By 2 Minutes
The original “Avengers” movie in 2012 had six superheroes in it - Captain America, Iron Man, Black Widow, Thor, Hulk, and Hawkeye. The most recent version of the movie, released last month, had about three times as many.
It’s a common strategy in TV shows and movies to introduce new characters as a means of keeping the public interested in the franchise, but at some point, it becomes just too much to bear and the franchise collapses from all the extra weight.
This is not to say that this year's “Avengers: Infinity War” is bad or destined for obscurity (it isn’t - if you haven’ seen it, go see it. If you have seen it, you’re probably going to see it again. Unless you dislike this genre of film, in which case I have totally tipped you off on what I find entertaining and now you're judging me), but even this money-printing machine is groaning from the weight of trying to give screen time to too many stars.
While the powers behind the next “Avengers” movie will have to deal with how many more superheroes can be shoehorned into the movie, collection agencies are wrestling with a similar dynamic.
For too long, the conventional wisdom in the ARM industry has been “more, more, more.” More clients with more accounts means more money collected means more revenue means more profits. But that’s not necessarily true.
Understanding which clients, which types of debt, and which types of accounts yield the most profit is key to establishing a solid foundation on which to grow a collection agency. Using a model of chasing as many accounts as possible is not a long-term strategy that will yield positive, sustainable results for most agencies - especially small to medium sized ones. When growth is treated as the goal itself, there are situations when agencies can actually grow to death.
Collection agencies need to understand and analyze their accounts and their clients to see which ones are the most profitable. If you are losing money on a client, what’s the point of keeping that client around? Who is benefiting? If you're just winning the business at an abnormally low margin to keep your competitor from getting it, who really won? If you're spending 80% of your time dealing with a client who represents 20% of your business, is that sustainable? Have you quantified those situations?
Is there a segment of your business that is more profitable because you get a higher rate of resolution? Do you know how to do a quantified analysis of your accounts? Does your software let you dive into that data objectively?
The key to understanding profitability is to dive into your collection software and analyze the results for each client, each type of debt, each collector, and each account. From that analysis, an agency can build its own type of superheros - the perfect client, the perfect market, you get the idea. Knowing what types of debt and account placements work best for you is a win-win for you and the client.
It doesn’t take a statistics degree or a pocket protector to pull out and analyze that data, either. Agency executives who are unfamiliar with that type of analysis shouldn’t run and hide. Newer software systems can make that data available with a few mouse clicks. The rest is up to you.
With the right analysis, you could be as rich as Tony Stark.
