No one says that entrepreneurship is a ticket to sure-fire success: you can either win or lose. The mark of a true entrepreneur, though, is having the courage to rise above failure, and bravely go on. Kathleen Mersmann-Balus stared at bankruptcy in the eye but moved on to rebuild her business and her self-esteem. Today, the company that Kathleen founded -- Pioneer Credit Recovery, Inc. based in Arcade, New York -- is the second largest women-owned business in Western New York.

Pioneer (http://www.pioneer-credit.com) provides immediate, professional debt management solutions for a multitude of clients, including financial, educational, governmental, medical and commercial businesses. As Kathleen describes her business, their goal is to “collect third-party debt from setting-up payment arrangements to getting accounts paid in full from people who owe our clients money.” From its humble beginnings in the 1980s, the business has now become a national leader in the highly competitive world of collections.

Kathleen started to sow the seeds of her credit collection business in 1980 while pursuing a degree in Business Administration at the State University of New York at Buffalo. 

It was Christmas break, and Kathleen was working as a waitress.  Her then-fiancée, a lawyer, had accounts receivables in his office – both from his own practice as well as from some of the local merchants who gave him accounts to collect. He asked Kathleen if she is interested in augmenting her income by helping him collect the debts. “Actually, I wasn’t interested in it at first and I really thought that it would be an awful job,” Kathleen recalls. “But I needed the money. I was a senior in school, so I decided to do it.”

The initial dislike for the job quickly turned to interest. In fact, she started to love it!  “Once I started doing it, I really liked it. I thought it was a really fascinating business.”  Kathleen was attracted with the seeming ease of earning money from this business. As she looks back, “It was very rewarding. You just make a phone call, then a couple of days later you get the money if you are successful. It is fairly lucrative.”  Collecting bills for others made her more money than working as a waitress ever did.

Sounds simple? Maybe. But her success in collecting those debts may also be attributable in large part to her compelling personality.  “I’m a very enthusiastic person,” she says. “People find it very hard to say ‘no’ to me – not in an overpowering way but in a convincing way.” 

Leadership and excellence are qualities ingrained in Kathleen. She was class president in high school for three years. She was also in the national honors society, while serving as the captain of the cheerleaders and band majorette. As she puts it, “I always had a lot of ability to lead and to have people follow me, sometimes follow me in the fire!” This woman also has a great sense of humor.

Starting with only a handful of receivables, a telephone, pencil and index cards, she officially started her company in 1980 in the back room of her then fiancé’s law office.  In her first few years in business, she focused primarily on medical collection, serving physician groups and rural hospitals.

She initially did everything by herself, hiring a secretary to help her only in her second year in business. “I did not have sales representatives in the first five years of my business,” she says.  

For the first six years, the company slowly expanded on the strength of her growing reputation in the business.  “I would get calls all the time from different businesses who would say ‘I was talking to so-and-so and they said that you were doing a real good job collecting their bills, so can we turn some accounts over.” 

In 1985, she incorporated the business and converted a Victorian home she bought in Arcade as her corporate headquarters. She had four employees by then. A year later, she added her first salesman.

The collection business grew slowly, adding a couple of new clients and a couple of new employees every year.

In the early 90s, she started a billing agency for medical claims that was meant to complement the collection agency.  However, “the business ended up failing miserably and almost drove me to bankruptcy,” she recalls with a tinge of sadness. 

The failure was not due to a lack of demand, but in getting the wrong people involved in the business. “I run into dishonest people, not once but twice, who stole the business from me.  She had the company stolen from me and there was really nothing that I could do about it. The person who stole it did not have assets to go after. So I really had the decision to close the chapter, sell off the business and move on.”

Those were trying times of her life. Getting over the failure of the billing company was her biggest challenge. “When I say bankruptcy, I’m not so sure if I was bankrupt financially as I was emotionally. It was a devastating situation…just devastating,” she recalls with sadness. In 1995, she was putting all the profits of her collection business to pay the bank over $170,000 that she had borrowed for the failed billing business. Recovery was painful.

Things started looking up for Kathleen the following year. In 1996, she was one of the 700 collection agencies throughout the country invited to bid the U.S. Department of Education account to collect defaulted student loans. “I had 25-30 employees at that time, and I put all my efforts into writing my bid.”  It took her four months to complete the proposal, and “it was literally a book that I submitted back to the government.”

In 1997, anticipating the award of a large Department of Education (DOE) contract, Kathleen purchased a lot and constructed a 10,000 square-foot office building. “I started constructing the building in the summer of 1997, just believing that I will win the contract,” she says.

And she did win the contract. The fax came in at 10:30 p.m. on September 30, the last day of the federal government’s fiscal year.  Kathleen could not be happier. Neither could her staff, which then numbered at 35. “We were one of the 15 companies that won the award,” she enthused.

The building was completed and the hiring and training of new employees began in October 1997 in order to gear up for the initial batch of student loans, which were received in December 1997.

Pioneer received a $650,000 guaranteed loan from the U.S. Small Business Administration (SBA) to finance the contract. Later that same year, Pioneer received another $300,000 from the SBA to purchase new equipment.

By September 1998, Pioneer was collecting $I .7 million monthly on delinquent student loan accounts. In fact, Pioneer ranked first among all collection agencies on the DOE contract in the final trimester of 1998, and then again during the first trimester of 1999. This was the first time in the history of the DOE collection contracts that an agency had received back-to-back first place awards. Pioneer's recovery rate is remarkably high - 33 percent, 80 percent higher than the national average of just 18 percent.

Collection placements continued to grow for Pioneer Credit. In 1998, the first year of the DOE contract, Pioneer had collection accounts totaling $700 million placed with their agency. In 1999, nearly $1 billion had been placed with Pioneer.

Balancing motherhood and career was a real challenge for Kathleen. In the early 80s, she got married, had a couple of children, and got divorced.  While she was starting her business, she was a single mom trying to support her two boys. “I left my children with babysitters, worked the hours here that I needed to work to get the job done.”  She remarried in 1995, “which has helped some” and had another child, a daughter.

She credits the sensitivities of her being a woman for her success.  “I ran my company very emotionally,” she says in describing her management style. “We give honors to top collectors. We celebrate birthdays. We just celebrate in a big emotional way.”  She describes herself as “very friendly, very non-intimidating.”  A people-oriented manager, her goal is to see people come to work for Pioneer and do very well. “I am happy when I write bonus checks for successful collectors who have done well.”

She counts the sizeable employment that her business has generated for Arcade as her greatest business accomplishment.  “This year, we will put out into our small town $7.5 million in payroll figures,” she proudly claims.  Arcade is a small rural community with an estimated population of 3,000, whose residents traditionally go to big cities like Buffalo, an hour’s drive away, to get decent work. Pioneer, however, has provided Arcade residents with the chance to make a good living with good benefits. “It’s been a truly remarkable opportunity for a lot of people in my community to earn $30-40,000 a year.”

Growth continues at Pioneer today as evidenced by a 10,000 square-foot addition to the existing 10,000 square-foot building constructed in 1997. As new contracts and bids continue to be placed with various industries ranging from colleges and hospitals to banks and fuel distributors, new employees are added to handle the wealth of new business that continues to flow in the direction of Pioneer Credit. Pioneer’s clients now number to more than 700, including retail firms like Sears; banks and financial institutions like Bankcard, Fleet, HSBC, and Bank of America.

Today, the company posts annual sales in excess of $10 million and employs 215 workers. The company is planning to add 50 more positions by the end of fiscal year 2000.  

Kathleen’s entrepreneurial success has not gone unnoticed. She has won several corporate and personal accolades. Recently, Pioneer ranked second in Business First in the number of full-time employees among all Women-owned businesses in Western New York, up from 13th place in 1991. She was the recipient of the 1999 Better Business Bureau’s Torch Award for Marketplace Ethics and the Wyoming County Business Development Corporation’s Retail/Service Business of the Year Awards. This year, she won the Small Business Person of the Year Award for the state of New York.

Kathleen’s foray into entrepreneurship was characterized by ups and downs – from falling to the brink of bankruptcy to rising to the pinnacles of success.  Her advice to would-be entrepreneurs? “Keep the faith. When times get really tough, just believe that you can do it. Had I not kept the faith, tried to keep the business going and bid on that contract, I would not be here today.”

Kathleen Mersmann-Balus credits her success to her family, who has always served as her driving force. Her father once told her, "If you are going to do something, do it big. Be a leader." Kathleen has done just that.