Article originally published in April 2002
From the brink of bankruptcy to becoming the second-largest women-owned business in Western New York, Kathleen Balus’ story is a testament to resilience, leadership and strategic turnaround. Discover how she turned failure into a springboard, built a thriving collection business, and what every entrepreneur can learn from her journey.
Key Takeaways
- Failure is a stepping-stone, not a stopping point. Kathleen’s near-bankruptcy didn’t end her—it made her stronger.
- Start lean, build reputation first. Early years were low-scale, personal, strong results.
- Culture and people matter. Her friendly, celebratory management style built loyalty and local impact.
- Be bold when opportunity strikes. The DOE contract gamble paid off because she had prepared.
- Service and community build lasting value. Jobs in a rural region, ethical recognition, and public service elevate beyond profits.
- Leadership means integrity. Awards like Torch Award for Marketplace Ethics show value matters.
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 (Editor’s Note: Ms. Balus was CEO of Pioneer Credit Recovery until 2003.)
Pioneer Credit Recovery 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.
Table of Contents
Part-time Job During Christmas Break
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 the 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 Costly Mistake and Near-Bankruptcy
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.
The Turn-Around: Winning a Government Contract
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.
A Woman in Business
Kathleen led as a woman in a male-dominated field, and 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.”
Her people-first management style stands out: she celebrates employees, rewards top collectors, and nurtures a friendly, non-intimidating culture. She says the company’s employment in rural Arcade, New York (pop. ~3,000) is one of her proudest achievements: providing good jobs with benefits where previously many commuted to Buffalo.
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 opportunity to earn a good living and enjoy good benefits. “It’s been a truly remarkable opportunity for a lot of people in my community to earn $30-40,000 a year.”
Additional Recognition & Service
According to the Congressional Record, in 2006 Kathleen Balus was honored as a New York State “Woman of Distinction.” From the speech of Hon. Brian Higgins of New York in the House of Representatives on December 5, 2006:
Mr. Speaker, I rise today to pay tribute to one of western New York’s business leaders. Kathleen M. Balus will be honored tomorrow, Friday, November 17, by her corporation, Pioneer Credit Recovery, for her lifetime of achievement. Ms. Balus founded Pioneer Credit Recovery while a senior at the State University of New York at Buffalo. She graduated with a B.S. in business administration. Following graduation, Ms. Balus incorporated Pioneer and built it into the industry-leading collection agency that it is today.
Ms. Balus has, throughout her career, been recognized as one of western New York’s most distinguished business leaders. She has been awarded four Entrepreneurial Excellence Awards from Working Women Magazine. She has also been awarded the 1999 Better Business Bureau’s Torch Award for Marketplace
Ethics; the Wyoming County Business Development Corporation’s Retail/Service Business of the Year; U.S. Small Business Administration’s 2000 Small Business Person of the Year for the State of New York; Buffalo Niagara Partnership’s ATHENA Award; MDA’s 2005 Humanitarian of the Year; and in 2006, she was named a New York State ‘‘Woman of Distinction.’’Ms. Balus has also affected her community through her efforts in the public sphere. She has served as a Sardina town board councilmember; Sardina town supervisor; member of the Small Business Administration Advisory Board and the board of Wyoming County Business Development Corporation. She is a past president of the New York State Collector’s Association as well as serving two terms on the board of directors.
Mr. Speaker, it is with great pleasure and gratitude that I stand here today to recognize the work of Kathleen M. Balus, a business leader and admired community member of the western New York region.
She also received the 1999 Better Business Bureau Torch Award for Marketplace Ethics and the 2000 Small Business Person of the Year Award for New York State. She served on the SBA Advisory Board, the New York State Collector’s Association (past president), and local government boards in Wyoming County.
Continuing Growth of the Business
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.
Advice to Entrepreneurs
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.
Success Lessons for Entrepreneurs from Kathleen Balus
- Use failure as a teacher, not a judge: When the billing business failed, Kathleen didn’t quit—she learned about partner selection, risk management, and resource focus, then returned stronger.
- Embrace risk wisely: Kathleen’s failed billing business taught her that growth requires not just opportunity but strong governance and trustworthy partners.
- Be ready for scale before you declare it: She built infrastructure ahead of the big contract, showing readiness and vision.
- Build referral-driven growth: Early growth from reputation kept costs low and momentum strong.
- Prioritize talent and culture: Her focus on rewarding people and building community loyalty created a stable foundation for growth.
- Stay grounded in mission: Providing jobs in her rural community kept her mission visible and connected to the region.
- Keep faith, but also pivot smartly: Resilience, a positive outlook, and a clear plan allowed her to rebound from setback and seize a major opportunity.
This article was originally published in April 2002 and updated on November 8, 2025.
