Company specializes in finding people who haven't paid their credit card bills
As long as Americans have a champagne thirst for the good life but a beer budget to pay for it, there will be debt.
And as long as there is debt, there will be those who fail to pay. That's where companies such as New Horizon Credit Inc. come in.
Founded in 2003 by brothers William and Fred Goodnight, New Horizon specializes in collecting older debt-debt that's been charged off and unpaid for two to five years. Ninety-eight percent of New Horizon's portfolio is chargedoff credit card debt.
When credit card companies have tried unsuccessfully to collect past-due debt from their customers, they sell the accounts to debt brokers. These brokers may continue to try to collect on the accounts before selling the portfolio again. This can happen several times.
Each time the portfolio is sold to a collection agency, the cost of purchasing the debt goes down. New Horizon may pay as little as 1/2 cent to 3 cents per dollar of debt. The company's goal is to collect on as much of the debt portfolio as possible to maximize profit after expenses.
So what makes New Horizon Credit so successful at collection? Fred points to one key: It's able to find more debtors than most agencies. "No other collection agency-unless they're the FBI-can find as many people as we do."
New Horizon could be called a family affair; brothers Bill and Fred Goodnight are the principal owners, cousin Pat Goodnight is a minority partner, and even Bill and Fred's parents own a small piece of the business. An unnamed partner owns the remaining 20 percent.
Fred, 31, serves as Horizon's president, and Bill, 29, is vice president.
When Fred graduated from Kansas Wesleyan University in Salina, Kan., in 1997, he moved back to his native Indiana and took a collections job with a local company. He soon found he had a talent for the business, with his income growing into six figures.
After three years, he left to work in collections at another local company. In 2003, he and Bill started New Horizon, financed by Fred.
One problem early on was knowing how to run a business.
"We knew how to collect, but we didn't know this industry or how to run a business," Fred said.
"We made every single mistake we could, but we haven't made it twice," Fred laughed. "Fortunately, I've surrounded myself by people who've made the mistakes that I could make. I call the people I trust who are successful in this type of business and they give me advice on what they would do in different situations."
The barrier to entry into this industry is much lower than for any other collection industry, Fred said. "We're basically a clientless business, and there's no competition. There could be another collection agency right next door, but we're still not in competition because there's so much bad debt out there-literally trillions of dollars of bad debt."
What sets New Horizon apart from other collection agencies is its "unprecedented level of integrity," said Michael Zoldan, president of Akron, Ohio-based Debt Sales Partners, a debt sales broker.
"The collections business is a tough business, but whether you're dealing with debtors, creditors or vendors, they're still human beings," Zoldan said. "Fred treats everyone in a very professional, straightforward way."
New Horizon's revenue has grown from $160,000 in 2003 to nearly $750,000 just in the first quarter of 2005. It services 50,000 accounts with a loan value of $110 million. Because it doesn't have enough in-house staff currently to work these accounts, New Horizon partners with 10 outsourcing agencies.
By mid 2006, Fred plans to increase the work force to 300 employees. That's also when the company will move to new offices at Castleton Office Park, directly across the street from its current location.
Bill, left, and Fred Goodnight are brothers and the principal owners of New Horizon Credit Inc.