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I'm interested in setting up a business to help people (I'm thinking mostly self-employed professionals) deal with clients who don't pay.

The plan is to have two strands: (1) buying bad debt of solvent clients (i.e. people who won't pay, rather than can't pay); and (2) help set clients up with appropriate procedures to avoid bad debts.

My background is as a lawyer, in which I saw clients who had this problem, had let it get to be a big problem, and had the money to pay lawyers to pursue accounts by the hour.

My first question is how prevalent a problem is this? My second question is how do I find people with this problem?

Edit (to reflect my answer to Gary E's question): The specific advantages of what I plan to offer are:

  1. Because I would be buying the debt, my customers would not incur any up front cost or any risk of having to pay more than they recover; and
  2. I will help them avoid bad debts, and reduce the pain of bad debts that do occur, without them having to use my services as an outsourced credit control department. I plan to do this by offering advice, and perhaps selling appropriate CRM and accounting software.

In particular, I think this would be suitable for customers for whom factoring, especially disclosed factoring is unsuitable. (Disclosed factoring also potentially reducing bad debts).

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2 Answers

up vote 3 down vote

There are plenty of companies that buy up accounts receivables.

There are plenty of collection agencies that will get your money for you (including going to court).

There are plenty of lawyers who will sue to collect your money for you.

So my question to you is, How are you any different? Unless you can stand out from the group above, why would anyone want your service?

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(1) Because I would be buying the debt, my customers would not incur any up front cost or any risk of having to pay more than they recover; and (2) I will help them avoid bad debts, and reduce the pain of bad debts that do occur, without them having to use my services as an outsourced credit control department. Disclosed factors who handle all of the billing and collection also do (2) by effectively being outsourced credit control. I want to target customers for whom such factors are not good value, or for whom factoring is unsuitable. – Marcin Apr 6 '11 at 12:26
up vote 0 down vote

Plenty of law firms have clients that won't pay. I want to be encouraging, but those law firms are used to dealing with deadbeat clients. Unless you'd charge way less than the matter could be handled internally, I don't see them outsourcing collections or the like. (Maintaining the client relationship is important, so they may not want to use an outsider no matter what the price.)

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Everything you say is true, but I don't see the relevance. I'm not targeting law firms, and I don't mention them. Obviously, aggressively pursuing clients whom one isn't going to drop is unlikely to work. As it happens, law firms are frequently quite bad at credit control. – Marcin Apr 8 '11 at 0:16

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