I had a discussion with a buddy of mine regarding CSE in Florida. The Dept. of Revenue charges the payee $4-11 fee for the privilege of dispersing a check. Now in my state “Florida Department of Revenue - Child Support Enforcement; Enforces child support law on behalf of about 975000 children, collecting $1.16 billion in FY06”
So let’s break this down:
· 975,000 orders
· Avg. $7.50/check=$7,312,500 per month
· $87,750,000 to put a check in the mail
· Assume 20% admin cost and it’s a nice racket
A part of my business is electronic payments i.e. debit/credit cards. In my industry the debit card has evolved into a payment card with the selling point being that it lowers the admin cost to employers. As I see it there are a couple of opportunities here:
· Privatizing the payment system
· Structured Settlements
The first item is purely a logistics issue and let’s says the vendor charges a lesser fee based on volume. I know that a private corp. can get the job done at 50% the cost now.
The second is the real cherry here: If you don’t know what structured settlements are -This is a settlement where the injured party may receive some of the money owed up front and the remaining is paid in installments, (i.e. annually, semiannually, quarterly).
The avg. child support judgment is roughly $600/month. Multiply this by 15 years ($108,000 over 15 years) The settlement company offers the recipient an $86,400 (80%) cash out. That’s a $21,600 profit for the company. Now if this company takes those proceeds and invest them they can potentially net a tidy sum after all is said and done.
The USP (Unique Selling Proposition) could be:
· Guaranteed income
· Lump sum payments etc.
· Bonding Services (never be arrested for arrearage)
The Biz op could be:
Agent structure with commissions based on building a network of independent Agents.
· Commission Structure:
· $25 fee/applicant
· 1 full month of CS Payment and 20% of 1 month for term
I see a huge opportunity here or am I Q-razy?
Dir. Business Development