The Pitch: "Every day, hundreds of small businesses and individuals win lawsuits against people who owe them money. But many of those court-awarded judgments are never paid. That's where we come in. We don't collect regular debts; we enforce court-ordered judgments. There's a huge difference. We electronically locate where debtors bank, work, and own property. Then, we file the legal documents required to get banks and employers to freeze the debtors' assets. We keep half of what we recover. Now we're preparing for a nationwide rollout. We plan to use most of the additional funds to hire staff and to customize our technology for each state, since each state has unique laws."
Company: The Judgment Group
Owner: Susan Wilson, founder, president, and CEO
Location: Stevensville, Maryland
2007 Revenue: $500,000
2008 Projected Revenue: $10 million
Investment Needed: $5 million to hire new staff and build hardware and software infrastructure for a nationwide rollout
Clients: Individuals and businesses with court-awarded settlements of less than $10,000, mostly in Maryland
Recent Buzz: Winner of American Express and Count Me In's "Make Mine a Million $ Business" award; named one of Working Mother magazine's Best Women-Owned Companies for 2008
The Experts Weigh In
Find bigger fish
This sounds like a big market and a great opportunity. Wilson clearly has a passion for the business, and with a demonstrated track record of revenue, the company is ready to raise money. But I'd think very carefully about the target customers in this business. Signing up creditors who are owed a single judgment is a tough way to scale the company. The Judgment Group needs to focus on creditors with a large number of judgments in their favor. A credit card company, for example, has thousands of people who owe it money. Operational efficiency, such as running a strong call center, will be crucial to the company's success.
Build a brand
The barriers to entry for this industry are low, and there are a few competitors. So Judgment Group should invest in a brand that becomes the go-to name in this space. Five million dollars should be sufficient to build staff and infrastructure, but it seems light for sales and marketing. Wilson could seek partnerships with lawyers, who could refer their clients. I would also advise her to put marketing dollars where they're going to catch the attention of small businesses, like in trade publications and on relevant websites. Cash flow could be a problem as she expands nationwide, since the company doesn't collect any fees up front.
I think part of what has made the company successful to date is its clear focus: going after judgments in Maryland of less than $10,000. Going national will require significant investment in technology, personnel, and marketing. This could be a big risk if Wilson doesn't meet sales projections, which seem extremely optimistic. She would probably be better off showing she can expand to a nearby state with some additional bootstrapping or a bank loan. If she really can deliver rapid growth and profitability within a region, then she may be able to attract venture capital investors.
Co-founder and managing director
Phenomenelle Angels Fund I, LP