Find aDomain Search Powered byGoDaddy.com ...
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as repo for car dealers.
We earn commissions if you shop through the links below. Read more
Written by: Carolyn Young
Carolyn Young has over 25 years of experience in business in various roles, including bank management, marketing management, and business education.
Published on March 25, 2022
Updated on October 7, 2022
Investment range
$4,750 - $9,500
Revenue potential
$65,000 - $325,000 p.a.
Time to build
1 – 3 months
Profit potential
$52,000 - $97,500 p.a.
Industry trend
Growing
Commitment
Flexible
Unfortunately, people sometimes have difficulty making on-time payments for major purchases, like cars, boats, furniture and appliances, so the repo man pays them a visit to either repossess the item or persuade the buyer to cough up.
A repo company works for banks and other lenders to retrieve large items purchased via loan so that the lender can sell them, usually at an auction. The repo business collects fees for each item repossessed, which can make for quite a profitable business. In fact, repo in the US is a growing, billion-dollar industry, so there’s real opportunity in this market.
But you need more than a tow truck to start a repo business. You need specific knowledge about how to launch a business and the ins and outs of the industry. Luckily, you’ll find everything you need to know in this step-by-step guide, designed to put you on a path to repo success.
Starting a repo business has pros and cons to consider before decided if it’s right for you.
Trends in the repo industry include:
Challenges in the repo industry include:
Startup costs for a repo business range from $4,500 – $9,500. The main costs are a down payment on a tow truck and a website. You’ll also need to meet the licensing requirements of your state.
In some states, you’ll just need a commercial driver’s license (CDL), while in others you’ll need a repossession license. To get a repo license, states require a certain number of educational hours and some repo experience. Check with your state for specific requirements. You’ll also need to check local repossession business laws.
Start-up Costs | Ballpark Range | Average |
---|---|---|
Setting up a business name and corporation | $150 - $200 | $175 |
Business licenses and permits | $100 - $300 | $200 |
Insurance | $100-$300 | $200 |
Business cards and brochures | $200 - $300 | $250 |
Website setup | $1,000 - $3,000 | $2,000 |
Tow truck down payment | $3,000 - $5,000 | $4,000 |
Repossession and CDL licensing | $200 - $400 | $300 |
Total | $4,750 - $9,500 | $7,125 |
The average price to repo a car is about $200, and larger, more valuable items can cost more. If you have to track down the person and the items, you can add fees of about $25 per hour. These calculations will assume an average per-repo price of $250. Your profit margin should be about 80%.
In your first year or two, you could work from home and repo five items per week, bringing in $65,000 in annual revenue. This would mean $52,000 in profit, assuming that 80% margin. As you get repeat customers, you could do 25 items per week. At this stage, you’d rent a commercial space and hire staff, reducing your profit margin to around 30%. With annual revenue of $325,000, you’d make a tidy profit of $97,500.
There are a few barriers to entry for a repo business. Your biggest challenges will be:
Now that you know what’s involved in starting a repo business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Research repo businesses in your area to examine their services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a repo business that focuses on trucks, boats, or furniture and appliances, or a repo business that offers investigative services to locate buyers.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as repo for car dealers.
This could jumpstart your word-of-mouth marketing and attract clients right away.
In addition to repossession services, you could offer investigation services. Since you’ll have a tow truck, you could also offer tow truck services when you don’t have repo work. You’d be a combination repo/tow truck business, which would bring in more revenue.
To learn more about tow truck services, read this Step By Step article on how to start a towing business.
The average price for a repo is $200 plus $25 an hour for investigative services. When you’re working by yourself, your ongoing costs will be limited to your tow truck payment, fuel, and insurance. You should aim for a profit margin of 80%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Your target market will be banks, lenders, and retailers that do their own financing. You can find them on LinkedIn, but your best bet is to call them directly. You can find them on Google or Yelp.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in our area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to repossession businesses.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your repo business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best option, other than friends and family, for funding a repo business.
Starting a repo business requires obtaining a number of licenses and permits from local, state, and federal governments.
In some states, you’ll just need a commercial driver’s license (CDL), and in others, you’ll need a repossession license. To get a repo license, states will require a certain number of educational hours, and some require repo experience. Check with your state for specific requirements. You’ll also need to check local repossession business laws.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your repo business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Smart Repo, Tracers, or Repo Systems to manage your contracts, invoicing, and payments.
Some of your business will come from the casual online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your repo business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your repo business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a repo business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in repo for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in repossession. You’ll probably generate new customers or find companies with which you could establish a partnership.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a repo business include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
If you want a business that might offer a little excitement, a repo business may be just the ticket. Auto repossession and other large item repossession is a large industry, worth $2 billion and counting. You can make a good living, have some flexibility, and run your business from home for a small investment. You’ll have to jump through a few licensing hoops and get a tow truck, but it will pay off in the end.
Now that you understand the business, you’re ready to get on the road to launching your new repo company!
You can start a repo business for less than $5,000. Your largest expense will be a down payment on a tow truck. You’ll also need to get any licensing required by your state.
Yes, a repo business can be profitable. You can earn a lot and your ongoing expenses are low. If you prove yourself to be reliable, you’ll get repeat business from the banks and lenders you work with.
State requirements vary. You may just need a CDL license, or your state may require a repossession license. You may also need various business licenses and permits at the state and local levels. Check with your local governments for requirements or visit MyCorporation’s Business License Compliance page.
The average fee to repo a car is $200. You can also charge about $25 an hour if you have to spend time tracking down the car. If you have to travel, you can also command a higher fee.
Published on August 16, 2023
Find aDomain Search Powered byGoDaddy.com ...
Read Now
Published on March 16, 2023
Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, ...
Read Now
Published on March 10, 2023
When to Use Paychex Flex When to Use QuickBooks Payroll ...
Read Now
No thanks, I don't want to stay up to date on industry trends and news.
Comments