Do you want to start credit repair business?
Do you want to start your own credit repair business? Well, there are many benefits of starting a credit repair business, the biggest one of which is the extremely low initial investment required for its startup. Secondly, you can also start it from a small office or even a virtual location and can increase your setup with time.
Credit repair companies improve the credit ratings of clients by identifying errors in their credit report and disputing inaccurate information with the appropriate organizations. Considering the present-day situation of inflation, credit repair services are needed more than ever by individuals as well as small businesses.
The only problem associated with this business is the difficulty you will face in finding high-paying clients so it is highly recommended that you prepare a comprehensive business plan for your startup. The business plan will not only help you attract good clients, it will also establish the basis of your company’s future operations and decisions. If you are wondering how to write one, here we are providing you the business plan for a credit repair business startup named ‘CrediReps’.
Executive Summary
2.1 The Business
CrediReps will be a licensed and registered credit repair company aimed at solving all your credit-related problems. The company will be owned by Frit John, an experienced credit consultant, and its main office will be located in Downtown Manhattan.
2.2 Management
The success of a startup heavily depends on its staff and management that’s why John planned it before starting a credit repair business. The company’s management will comprise of sales executives, credit analysts, and business consultants.
2.3 Customers
We will provide credit repair consulting services to individuals, household, smaller organizations and also to the established organizations located in Manhattan.
2.4 Business Target
Our target is to balance the initial cost of the startup with earned profits and to achieve the net profit margin of $10k per month by the end of the first year.
Company Summary
3.1 Company Owner
CrediReps will be owned by Frit John, a business graduate from the University of Illinois. John has more than ten years’ experience of working with various credit firms including FICO and Equifax.
3.2 Why the Business is being started
The business is being started with the purpose of making profits in this industry while also providing quality services to the clients.
3.3 How the Business will be started
In case you are thinking, how do I start a credit repair business, know that you can successfully start it only after proper planning. For his startup, John planned everything beforehand. The company will be started in a leased office. In addition to computer systems and usual office inventory, credit repair software (TrackStar) will also be procured.
The startup summary is as follows:
The detailed startup requirements are given below:
| Start-up Expenses | |
| Legal | $55,300 |
| Consultants | $0 |
| Insurance | $32,750 |
| Rent | $32,500 |
| Research and Development | $32,750 |
| Expensed Equipment | $32,750 |
| Signs | $1,250 |
| TOTAL START-UP EXPENSES | $187,300 |
| Start-up Assets | $0 |
| Cash Required | $332,500 |
| Start-up Inventory | $32,625 |
| Other Current Assets | $232,500 |
| Long-term Assets | $235,000 |
| TOTAL ASSETS | $121,875 |
| Total Requirements | $245,000 |
| START-UP FUNDING | $0 |
| START-UP FUNDING | $273,125 |
| Start-up Expenses to Fund | $11,875 |
| Start-up Assets to Fund | $15,000 |
| TOTAL FUNDING REQUIRED | $0 |
| Assets | $23,125 |
| Non-cash Assets from Start-up | $18,750 |
| Cash Requirements from Start-up | $0 |
| Additional Cash Raised | $18,750 |
| Cash Balance on Starting Date | $21,875 |
| TOTAL ASSETS | $0 |
| Liabilities and Capital | $0 |
| Liabilities | $0 |
| Current Borrowing | $0 |
| Long-term Liabilities | $0 |
| Accounts Payable (Outstanding Bills) | $0 |
| Other Current Liabilities (interest-free) | $0 |
| TOTAL LIABILITIES | $0 |
| Capital | $0 |
| Planned Investment | $0 |
| Investor 1 | $332,500 |
| Investor 2 | $0 |
| Other | $0 |
| Additional Investment Requirement | $0 |
| TOTAL PLANNED INVESTMENT | $695,000 |
| Loss at Start-up (Start-up Expenses) | $313,125 |
| TOTAL CAPITAL | $251,875 |
| TOTAL CAPITAL AND LIABILITIES | $251,875 |
| Total Funding | $255,000 |
Services for customers
Before starting credit repair business, make sure to pay special attention to what services will you offer to your clients because the planning of all subsequent stages depends on your services. CrediReps will improve the credit ratings of clients by identifying errors in their credit report and disputing inaccurate information with the appropriate organizations. Our main services include:
- Credit repair services
- Dispute processing services
- Credit reestablishment services
- Settlement assistance services
- Cease and desist collections processing services
- Other financial advisory services
Marketing Analysis of credit repair business
If you don’t know how to start a credit repair business, you can do your own research and can even take help from this credit repair business plan template or similar business plans available online. The most important component of an effective bank credit business plan is its accurate marketing analysis that’s why it is advisable to seek the help of marketing experts. If you are starting this venture on small scale, you can take help from this credit repair business plan sample and carry out a marketing analysis yourself. Marketing analysis is extremely important because it gives you an idea of your position in the market. Therefore, it must be duly considered before thinking about how to start credit repair business.
5.1 Market Trends
Rising unemployment rates and declining disposable income has led to increased debt problems for individuals which in turn has affected their reliance on credit repair services. Credit repair service help them in the management of their debts, identification of errors in their credit reports and also in disputing their inaccurate credit information with credit agencies. Considering the importance of the work they do for the consumers, the number of business providing credit repair services is on the rise, especially in the developed countries. There are more than 123,000 registered credit repair companies in the United States which are responsible for employing more than 135,000 people and for generating more than $6 billion in revenue every year.
5.2 Marketing Segmentation
It is very important to analyze the market segmentation of the future customers of your services before developing a credit repair company business plan because a successful and efficient marketing strategy can only be developed after we completely know our potential customers. Our target market is the residential community as well as the corporate sector located in Manhattan. Our experts have identified the following type of target audience which can become our future consumers:
The detailed marketing segmentation of our target audience is as follows:
5.2.1 Corporate Sector:
The biggest consumer of our services will be the corporate sector located in the Downtown Manhattan ranging from small startups to established companies. This group includes product manufacturers and distributors, real estate owners, hotels, restaurants and food companies, IT and software development firms, branding and advertising agencies. These businesses will frequently need our services to address any issue that arise in their credit report otherwise they will face many problems like getting higher interest rates by creditors, lenders and insurance companies.
5.2.2 Institutions & Organizations:
Our second target group comprises of various institutions and organizations located in Manhattan. These organizations also need to have an up-to-date and correct credit report so as to enjoy various credit services.
5.2.3 Individuals:
Our third target group consists of individuals including both the employed and unemployed ones. They also need to have good credit status otherwise they will face a lot of difficulties in getting mortgages, loans and even insurance. The unemployed individuals will even face problems in securing a job or starting a business if they have bad credit status. That’s why they will need our services to repair their credit report as soon as a problem arises in it.
The detailed market analysis of our potential customers is given in the following table:
| Market Analysis | |||||||||
| Potential Customers | Growth | YEAR 1 | YEAR 2 | YEAR 3 | YEAR 4 | YEAR 5 | CAGR | ||
| Corporate Sector | 48% | 22,334 | 32,344 | 43,665 | 52,544 | 66,432 | 10.00% | ||
| Institutions & Organizations | 18% | 11,433 | 13,344 | 16,553 | 18,745 | 20,545 | 13.43% | ||
| Individuals | 34% | 18,322 | 19,455 | 20,655 | 22,867 | 24,433 | 15.32% | ||
| Total | 100% | 52,089 | 65,143 | 80,873 | 94,156 | 111,410 | 9.54% | ||
5.3 Business Target
- To achieve the net profit margin of $10k/month by first year, $15k by second year, and $25k by third year
- To balance the initial cost of the startup with earned profits by the end of the first year
5.4 Product Pricing
Product pricing is one of the most important factors in deciding the strategy for any business. After considering the market demands, we have priced all our products in the similar ranges as of our competitors.
Strategy
Like marketing analysis, sales strategy is also an important component of an effective business plan so it must be given proper attention before you think about how to start your own credit repair business.
6.1 Competitive Analysis
As mentioned earlier, there are more than 123,000 registered credit repair companies in the United States, so we can say that we have a tough competition ahead. In addition to that, several other financial consulting related service providers also provide credit repair services to their customers, thus making this field even more competitive. Although we have a lot of competitors, we hope to surpass all of them by providing quality services and unparalleled customer experience.
6.2 Sales Strategy
- We will ensure at least a 10% increase in traffic each month on our official website and will ensure at least a 50% conversion rate
- We will carry out a large-scale advertising campaign on social media.
- We will offer a 20% discount on our services for the first three months of our launch.
6.3 Sales Monthly
6.4 Sales Yearly
6.5 Sales Forecast
| Sales Forecast | |||
| Unit Sales | Year 1 | Year 2 | Year 3 |
| Credit repair services | 187,330 | 260,320 | 258,240 |
| Dispute processing services | 802,370 | 815,430 | 823,540 |
| Credit reestablishment services | 539,320 | 770230 | 1,002,310 |
| Settlement assistance services | 265,450 | 322,390 | 393,320 |
| Cease and desist collections processing services | 1,435,320 | 1,250,430 | 1,762,450 |
| TOTAL UNIT SALES | 3,229,790 | 3,418,800 | 4,239,860 |
| Unit Prices | Year 1 | Year 2 | Year 3 |
| Credit repair services | $140.00 | $150.00 | $160.00 |
| Dispute processing services | $600.00 | $800.00 | $1,000.00 |
| Credit reestablishment services | $700.00 | $800.00 | $900.00 |
| Settlement assistance services | $650.00 | $750.00 | $850.00 |
| Cease and desist collections processing services | $140.00 | $120.00 | $100.00 |
| Sales | |||
| Credit repair services | $214,800 | $274,000 | $333,200 |
| Dispute processing services | $120,050 | $194,500 | $268,500 |
| Credit reestablishment services | $50,110 | $71,600 | $93,000 |
| Settlement assistance services | $139,350 | $194,600 | $249,850 |
| Cease and desist collections processing services | $62,350 | $72,300 | $82,250 |
| TOTAL SALES | |||
| Direct Unit Costs | Year 1 | Year 2 | Year 3 |
| Credit repair services | $0.70 | $0.80 | $0.90 |
| Dispute processing services | $0.40 | $0.45 | $0.50 |
| Credit reestablishment services | $0.30 | $0.35 | $0.40 |
| Settlement assistance services | $3.00 | $3.50 | $4.00 |
| Cease and desist collections processing services | $0.70 | $0.75 | $0.80 |
| Direct Cost of Sales | |||
| Credit repair services | $98,300 | $183,000 | $267,700 |
| Dispute processing services | $66,600 | $119,900 | $173,200 |
| Credit reestablishment services | $17,900 | $35,000 | $52,100 |
| Settlement assistance services | $19,400 | $67,600 | $115,800 |
| Cease and desist collections processing services | $27,700 | $69,200 | $110,700 |
| Subtotal Direct Cost of Sales | $294,100 | $699,400 | $1,104,700 |
Personnel plan
Personnel plan gives an estimate about the staff you require along with their salaries so make sure to develop it before you start up credit repair business. John has developed the following personnel plan for his company.
7.1 Company Staff
John will act as the General Manager of the company and will initially hire following people:
- 1 Accountant to maintain financial and other records
- 2 Sales Executives responsible to market and discover new ventures
- 4 Credit Analysts to analyze the credit reports of clients
- 2 Credit Consultant to provide consultation
- 2 Customer Representatives to interact with customers
- 1 Front Desk Officer to act as a receptionist
7.2 Average Salary of Employees
| Personnel Plan | |||
| Year 1 | Year 2 | Year 3 | |
| Accountant | $85,000 | $95,000 | $105,000 |
| Sales Executives | $85,000 | $92,000 | $109,000 |
| Credit Analysts | $166,000 | $173,000 | $180,000 |
| Credit Consultants | $95,000 | $105,000 | $115,000 |
| Customer Representatives | $63,300 | $70,000 | $76,700 |
| Front Desk Officer | $20,000 | $23,300 | $30,000 |
| Total Salaries | $429,300 | $463,300 | $510,700 |
Financial Plan
8.1 Important Assumptions
| General Assumptions | |||
| Year 1 | Year 2 | Year 3 | |
| Plan Month | 1 | 2 | 3 |
| Current Interest Rate | 10.00% | 11.00% | 12.00% |
| Long-term Interest Rate | 10.00% | 10.00% | 10.00% |
| Tax Rate | 26.42% | 27.76% | 28.12% |
| Other | 0 | 0 | 0 |
8.2 Brake-even Analysis
| Brake-Even Analysis | |
| Monthly Units Break-even | 5530 |
| Monthly Revenue Break-even | $159,740 |
| Assumptions: | |
| Average Per-Unit Revenue | $260.87 |
| Average Per-Unit Variable Cost | $0.89 |
| Estimated Monthly Fixed Cost | $196,410 |
8.3 Projected Profit and Loss
| Pro Forma Profit And Loss | |||
| Year 1 | Year 2 | Year 3 | |
| Sales | $309,069 | $385,934 | $462,799 |
| Direct Cost of Sales | $15,100 | $19,153 | $23,206 |
| Other | $0 | $0 | $0 |
| TOTAL COST OF SALES | $15,100 | $19,153 | $23,206 |
| Gross Margin | $293,969 | $366,781 | $439,593 |
| Gross Margin % | 94.98% | 94.72% | 94.46% |
| Expenses | |||
| Payroll | $138,036 | $162,898 | $187,760 |
| Sales and Marketing and Other Expenses | $1,850 | $2,000 | $2,150 |
| Depreciation | $2,070 | $2,070 | $2,070 |
| Leased Equipment | $0 | $0 | $0 |
| Utilities | $4,000 | $4,250 | $4,500 |
| Insurance | $1,800 | $1,800 | $1,800 |
| Rent | $6,500 | $7,000 | $7,500 |
| Payroll Taxes | $34,510 | $40,726 | $46,942 |
| Other | $0 | $0 | $0 |
| Total Operating Expenses | $188,766 | $220,744 | $252,722 |
| Profit Before Interest and Taxes | $105,205 | $146,040 | $186,875 |
| EBITDA | $107,275 | $148,110 | $188,945 |
| Interest Expense | $0 | $0 | $0 |
| Taxes Incurred | $26,838 | $37,315 | $47,792 |
| Net Profit | $78,367 | $108,725 | $139,083 |
| Net Profit/Sales | 30.00% | 39.32% | 48.64% |
8.3.1 Profit Monthly
8.3.2 Profit Yearly
8.3.3 Gross Margin Monthly
8.3.4 Gross Margin Yearly
8.4 Projected Cash Flow
| Pro Forma Cash Flow | |||
| Cash Received | Year 1 | Year 2 | Year 3 |
| Cash from Operations | |||
| Cash Sales | $40,124 | $45,046 | $50,068 |
| Cash from Receivables | $7,023 | $8,610 | $9,297 |
| SUBTOTAL CASH FROM OPERATIONS | $47,143 | $53,651 | $59,359 |
| Additional Cash Received | |||
| Sales Tax, VAT, HST/GST Received | $0 | $0 | $0 |
| New Current Borrowing | $0 | $0 | $0 |
| New Other Liabilities (interest-free) | $0 | $0 | $0 |
| New Long-term Liabilities | $0 | $0 | $0 |
| Sales of Other Current Assets | $0 | $0 | $0 |
| Sales of Long-term Assets | $0 | $0 | $0 |
| New Investment Received | $0 | $0 | $0 |
| SUBTOTAL CASH RECEIVED | $47,143 | $53,651 | $55,359 |
| Expenditures | Year 1 | Year 2 | Year 3 |
| Expenditures from Operations | |||
| Cash Spending | $21,647 | $24,204 | $26,951 |
| Bill Payments | $13,539 | $15,385 | $170,631 |
| SUBTOTAL SPENT ON OPERATIONS | $35,296 | $39,549 | $43,582 |
| Additional Cash Spent | |||
| Sales Tax, VAT, HST/GST Paid Out | $0 | $0 | $0 |
| Principal Repayment of Current Borrowing | $0 | $0 | $0 |
| Other Liabilities Principal Repayment | $0 | $0 | $0 |
| Long-term Liabilities Principal Repayment | $0 | $0 | $0 |
| Purchase Other Current Assets | $0 | $0 | $0 |
| Purchase Long-term Assets | $0 | $0 | $0 |
| Dividends | $0 | $0 | $0 |
| SUBTOTAL CASH SPENT | $35,296 | $35,489 | $43,882 |
| Net Cash Flow | $11,551 | $13,167 | $15,683 |
| Cash Balance | $21,823 | $22,381 | $28,239 |
8.5 Projected Balance Sheet
| Pro Forma Balance Sheet | |||
| Assets | Year 1 | Year 2 | Year 3 |
| Current Assets | |||
| Cash | $184,666 | $218,525 | $252,384 |
| Accounts Receivable | $12,613 | $14,493 | $16,373 |
| Inventory | $2,980 | $3,450 | $3,920 |
| Other Current Assets | $1,000 | $1,000 | $1,000 |
| TOTAL CURRENT ASSETS | $201,259 | $237,468 | $273,677 |
| Long-term Assets | |||
| Long-term Assets | $10,000 | $10,000 | $10,000 |
| Accumulated Depreciation | $12,420 | $14,490 | $16,560 |
| TOTAL LONG-TERM ASSETS | $980 | $610 | $240 |
| TOTAL ASSETS | $198,839 | $232,978 | $267,117 |
| Liabilities and Capital | Year 1 | Year 2 | Year 3 |
| Current Liabilities | |||
| Accounts Payable | $9,482 | $10,792 | $12,102 |
| Current Borrowing | $0 | $0 | $0 |
| Other Current Liabilities | $0 | $0 | $0 |
| SUBTOTAL CURRENT LIABILITIES | $9,482 | $10,792 | $12,102 |
| Long-term Liabilities | $0 | $0 | $0 |
| TOTAL LIABILITIES | $9,482 | $10,792 | $12,102 |
| Paid-in Capital | $30,000 | $30,000 | $30,000 |
| Retained Earnings | $48,651 | $72,636 | $96,621 |
| Earnings | $100,709 | $119,555 | $138,401 |
| TOTAL CAPITAL | $189,360 | $222,190 | $255,020 |
| TOTAL LIABILITIES AND CAPITAL | $198,839 | $232,978 | $267,117 |
| Net Worth | $182,060 | $226,240 | $270,420 |
8.6 Business Ratios
| Ratio Analysis | ||||
| Year 1 | Year 2 | Year 3 | Industry Profile | |
| Sales Growth | 4.35% | 30.82% | 63.29% | 4.00% |
| Percent of Total Assets | ||||
| Accounts Receivable | 5.61% | 4.71% | 3.81% | 9.70% |
| Inventory | 1.85% | 1.82% | 1.79% | 9.80% |
| Other Current Assets | 1.75% | 2.02% | 2.29% | 27.40% |
| Total Current Assets | 138.53% | 150.99% | 163.45% | 54.60% |
| Long-term Assets | -9.47% | -21.01% | -32.55% | 58.40% |
| TOTAL ASSETS | 100.00% | 100.00% | 100.00% | 100.00% |
| Current Liabilities | 4.68% | 3.04% | 2.76% | 27.30% |
| Long-term Liabilities | 0.00% | 0.00% | 0.00% | 25.80% |
| Total Liabilities | 4.68% | 3.04% | 2.76% | 54.10% |
| NET WORTH | 99.32% | 101.04% | 102.76% | 44.90% |
| Percent of Sales | ||||
| Sales | 100.00% | 100.00% | 100.00% | 100.00% |
| Gross Margin | 94.18% | 93.85% | 93.52% | 0.00% |
| Selling, General & Administrative Expenses | 74.29% | 71.83% | 69.37% | 65.20% |
| Advertising Expenses | 2.06% | 1.11% | 0.28% | 1.40% |
| Profit Before Interest and Taxes | 26.47% | 29.30% | 32.13% | 2.86% |
| Main Ratios | ||||
| Current | 25.86 | 29.39 | 32.92 | 1.63 |
| Quick | 25.4 | 28.88 | 32.36 | 0.84 |
| Total Debt to Total Assets | 2.68% | 1.04% | 0.76% | 67.10% |
| Pre-tax Return on Net Worth | 66.83% | 71.26% | 75.69% | 4.40% |
| Pre-tax Return on Assets | 64.88% | 69.75% | 74.62% | 9.00% |
| Additional Ratios | Year 1 | Year 2 | Year 3 | |
| Net Profit Margin | 19.20% | 21.16% | 23.12% | N.A. |
| Return on Equity | 47.79% | 50.53% | 53.27% | N.A. |
| Activity Ratios | ||||
| Accounts Receivable Turnover | 4.56 | 4.56 | 4.56 | N.A. |
| Collection Days | 92 | 99 | 106 | N.A. |
| Inventory Turnover | 19.7 | 22.55 | 25.4 | N.A. |
| Accounts Payable Turnover | 14.17 | 14.67 | 15.17 | N.A. |
| Payment Days | 27 | 27 | 27 | N.A. |
| Total Asset Turnover | 1.84 | 1.55 | 1.26 | N.A. |
| Debt Ratios | ||||
| Debt to Net Worth | 0 | -0.02 | -0.04 | N.A. |
| Current Liab. to Liab. | 1 | 1 | 1 | N.A. |
| Liquidity Ratios | ||||
| Net Working Capital | $120,943 | $140,664 | $160,385 | N.A. |
| Interest Coverage | 0 | 0 | 0 | N.A. |
| Additional Ratios | ||||
| Assets to Sales | 0.45 | 0.48 | 0.51 | N.A. |
| Current Debt/Total Assets | 4% | 3% | 2% | N.A. |
| Acid Test | 23.66 | 27.01 | 30.36 | N.A. |
| Sales/Net Worth | 1.68 | 1.29 | 0.9 | N.A. |
| Dividend Payout | 0 | 0 | 0 | N.A. |
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