Raising support
Finding the right investors made growth possible for firm
Austin Business Journal - March 31, 2006 by Kathy Lesko Contributing Writer
As the nation's largest private child-support enforcement company working directly with non-welfare custodial parents, Austin's Supportkids Inc. has embraced the vision to be part of the answer to the national problem of unpaid child support.
Today, there are 7 million cases in the United States in which no child support has been collected at all, and there is more than $100 billion in outstanding support. Frustrated by their failure to obtain help from government agencies, thousands of parents have turned to the private sector for assistance in collecting unpaid child support.
Bryon Sehlke, Supportkids' president and CEO, appreciates the measures his employees take on behalf of their clients, and understands the frustrations that send people to his company's doors.
"Most of our clients are already dissatisfied with the system when they come to us," Sehlke says. "Many of them are seeking more than $40,000 in past-due child support."
He cites these conditions as the driving force behind the company's increased communication with its clients.
"We've instituted a live client telephone line to provide additional support," Sehlke says.
Even Supportkids' "self-serve" portion of its Web site has become more user-friendly, enabling clients to log on to find out the current status of their cases. Supportkids has also redesigned its user contracts, with approval by the Texas Department of Banking, to make them easier to comprehend.
While improved customer satisfaction reduces the instances where clients want to close their cases with Supportkids, the organization's biggest critics cite the fact that private-sector organizations are attaching fees to a service that parents should be entitled to receive for free.
Supportkids cases are handled on a contingency basis; the company does not receive payment until child support is collected for the family.
"We agree that it would be great if parents didn't have to pay for this service, but the fact of the matter is that someone has to pay for it. Support on the state and federal level is done by the taxpayers, and unfortunately, the funds are not there to support these efforts," Sehlke says.
He points to the 93 percent of unpaid child support that goes uncollected annually in the United States as evidence that more options are necessary.
Securing unpaid child support is a very labor-intensive process. Supportkids relies on specially trained investigators and enforcement specialists to maximize its results. With 8,000 to 10,000 applications sent every month, concise business metrics track Supportkids' progress on each case.
"The business process basically begins when the case comes through the door," Sehlke says. "We have developed a culture and process of setting monthly expectations for every step and every person who handles a case. By doing this, I believe we will achieve our targets at the highest level."
Supportkids' collection of more than $270 million since its founding 15 years ago speak to this philosophy.
Finding the right financing structure and investors who understand and support Supportkids' business model has proven to be a challenge.
In 2000, a $20 million investment from Austin Ventures and other investors accelerated Supportkids' growth, putting the company on PricewaterhouseCoopers' list of the 50 fastest-growing private companies in 2000.
Sehlke stresses that Supportkids' ability to essentially double its revenues since 2000 has been an ongoing effort.
"Matt Landry, Supportkids' former president and CEO, recognized the need, early on, for financial vehicles and investors that would allow us to effectively do our jobs," Sehlke says."Along with strong equity partners, he was able to create relationships that fueled Supportkids' growth, both on the debt and equity side."
The group recently received another $2.7 million funding from investors, including Austin Ventures. The company has raised a total of $40 million in private investment since 1997.
Developing relationships with government officials and agencies was also important in this industry, Sehlke says.
"Landry also recognized and appreciated the fact that the state of Texas is a great state in which to do business. He saw that Texas recognized the need for private child support agencies, and worked diligently with the state to maintain their support of our efforts."
On average, it take nine months from the time Supportkids opens a claim until the first payment is received and Supportkids begins to get paid.
Sehlke notes that a considerable amount of executive resources are expended on financing, and financing is the key to supporting growth given a very long business cycle.
"Supportkids has done a tremendous job," says Darryll Grubbs, an attorney who provides consulting support to the organization. "The work they are doing is something that requires significant capital, and they've been successful in obtaining it."
"We've been fortunate to have some great financial partners who support our mission, and our business has matured to the point where we have been able to acquire the debt structure that supports our business model," he says.
Supportkids Inc.
What it does: Provides child-support enforcement services for custodial parents
Employees: 175
Revenue: $15 million
Address: P.O. Box 18988, Austin 78760
Phone: (800) 305-KIDS
Web: www.supportkids.com
Email: info@supportkids.com
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