Table of Content

    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.

    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 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:

    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 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

    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 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

    Credit Repair Business Plan - 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

    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 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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