How Do Water Damage Restoration Companies Make Money?
Start restoration business with revenue sources that will grow your business into a multimillion dollar business you have dreamed of having. New business owners need cash flow sufficient to run their business without worry. They want cash reserves necessary to undergird their business development plans to grow their business. They want to increase their personal wealth by taking money out of the business for retirement and personal investing.
There are ONLY two ways to make the money needed to support cash flow, cash reserves and personal wealth and they are to accelerate top line revenue growth and improve and protect bottom line profit growth. Increasing revenue and profit are the only ways to make money in business.
Accelerating Top Line Revenue Growth
What are the best and most effective strategies to increase revenue in the restoration marketplace today?
Strategy #1 – Start restoration business as a program contractor
Today the bulk of damage repair claims are managed by Third Party Administrators (TPAs) like Contractor Connection and Alacrity. There are 8 National Third Party Administrators and you want to apply to every single one of them. Becoming a preferred contractor for any one of them leads to an increasing volume of damage repair claims that are directly assigned to you.
Imagine calling your newly assigned damage repair customer and introducing yourself, “Hi Mr. Jones, I am George Burns from Certified Repair Specialists. I am the USAA contractor that has been assigned to complete your repairs.” This introduction speaks volumes to the customer.
You are a representative of the homeowner’s insurance company and you have been assigned by them to this claim. The insurance carrier expects you to complete the repairs so you are not bidding against other hopeful contractors. The job is yours and you are dispatching a team to begin damage control immediately.
The value of each TPA is not only that you get the job as an assignment but that each TPA represents many insurance carriers. If you do a good job you will be added to a second, and a third, and to a fifth and tenth carrier’s program and your business will continue to grow.
My company was active on 23 carrier programs through a single Third Party Administrator and 30 altogether. Our business doubled every 1.4 years over nearly a decade of time. Our growth trajectory sky-rocketed with a 46% average annual growth rate. While we diversified our revenue sources TPAs provided the jet fuel to sustain our growth!
Additionally, each carrier has internal repair programs. You may be on only one of six or more when you are first activated. So the opportunity exists for you to not only increase the number of carrier programs you are active on but also increase the number of programs of any particular active carrier. Let me illustrate this using USAA. They offer six internal programs and each one has the potential to provide a huge amount of volume and opportunity to the restoration contractor. The six programs include:
- Mitigation – water damage
- Managed Repair – construction rebuild services
- Fire & Smoke – most fire rebuilds exceed $150,000. Contents cleaning for a smoked house can range from $35,000 – $50,000.
- Large Loss – these are repair jobs that exceed $100,000 in scope.
- Roofing – weather damage to roofs and exterior. One year my company received $1.5 million in roofing repairs from a single insurance carrier!
- Consumer Services – this gives carrier policy holders access to the carriers preferred contractors for medium to large remodel work such as kitchen and bath remodels, basement finishes, exterior deck building, and more.
Becoming a program contractor is an industry game changer and one of the very best ways to begin and sustain growth over the long haul.
Strategy #2 – Partner with local government agencies
In every community in the U.S. there are three government agencies that provide grants to local homeowners for remodeling. These grants range in size between $7,000 and $70,000. My company did approximately $500,000 of remodel work a year through one of these sources.
Since this is not insurance work it also helped to diversify our sources of income to include general contracting and government sources. Two of these sources are relatively easy to become partners with and one is a bit more challenging to navigate. But once you are on the inside local government agencies will refer the grant recipients directly to you as an approved contractor. These three agencies provide a wonderful opportunity to serve your community and its residences. The marketing value of claiming association with any one of these three government agencies is a positive reputation builder too.
Strategy #3 – Get in on local fire services
I don’t mean fire chasing. No one likes a fire chaser and most fire department incident commanders take great steps to keep these vultures separated from fire victims. But what If I told you there were ways to partner with the city and with the fire department that would allow you inside the fire incident perimeter allowing you to render aid to the victims, board up the property, and perhaps secure the contract for the rebuild? What would this privilege be worth to you? Well, it is possible and the opportunity is available in most U.S. communities. The largest fire rebuild we ever completed was $350,000. You can see that it only takes a handful of these opportunities over the span of a year to generate $1 million in revenue. In my community of Colorado Springs there is on average one fire incident every single day of the year. WOW!
Strategy #4 – Use on-trend methods to market your company to local insurance agents, plumbers, property managers and realtors
Most of the marketing strategies you hear about these days or read about in blogs or are taught at seminars DON’T WORK! They represent the same old tired approaches to building relationships through constant contact with office visits, invitations to coffee, and weekend golf outings. You don’t have time for these things and neither do they! You read about the part-time Mom who travels from office to office refilling candy jars as if reminding the office staff that your company is still in business is going to translate into referrals.
IT DOESN’T! For those seasoned contractors who know these tactics have seen their day and fallen by the wayside they frequently turn to internet lead generation because there seems to be no other options open to them. I have yet to talk with a contractor who is satisfied with what he gets from these sites and is almost always dissatisfied with how much they pay for the measly results. There are on-trend effective strategies that fit into the flow of business life for contractors and the local professionals they seek to influence.
These marketing tactics are proven and can make all the difference in the world when trying to gain the attention of local professionals and get name recognition and influence with them. I am happy to share those with you!
Strategy #5 – Start restoration business as a full-service contractor
For mitigation only contractors NOTHING is more transformational than this ultimate revenue generator.
Imagine this scenario of the typical mitigation only restoration contractor. The company is earning around $600,000 in annual revenue. Since the typical mitigation job is $2,500 this translates into approximately 240 jobs per year.
Imagine becoming a full-service restoration contractor by adding construction services. The typical damage repair rebuild is $10,000 so this scenario could add $2.4 million to the $600,000 already earned through mitigation.
That is amazing!
We live in a day when most customers, insurance professionals, and TPAs want a full-service company. They provide for a better customer experience and offer better accountability of the contractor. One call to one contractor who can do it all is preferred to working with multiple contractors on a single job.
When you show up at the door of a homeowner ankle deep in water and tell them you are going to do the dryout but they will have to find their own general contractor to put it all back together you might want to take a step backwards because they may become a bit animated when expressing their disapproval.
They will want to know “Why can’t you do it all?” Good question! If they expect you to do it all why not do it? In this current scenario if the contractor secured only 75% of the possible rebuild jobs on the back side of their mitigation work that would yield $1.8 million in additional revenue which is three times what the contractor is currently earning as a mitigation only contractor.
This is a no brainer and should become the immediate growth strategy for nearly every mitigation contractor. By the way, it really is not as hard as you might think to be successful at this even if you don’t have prior construction experience. With a little bit of help and support you can successfully add this division to your restoration business and double or even triple your revenue in 18 – 24 months.
How do restoration companies make money – take your pick of any one of these five strategies that can become the cornerstone to growing your restoration company. Any one, or a combination of these five might work for you and could lead to a break out for your company that could change your life! I will save the “Improving and Protect Your Bottom Line Profit” for my next blog.
Look for it on Google or find it on my website at www.growmyrestorationbusiness.com 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. Visit me at www.growmyrestorationbusiness.com or call me for a FREE 30 Minute Consultation at 800.655.1598.