Working for FreeMay 4th, 2011 | By Editorial Staff | Category: Features
By Jo Kemp, Quality Recovery Services Inc.
Editor’s Note: Quality Recovery Services Inc. appears in the May Tow Times Repossessor issue Products at Work feature. See page 24. The following is a repossession business outlook by Kemp as a continuation of repossession industry coverage in that issue.
Repossessor drivers tend to think if the fax is constantly going off and accounts are coming in, “life is good.”
Some companies think when prospective clients call and offer a large volume of work at a significantly reduced rate, that’s a good deal.
It doesn’t matter how many assignments a company receives, if they are not making any money, soon their trucks wear out, they can’t pay their drivers, they can’t pay their bills, and before they know it, they are out of business. We have a saying in our office: “Volume at a low price is like eating tomato soup with a fork. You’re always busy, but you never get full.”
In the repossession industry and in the wrecker/towing industry, clients want free storage. Seven, 10, 15, even 30 days for free. The problem is, storage is not free. We have invested in high-dollar fences, gates, security cameras, the land the cars sit on and the outrageous cost of concrete. We are required to carry insurance on all of these vehicles, whether it’s a Lamborghini or a Ford Focus. We are liable for these units every day they sit on our lot, and we all know that if anything happens to the vehicle (during that “free” storage period) who is going to pay for it.
I once heard of a repossession owner who replied to a client asking for free storage: “Sure we have free storage, that’s the storage on the outside of the fence.”
I’ve personally never had the courage to say that to a client, but I certainly understand where that owner was coming from.
Another services we can no longer charge for is skip tracing, or locating the collateral. Until a few years ago we could charge for this service but now our clients hire skip tracing companies. However, we still have skip tracers on the payroll and skip tracing tools at a cost of about $9,000 per month. We still find most of our cars, but we are no longer able to bill for the expense. We’ve had to absorb that cost as well.
We know that repossession companies and wrecker companies are suffering due to the recession, but to make matters worse, fuel is on the rise again, and wrecker companies — like us — are locked into contracts with motor clubs, insurance companies, etc., with no option to add a fuel surcharge.
To offset these conditions, we are trying to diversify and find other ways of generating revenue, such as doing our own deliveries as we have flatbeds that need to keep moving. We also try to sell what vehicles we can, as most of them just go to the auction. We make keys, and we are detailing cars, which we hope will bring in more money for clients. We also bought Digital Recognition Network cameras for all of our trucks. None of these approaches is the single answer or a quick fix, but each is a tool for generating revenue.
At the end of the month, it’s all about balancing your income with your expenses — making enough revenue to cover costs and doing what it takes to bring your company within this basic business principle. And as stated previously, having a lot of assignments doesn’t matter if you aren’t making any money. You may be busy, but you’ll never get full.
Jo Kemp is president of Quality Recovery Services Inc., which provides a wide range of repossession and collection services from locations in Dallas, Ft. Worth and Tyler, Texas, and Durant, Okla. Visit www.qualityrepo.com.