing.
  • There is collection software available, but it’s not a necessity. A spreadsheet program, like Microsoft Excel will keep you organized as you get started.

A Collector’s Skills & Attributes

  • Investigative Skills: Often the people who owe money to your clients, will have seemed to have disappeared. You will need to use your investigative skills to find new addresses and or phone numbers for these individuals.
  • Organization: You need to be extremely organized. First, you need to be able to manage all your clients and be on top of their collection needs. Second, you need to be able to keep track of what contact you have made to the various debtors and what action they have promised to take on their overdue accounts. You also need to be able to provide this information to your clients.
  • Empathy: Your job is not to intimidate. It is to produce results for your clients. Most debtors are not bad people, they are people who have found themselves in very difficult situation. You will often get better results if you can empathize with a debtor than if you bully them.
  • Negotiation: Many times, debtors will not be able to pay the full amount owing all at once. You will need to negotiate a reasonable repayment plan that ensure the debt is paid in a reasonable time frame.
  • Persistence: You will be empathetic and use good negotiation skills, but be persistent and don’t be soft. Many times, you will have troubles locating a debtor. Once you locate him, you may have difficulty getting a response. Even when a debtor agrees to pay, you may have to follow up a number of times to ensure that payment is made.
  • Customer Service Skills: You need to ensure impeccable customer service for your clients. These are businesses that need to have their debts cleared up. You need to give there accounts proper attention, be available for questions and ensure that your clients feel comfortable with the results you provide.

A Collection Agency’s Rates

Generally, you get paid when you collect. You can charge about 20-30% of what you collect.

Getting Your Business Off the Ground

  • Connect with various smaller businesses in your area: Let them know about your services. It is better if you speak with them personally, rather than sending something in the mail. Outline all the features of your services, why you are unique and let them know the bonuses of you being a small business venture yourself. Being small means they will receive more personalized service and they can contact you directly any time they need assistance.
  • Of course, you need a website: This is where your current and potential clients can go “visit” you and find out more about your services. It also provides you with the potential of finding clients that are not in your immediate area. A website could also help you expand your business, find other collectors to work accounts for you all over the country.

    Website Tips

    • Establish yourself as an expert in your field and increase your search engine rankings: You can do this by adding useful information to your website visitors. This can include tips on collecting, when to call a collection agency, how to choose a collection agency…anything collection-related.
    • Start a Newsletter: Publish a regular newsletter for your clients and offer subscriptions right off your website. Again, this will help establish you as an expert in your field and helps you promote your services.
    • Partner with other Business to Business Sites: Find other sites that offer services to businesses and exchange links, offer to promote each other’s services or find another way to work together.
    • Include Testimonials & Statistics About Your Collection Rates: This will be a growing section to your website as you gain more experience. To be more effective, make sure the people who offer testimonials are willing to be contacted by potential clients.
  • Press Releases & Letters to the Editor: There’s nothing like free promotion and when people see your story in the newspaper or on TV, it’s like getting an endorsement from the media. Be sure to prepare a professional press release to submit to your local media and small business publications. You can prepare a press release yourself or have one prepared for you. In addition, when you see, hear or read a news story that relates to your business — always write a letter to the editor or call the reporter an add your expert viewpoint. You never know what might turn into a feature.

For a More Comprehensive Look at Starting a Collection Agency from Home — Don’t miss Robert H. Bills’ book How to Start a Home-Based Collection Agency. This is a comprehensive, step-by-step guide to starting a home based collection agency. This book takes a frugal, yet realistic approach to start up and operating costs.

Everything is covered from what it takes to be a collector (and you don’t have to be as cut-throat as you think), business plan worksheets, marketing, legal considerations and collection strategies and approaches. Resources include a large library of sample collection letters and collection service agreements, making this a very practical guide for anyone interested in starting their own collection agency. You can get more information or buy the book at

Interview & Article by Alice Seba, editor of — a FREE online business resource center for work at home moms. Visit her copywriting website at for free content, writing tips and services.

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