I just ran across a story about a 13 year old debt settlement business for sale in TX. I wonder if it is possibly connected to the new FTC law going into effect on October 27 of this year that is going to prevent these guys from charging all of their fees upfront?
Funny the for sale ad doesn’t mention anything about that. I really hope some uninformed young entrepreneur does his homework on this industry before buying a business that from the ad, does not look viable at all given the current climate. Here are some excerpts from the ad:
The Sale price is only $69,000
The ad claims Revenues of $87,000
and cash flow of $42,000
13 year old Dallas Texas based company for sale specializing in consumer and business debt settlement. We operate nationwide with the exception of a few states. Our sales team works to help clients live a debt free life by eliminating unsecured debt to pennies on the dollar by professional negotiations with their creditors. We accept clients with $10,000 or more in credit card or total unsecured debt. The national average consumer debt amount equals $30,000. We charge fees of 14.9% of the debt enrolled. This creates residual income over a period of 12 to 15 months. Leads are driven through debt specific lead vendors, online search engine optimization efforts, and referrals from affiliate relationships with mortgage, loan modification and credit repair companies. The market is filled with businesses, families and individuals whom are experiencing financial trouble and in need of these services. The company has no debt. Cash flow information will be available to serious inquiries.
Wait, back this truck up just a second. Lets look at this business model. They charge 14.9% of a clients total debt and this provides residual income over 12 to 15 months. Ok, so this business model will be illegal on October 27th of this year. So for $69,000 some lucky entrepreneur can be the proud owner of a business that is not in compliance with federal law, and get nothing but angry clients that have already paid their fees and are now looking for the promised services.
Well, maybe it gets better for the poor entrepreneur, lets look at the ad again:
Expansion Potential: Tremendous upside potential during the present difficult economic conditions and stable growth during normal economic expansion periods. With more advertising revenue committed toward sales, revenues can be dramatically increased to over one million dollars per year.
Reasons for Selling: Owners have other business interests.
Tremendous upside potential up to a million dollars a year? Do these guys have no shame? I don’t see any mention of the regulatory changes that will seriously impact this business model in the next two months. These guys seem to see the writing on the wall, and are hoping to lighten the wallet of some young entrepreneur before their business is worth less than nothing.
The owners have other business interests? Ya could it possibly be because their current ponzi scheme of a debt settlement program is about to tank when new regulations don’t allow them to collect this “residual income over 12 to 15 months?” Naw, I bet that doesn’t have anything to do with it.
If you are considering the purchase of a debt settlement program in this current environment, I just have one question for you. Do you feel lucky?
There is a reason these guys will be trying to unload them.