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Doug Tonne went to school to become an occupational therapist and did that “for a while” before he got an opportunity to work for a law firm in Fort Worth, where he helped manage a multi-office bankruptcy practice for several years. Before federal bankruptcy law changed in 2005, requiring prospective consumer filers to complete a personal finance course and undergo more training after formally seeking protection, Tonne sensed opportunity.
He launched the nonprofit Debt Education and Certification Foundation with co-founder Mitchell Allen. “We knew the law change was coming,” Tonne, now 45, says. The foundation, better known by its acronym DECAF, provides both rounds of education for bankruptcy filers, working with attorneys who typically register their clients with the service.
The business has changed significantly, as bankruptcy filings peaked in 2010 and shrunk since then. Pricing in the competitive space – virtually everybody in it is a nonprofit, as federal law requires organizations providing the first personal finance course to be nonprofit – has turned aggressive, forcing the organizations to lower prices, pare expenses, and look for ways to innovate. DECAF, whose training is mostly online with a short time spent over the phone with bankruptcy filers, has 22 employees at its Benbrook offices and about $2 million in annual revenue today, compared to 48 employees and about $7 million in revenue at the peak of bankruptcy filings.
“One of the things that makes us unique is we market to attorneys,” Tonne, a member of the Fort Worth chapter of the Entrepreneurs’ Organization, says. “We have individuals using our service, but that’s not who we market to. We really focus on what we can do to help the attorney.”
Competition. Initially, there were about 250 that do what we do nationally. We’re heavily regulated. A lot of the small companies don’t do it anymore.
Clients. We usually do a few hundred a day. At our peak, we were about three times as busy as we are now.
Pricing ($35 today, compared to $50 initially). This is a volume, low-cost business. Our industry has been tough. We’ve had some commodity pricing in our industry – low service, low cost. We’ve had to get lean, cut expenses, figure out how to be more productive.
Innovation. We’ve tried to really start thinking about processes, where you have waste. A lot of projects we’re working on involve innovation. One of the things we’re working on right now is texting. We can [help the attorney] contact the client and get this program done. We’ve created a lot of things in our system to take out human error. (One example: the program completion certificate.) We’ve created an interface where my counselors don’t have to take the time to enter that information. It just pushes it out.
Causes of personal bankruptcy today. Sixty-two percent medical. Reduced income, job loss, divorce. Those are four of the top five. [For] a lot of people who have credit card debt, their real problem is in their house or their cars. People can get overextended on their house, and that pushes them to the edge.
Being unique. One of the things that makes us unique is we focus on the attorneys. We have individuals using our service, but that's not who we market to. We really focus on what we can do to help the attorney.
What EO does. It motivates me to do more, try more, and give it more effort. I’ve dabbled in residential and commercial real estate. We flipped houses for a couple of years. I have some rental property. I have a commercial building I just sold. As we’ve started new businesses, we’ve usually bought our buildings.
Life-changer. I had an ascending aortic dissection nine years ago. They didn’t expect me to live to or through surgery. It makes you refocus on family and friends. It’s part of being a better business owner, better boss, better co-worker.