Referrals will also play a bigger role in the marketing mix, according to Jones's plans. Toward that end, Belkov is cultivating the support of local hospitals, military outreach offices, and public-private organizations. Recently, employers who've read about the company have inquired about providing the service to their workers. Belkov has made presentations to several large local companies and has held a few employee seminars. The way it might work: workers would receive a flier on Child Support Services in their pay envelopes, and Jones would waive the application fee.
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The Service
"No one vanishes unless he changes his name and Social Security number or leaves the country," states Jones. Even then, he adds, "we'll find him." Child Support Services locates about 85% of its targets, using the classic techniques of the bill-collection trade. "My people are trained to skip-trace, to search to locate someone. They don't have to leave their chairs. They're calling neighbors, credit references, past employers," explains Jones. "The state can look into some databases I can't, like the IRS's and Social Security's, but I have lots of other tools." Those include instant on-line credit reports, department of motor vehicles reports, magazine-subscription updates, post-office changes of address, "list enhancement" services from major credit-card companies -- and direct contact with the target's creditors.
Jones has ample room to negotiate payment terms with support offenders. While the 1977 Fair Debt Collection Practices Act strictly regulates third-party debt collection, it doesn't appear to encompass child-support-collection agencies, which attempt to enforce direct court orders. "I'm going to be in a guy's back pocket. I want a payroll deduction, a debit from a bank, whatever," says Jones. Still, he must be careful to follow state guidelines: The first money collected goes to current monthly support. The check must go to the appropriate state child-support-enforcement office, which documents the payment and sends it back to Jones, a process that can take days, weeks, or months. The check is made out to the custodial parent care of Child Support Services, as spelled out in the client's one-year contract. In the end Jones takes 25% of whatever is collected, until the arrearage is paid off or the yearly contract terminates.
If the absent father wants nothing to do with his ex, Child Support Services acts as an objective go-between. "If you know where the guy is, you should be able to take the court papers and do it yourself," client Martha Bond, who has a 15-year-old daughter and a mortgage to meet, says with a sigh. "But he won't pay unless someone makes him, so I've got to renew my contract."
Only half of Jones's clients actually pay the application fee up front. He concedes that the $35 has been a sticking point with would-be customers. He's waived that fee numerous times and even arranged a volume discount for one woman with two ex-husbands. "I'm in business to make a profit, don't get me wrong. I have employees to pay, but it's not cut-and-dried. You have to have some compassion."
Nevertheless, keeping overhead under control is a major challenge. He spends much of his time detailing expenses per account, and "they're always changing." Time spent getting parents to fill out the applications and calculating arrearages, and data entry (which costs $18 a case) to put the case on the books, quickly consume the $35, says Jones.
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Operations
Child support services is located in a 100-year-old onetime livery stable in Ghent, a Norfolk neighborhood where the rich and the poor sections overlap like the cases in Jones's files. There's little decor in the 2,000-square-foot office, which is open six days a week and in the evenings.
In the first year of business, Jones took on some 900 cases, with two administrative employees, two full-time collectors, two part-time collectors on the night shift, and two key managers, J. D. Summerhill, who signed on in June as vice-president of operations, and Sandra McElroy. Most employees came over from Credit Service. Jones, Summerhill, and McElroy run both companies and have agreed to defer their compensation from Child Support until the end of its first profitable year. In late September Jones hired another full-time collector, a former military policeman who pursued AWOL cases. "I want collectors who've worked the toughest cases there are," says Jones.
Collectors are paid a low base salary but receive a 5% commission on the down payments they arrange. "Down payments are where we make our money," explains Jones, who also runs contests such as one to reward collectors who get the most overnight payments. For the company to be profitable, he has calculated, payroll can't exceed 40% of revenues.
Jones uses a $175,000 network of IBM and Digital computers to run both companies. Despite the shared setup, he is quick to admit that collecting a child-support debt isn't like going after an old dentist's bill. In the latter case, a collector might spend a few minutes on the phone; with child support, 20 minutes or more.
Because there are no industry statistics, determining the "collectability" of this new class of debt is hard. The job now falls to Summerhill, who says: "No two deadbeat dads are alike. Sometimes we spend many hours on a case and get nothing; other times there's a big payoff for a few hours' work. If we put an account on hold, we'll let the mother know." The company tries to avoid having clients go back to court. A voluntary arrangement with the absent parent is always best.
Interstate cases are the toughest. Child Support Services sometimes sends cases to other companies in the industry association -- with mixed results. After the company teamed up with a California start-up to collect a rec-ord $17,000 down payment, the West Coast company tried to reduce Jones's cut. "It's bad enough collecting from deadbeat dads," says Jones. "Now I've got to collect from the collector."
