[Julissa RiosMember]

Hey everyone,

I am in talks of buying an exsisting collections agency right here out of FL but I want to make sure I am not gettting scammed. He sent me over a copy of the contract he wants me to sign and my gosh, have we heard of spell check or basic grammar…

Here are some facts, please let me know what you think or what else I should be asking..

1-He bought the co 2 years ago and co has been in bus 10+ years, mo laywsuits ever or pending judgements

2- He claims in 06 he following:

Collection fee income (total income) 70k

Expenses (rent, adv, phone, stamps 12k

Salary 50k

Total income 120k

Paid to client 50k

Paid to agency 70

He says he had hired 2 people to work part time but he also had a full time job and has been doing this pt, claims to have over 850k in active account, 73 active clients on contract, and 7k accts which have yet to be entered into debtmaster..

He is trying to sell it to me for $40k includin software in co name, 5 licenses and 2 computers, printers, etc… the basics needed..

He claims he is moving from fl to oregon and if he took the bus with him he would have too get bonded for a million and in oregon they only make 12-17% where here in fl its 30-50%..

Does any of what I am saying make sense to anyone? Is 40k a good price? or is this guy a scam artist? please all help is appreciated! Thanks!!!

[~Fleppie~Member]

Oregon bond requirements are only 10K not 1 Million…… It costs 350.00 to register and 120 renewal (annually) ……..If he’s adding a few zero’s to that….. Just how many zero’s is he adding to what he’s making……

[OutBackJackMember]

Who knows, he may be telling the truth, but there’s only one way to find out……..Due Diligence.

If he is claiming those figures for 2/10ths of b*gger all work, hell I’d be interested in buying it, make him prove it.

You will want to see bank account statements, talk to clients independently, see the evidence, if he ain’t prepared to show you his, don’t show him yours…money that is

[The New GuyParticipant]

whoah… hold up a minute

$120k gross collections

$50k paid to client

$70k paid to agency

30%-50% rates

Right there is enough information alone to come to a screeching halt and question everything.

Let’s say the average rate is 40% (which, by the way, is probably a bit high for the market, meaning you may not be able to sustain it long term).

$120k in gross collections would equate to a total of $48k in net revenue. Take the 12k in overhead out of that, bringing it down to $36k. Now pay two part time employees and yourself. Figure a part timer costs you $10k a year on the low side, and that leaves you with an income of $16k.

Congratulations! You are working your tail off for less than you would make at McDonalds. No wonder he still needs a full time job.

There is a LOT to consider before taking this step. Before anything else, you had better get a good explanation of the above anomaly. Then, if you are satisfied with the explanation, spend some quality time watching his daily routine, and watching how the money flows through the company.

Get a good grip on analyzing his system reports, and see that they jive with reality. Then consider what your strategy will be when you get sued (because you will, it’s just a matter of time). Legal fees quickly get into the thousands – can you adequately protect yourself when it happens?

If you want to talk this through further with someone who has been through it and learned many, many lessons about proper due diligence, PM me and I’ll give you my phone number.

[The New GuyParticipant]

And by the way, Fleppie is right. Oregon requires a $10k bond as well as an initial registration fee of $350. Hardly a significant barrier.

But even more relevant is the crapola he is feeding you about commission rates. There is no inherent difference in rates from state to state that would be anywhere near so drastic. Rates differ by type of debt more than by geography. (i.e. commercial vs. consumer, age, volume, average balance, neighborhood, etc)

There are two blatant lies he is feeding you about his motivations, plus the impossible balance sheet from above. What else is he not being honest about?

[AnthonyMember]

Just my opinion, but the numbers you put in your OP – $70K income, $12K expenses, $50K salary – that leave $8,000 in profit. You really want to work all year for $8,000?

THG said it pretty well – you’d make more at McDonalds.

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