Sunday 3 January 2016

How to Start a Restoration Company Current Trends

Posted by at 12:36 PM in

How to Start a Restoration Company Current Trends

Every industry is impacted by the ebb and flow of the tides of change. This is true in the restoration industry too. Understanding these trends and getting into the flow is essential to success in starting a restoration company. There are three seismic shifts occurring in the restoration industry and each one should be given a substantial place in the planning for and eventual launch of your restoration business.

Trend #1 – A movement by insurance carriers to Third Party Administrators to manage their claim volume

This trend has been underway for a decade and continues to increase. Four years ago American Family shut down their internal Home Repair Program (rebuild) and their water mitigation programs and turned over the primary claims management to Contractor Connection. More recently Farmers Insurance Group has done the same thing dividing their claims volume among three of the eight National Third Party Administrator Networks.

Yes, there are eight national third party administrator networks and they manage claims for the vast majority of insurance carriers. Ten years ago most top tier carriers fielded a cadre of adjusters in most major metropolitan communities of our nation.

Today, in an effort to cut costs these same carriers utilize the services of TPAs to manage their claims volume. The day of local adjusters passing claims to their favorite contractors are largely over. Either you are on the inside of one or more TPAs and getting the benefit of direct claims assignments or you are on the outside wishing you were in.

There is no better growth step to take than to become a program contractor. The volume of work offered through each TPA varies though each one typically manages claims for more than one carrier. Their direct assignments to your company can make you a dominant company in your marketplace.

Success breeds success and being a program contractor for various TPAs and insurance carriers can be a powerful marketing force as you seek to build additional referral relationships.

Trend #2 – A movement toward full-service contractors who provide both mitigation and rebuild services

Most customers want to make one call to one contractor who can provide all the services needed to complete their repairs. When a mitigation contractor shows up at the front door of a homeowner standing ankle deep in water and is told that the contractor is there only to do the water extraction and the homeowner must find their own general contractor for the repairs – watch out! The sparks could fly.

So I ask you - if the customer wants you to do it all why not do it! Our culture values customer convenience. In the restoration industry this could translate into a huge plus for the restoration contractor who chooses to become full service rather than remaining mitigation only. Let’s let the numbers speak for themselves.

  • The typical mitigation only company generates about $600,000 of annual revenue. With the typical mitigation job in the U.S. coming in at about $2500 in revenue we can see that this equals approximately 240 mitigation jobs annually.
  • If the full-service contractor secured the rebuild for each of those 240 mitigation jobs that would generate about $2.4 million in revenue since the average rebuild is about $10,000. If the contractor was doing a good job with their operational efficiency and earned a 50% profit off the rebuild services, they would produce approximately $1.4 million in profit. WOW!
  • If you feel this is too good to be true imagine securing only 75% of the construction work on mitigation jobs completed and you still generate revenue of $1.8 million and profit of $900,000.

This movement to full-service is an industry trend and it is good news for restoration contractors. The truth is that it is really not that hard to add construction services even if the owner does not have a personal construction background. You just need a good coach who can show you what to do and help you along the way.

Trend #3 – A movement by contractors toward referral sources to accelerate sales growth

The bulk of insurance related damage repair claims is consolidating around a small number of referral sources. These are groups that controls who gets the call when damage occurs. Many contractors try to gain direct access to damage repair customers through the internet but most of these efforts produce little in terms of actual results.

When restoration contractors use the internet as a focus of their marketing they need to understand that they have a lot of companies competing for the attention of internet accessible customers.

This produces two results; first it makes the service very expensive due to the number of competitors using these services, and second it produces poor results because the limited number of internet accessible customers have a lot of contractors to choose from.

Most customers who are ankle deep in water don’t pull out their smartphones to scour the internet looking for service providers they are entirely unfamiliar with. Most potential customers call one of three individuals when damage occurs:

  • They call a plumber – “Turn off my running water!” Plumbers come in contact with running water nearly every day of their work. How much work might you get in a year with just a handful of plumbers putting you in immediate touch with a homeowner who needs water extraction once the flow of water stops?
  • They call their insurance agent – “Please help me.” What value would it be to you if the agent made a call to you or offered your name to their client?
  • They call the 800 number for their insurance carrier to report a claim – “What do I do now?” Since nearly ALL insurance carriers manage their claims through a Third Party Administrator like Contractor Connection or Alacrity this call will lead to an immediate assignment to one of the TPAs preferred contractors for immediate dispatch.

It is important to understand these three sources represent the bulk of referrals to restoration contractors, and that these referrals are initiated by the customer seeking help from a trusted source of help. It makes sense to build marketing strategies around gaining influence among these three professional groups for maximum effectiveness.

Two other sources of referrals are local government agencies and local opportunities to partner with fire department districts. In every community in the U.S. three government agencies make regular grants to homeowners for aging-in-place modifications. These grants range in size from $7,000 - $70,000. My company performed about $500,000 of work each year for these agencies. Becoming a preferred contractor for these agencies could add a nice boost in revenue and diversification to your referral sources.

In many communities there are opportunities to work side-by-side with local fire departments in order to provide victim assistance and board-up services. This may also lead to an opportunity to be the contractor for the rebuild services too. As with most opportunities you need to know they exist and how to access them. Most contractors don’t know either and so they remain on the outside and never become aware of some of the best growth opportunities available to them in their marketplace.

It is important to understand the restoration industry trends. Like with most trends if you try to buck the headwind you will likely not succeed. If you get into the flow you may discover opportunities that could dramatically change your business. As a top industry business coach I help restoration businesses accelerate their top line revenue growth and improve and protect their bottom line profit growth.

Visit my website today where you will find over 50 blogs, podcasts and webinars on topics related to growing your restoration business. You will find a Coaching Plan that is uniquely focused on the growth needs your company faces. You will also find two FREE eBooks titled HOW TO GROW YOUR RESTORATION BUSINESS and STOP YOUR PROFIT KILLERS DEAD IN THEIR TRACKS. There is a lot of support available to help you gain additional traction and develop the operational design to succeed and thrive as you continue growing your restoration business. Visit me at or call me for a FREE 30 Minute Consultation at 800.655.1598.