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Vital Factors
A multimillion-dollar company that excels in commercial debt collections is primed for even more growth as the economy's slump lingers.
Is it possible for an international company with $25 billion in client assets, 19 worldwide offices and customers as well known as Disney, Microsoft and FedEx to stay nearly invisible?
In the case of Vengroff, Williams & Associates, a Sarasota-based commercial debt collections and business and management consulting firm, it appears that it is. "We are kind of like the Intel chip - the internal drive behind the computer," chief executive Mark Vengroff says of the company's lay-low philosophy.
And like Intel, the company, considered one of the largest commercial debt collection firms in the world, has been hugely successful. While Vengroff declines to disclose actual annual revenues, the sheer size of its debt collections department is telling: In 2007, for instance, the company held nearly 119,000 collection accounts worth more than $1 billion in unpaid bills. Of those debts, the firm had collected more than $200 million in previously unseen money - an industry-leading success rate of almost 20%.
What's more, Vengroff expects the rest of 2008 and most of 2009 to be just as stellar in terms of adding new accounts, as the slumping economy means more debts are likely to go unpaid. "Tough economies always result in increased bad debt or the need to cure slow paying customers," Vengroff says in a recent company statement touting the company's increase in landing third-party collection work.
Indeed, business has been so good that Vengroff says from 2006 to 2007 revenues grew 34% in North America and 63% in its overseas division. And prior to last year, revenues were growing annually at about a 20% rate. The company has about 1,100 employees, including 400 who work out of its Sarasota headquarters.
Clients - more than 3,000 businesses in nine countries - include some of the most recognizable names of the Fortune 1,000. And the company, with a presence in countries from England to Spain to the Netherlands, hopes to further expand globally later this year by opening a new office in South America. It already has offices in Asia and the Middle East.
The business operates on such a global mindset that Vengroff actually works out of the company's Garden Grove, Calif. offices. Vengroff's father, Sarasota real estate entrepreneur Harvey Vengroff, co-founded the company in 1963 and the younger Vengroff, 43, started working with the company in the mid-1980s, initially serving as a collection specialist. More recently, Mark Vengroff has guided the company for the past three years, during which Collection Advisor magazine named him one of the 50 most influential executives in the industry.
'In-country outsourcing'
Vengroff attributes much of the company's recent success to figuring out a surprising twist on an old trend: bringing outsourced jobs back to the U.S., or as the company calls it, "on-shoring". Says Vengroff: "We are going against the grain of the industry."
Vengroff says the company figured out several years ago that the hassles and high costs embedded in sending phone-heavy jobs such as debt collection, data entry and customer service overseas usually outweighs any potential benefits the outsourcing might offer. What's more, outsourcing jobs overseas tends to bring a wave of negative publicity.
Instead, VWA has set up several domestic outsourcing programs for its clients, which has proven to be both profitable and industry-changing, as some of the company's competitors have followed the move. "We've been able to bring an in-country outsourcing model back," Vengroff says.
A key to the on-shoring system is to build clusters of jobs in non-metro areas that normally have a lower-cost of living and as such require less labor costs. One major exception to that rule, however, is the company's Sarasota headquarters, where a cubicle farm of workers toil away on accounts from midsize regional companies to national giants, including Ford Motor Co., Kodak and Yamaha. The Sarasota-Bradenton area, of course, is no hotspot of low-cost living.
Still, the domestic outsourcing innovation follows a pattern at VWA going back to 1963 when Harvey Vengroff founded the company. Back then, the elder Vengroff ran a small storefront janitorial services company on Long Island, N.Y. The entire office totaled 300 square feet.
A client ran up a $35,000 debt of unpaid bills though, and the cumbersome process of tracking down that money led Vengroff to pursue a new venture in business debt collections. In those early days, more than a decade before the 1977 federal Fair Debt Collection Practices Act was passed, the industry was so unrefined that Vengroff brought along his Great Dane on collection calls, just to get a point across.
Harvey Vengroff, who maintains an ownership stake in the company, now invests in startup businesses in addition to owning dozens of rental homes and apartment complexes in Greater Sarasota. The elder Vengroff and his business partner, Bob Williams, now chairman of VWA's board, were the Review's Entrepreneurs of the Year in 2002 for founding, and growing, the company.
Payment predictability
But while debt collections is a big and still growing part of the business, Mark Vengroff is cognizant of not letting the company drift off into becoming a "dialing-for-dollars" outfit. Instead, Vengroff says the company's strength lies in continually innovating to find the next big trend before its competitors do.
Two of those soon-to-be trends, Vengroff says, are transaction pricing and using high-end software to fine-tune its payment predictability models. On transaction pricing, the company has essentially set up an a la carte menu for mid-sized businesses to pick and chose which type of services to use. "We are the only ones doing this now," says Vengroff.
And on the payment predictability models, the company is using new software to track the payment histories and other data belonging to its client's customers. The idea is that more information early in the payment process could limit problems later in the process.
Vengroff's biggest challenge since he ascended to the top of the company a few years ago has been to lasso all of the company's innovations and departments into one cohesive unit. A key step in that direction occurred in 2006, when the company began using a management system known as Vital Factors, which focuses on finding the company's five vital signs that need to be operating simultaneously for the entire company to succeed.
The system is based on "Vital Factors: The Secret to Transforming Your Business and Your Life," a 2006 book written by management consultant Lee Froschheiser. The book, and the concept, takes a laser-like focus approach to several key business concepts, such as leadership, teamwork, company-wide execution and how to manage growth.
While it took almost two years to fully implement the system, Vengroff now sees it paying off almost everyday in how managers, department heads and executives communicate with each other.
Managing it all, however, remains a challenge.
"It was easier when we were smaller because you could touch everything," says Vengroff. "That gets harder as you get larger."
REVIEW SUMMARY
Businesses. Vengroff, Williams & Associates, Sarasota
Industry. Commercial debt collections, management consulting
Key. Company seeks new innovations to continue growing.
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