OKLAHOMA CITY -

A problem the executive director of Time Finance Adjusters believes many hard-working, reputable repossession agencies are facing nowadays is becoming more evident as the economy slowly struggles to right itself.

During a gathering of veteran agents, Ron Brown shared that he “was very surprised that many guys did not know what they’re daily expenses were or what the individual expense to repossess a vehicle was.”

To further explain this point, Brown recounted the downfall of an agency that had been in business for many years. A forwarding company approached this agency and said the operation would receive just $275 per assignment, but the stream of repo jobs would be significant.

“Well if you’re working for $275 and it’s costing you $300 to do it, high volume just means you’re going to go out of business faster,” Brown conceded. “That’s exactly what happened to him.”

With repo volume off from its peak that came in 2008 and 2009 when the recession gripped the U.S. tightly, Brown thinks surviving agencies are functioning leaner, especially operations that keep close tabs on their daily accounting tables.

“The biggest thing I see is the operators are not business people,” Brown surmised. “They’re good repossessors. They’re well trained. They know how to track people down. They know how to recover vehicles. But they’re not businesspeople. They don’t know what it costs to repossess a vehicle.”

To rectify that problem, Brown suggested agencies use what he thinks is a simple formula.

“You take your last 90 days expenses and you take the number of vehicles and assignments you close and you divide the number of assignments into the expenses and there’s your cost per vehicle,” he explained.

“Then you can take your income and do the same thing,” Brown added. “If the income is not greater than the cost, you’ve got a problem.”

With repo agencies operating on slim margins, Brown insisted that operations must become more cognizant of their balance sheet, not just the latest regulations and procedures.

“That is the No. 1 problem I see within the industry right now. So many of these people don’t understand basic business 101,” Brown stressed.

“The industry has got to become more business oriented and understand economics,” he continued. “At one time, everyone operated out of their pocket. Now it’s different. You better know how much it costs, how much overhead is.

“If you’re going to survive in this business today, you’re going to have to become not only a professional recovery person, but you’ve also got to become a professional businessperson,” Brown concluded.

Editor’s Note: This is the first in a series of articles featuring Ron Brown, the executive director of Time Finance Adjusters. Watch for future installments in coming editions of Repo & Recovery.