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 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.

Credit Repair Business Plan - 3 Years Profit Forecast

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:

Credit Repair Business Plan - Startup cost

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 credit repair 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:

Credit Repair Business Plan - Market Segmentation

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 CustomersGrowthYEAR 1YEAR 2YEAR 3YEAR 4YEAR 5CAGR
Corporate Sector48%22,33432,34443,66552,54466,43210.00%
Institutions & Organizations18%11,43313,34416,55318,74520,54513.43%
Individuals34%18,32219,45520,65522,86724,43315.32%
Total100%52,08965,14380,87394,156111,4109.54%

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

Credit Repair Business Plan - Sales Monthly

6.4 Sales Yearly

Credit Repair Business Plan - Sales Yearly

6.5 Sales Forecast

Credit Repair Business Plan - Unit Sales

Sales Forecast   
Unit SalesYear 1Year 2Year 3
Credit repair services187,330260,320258,240
Dispute processing services802,370815,430823,540
Credit reestablishment services539,3207702301,002,310
Settlement assistance services265,450322,390393,320
Cease and desist collections processing services1,435,3201,250,4301,762,450
TOTAL UNIT SALES3,229,7903,418,8004,239,860
Unit PricesYear 1Year 2Year 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 CostsYear 1Year 2Year 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 1Year 2Year 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 1Year 2Year 3
Plan Month123
Current Interest Rate10.00%11.00%12.00%
Long-term Interest Rate10.00%10.00%10.00%
Tax Rate26.42%27.76%28.12%
Other000

8.2 Brake-even Analysis

Credit Repair Business Plan - Brake-even Analysis

 Brake-Even Analysis 
Monthly Units Break-even5530
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 1Year 2Year 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/Sales30.00%39.32%48.64%

8.3.1 Profit Monthly

Credit Repair Business Plan - PROFIT MONTHLY

8.3.2 Profit Yearly

Credit Repair Business Plan - PROFIT YEARLY

8.3.3 Gross Margin Monthly

Credit Repair Business Plan - GROSS MARGIN MONTHLY

8.3.4 Gross Margin Yearly

Credit Repair Business Plan - GROSS MARGIN YEARLY

8.4 Projected Cash Flow

Credit Repair Business Plan - Projected Cash Flow Diagram

 Pro Forma Cash Flow   
Cash ReceivedYear 1Year 2Year 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
ExpendituresYear 1Year 2Year 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   
AssetsYear 1Year 2Year 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 CapitalYear 1Year 2Year 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 1Year 2Year 3Industry Profile
Sales Growth4.35%30.82%63.29%4.00%
Percent of Total Assets
Accounts Receivable5.61%4.71%3.81%9.70%
Inventory1.85%1.82%1.79%9.80%
Other Current Assets1.75%2.02%2.29%27.40%
Total Current Assets138.53%150.99%163.45%54.60%
Long-term Assets-9.47%-21.01%-32.55%58.40%
TOTAL ASSETS100.00%100.00%100.00%100.00%
Current Liabilities4.68%3.04%2.76%27.30%
Long-term Liabilities0.00%0.00%0.00%25.80%
Total Liabilities4.68%3.04%2.76%54.10%
NET WORTH99.32%101.04%102.76%44.90%
Percent of Sales
Sales100.00%100.00%100.00%100.00%
Gross Margin94.18%93.85%93.52%0.00%
Selling, General & Administrative Expenses74.29%71.83%69.37%65.20%
Advertising Expenses2.06%1.11%0.28%1.40%
Profit Before Interest and Taxes26.47%29.30%32.13%2.86%
Main Ratios
Current25.8629.3932.921.63
Quick25.428.8832.360.84
Total Debt to Total Assets2.68%1.04%0.76%67.10%
Pre-tax Return on Net Worth66.83%71.26%75.69%4.40%
Pre-tax Return on Assets64.88%69.75%74.62%9.00%
Additional RatiosYear 1Year 2Year 3
Net Profit Margin19.20%21.16%23.12%N.A.
Return on Equity47.79%50.53%53.27%N.A.
Activity Ratios
Accounts Receivable Turnover4.564.564.56N.A.
Collection Days9299106N.A.
Inventory Turnover19.722.5525.4N.A.
Accounts Payable Turnover14.1714.6715.17N.A.
Payment Days272727N.A.
Total Asset Turnover1.841.551.26N.A.
Debt Ratios
Debt to Net Worth0-0.02-0.04N.A.
Current Liab. to Liab.111N.A.
Liquidity Ratios
Net Working Capital$120,943$140,664$160,385N.A.
Interest Coverage000N.A.
Additional Ratios
Assets to Sales0.450.480.51N.A.
Current Debt/Total Assets4%3%2%N.A.
Acid Test23.6627.0130.36N.A.
Sales/Net Worth1.681.290.9N.A.
Dividend Payout000N.A.