Guide To Building A Successful Restoration Business
Entering the insurance repair industry is quite different form entering the carpet cleaning industry. While both carpet cleaning and insurance restoration are rewarding and both involve cleaning at their core, the required equipment, industry expertise, technical know how, and marketing of the services is where the two are 180 degrees apart.
The advantages of entering the insurance repair industry are numerous, including; Excellent cash flow, recession resistant, and little need to advertise. Insurance restoration is generally immune to the normal economic cycles. Mortgage companies and banks require insurance coverage to be in place and insurance companies pay the bill. What a sweet deal!
Now that we’ve established the need for the service, and the source of payment, let’s discuss a few of the basic steps involved in entering and succeeding in the restoration business.
Like any business start-up, prior to commencement comes the planning stage. This is the time when tough questions must be asked and honestly answered. Your ability to determine the answers to these questions will greatly increase the odds of your success.
Am I willing to invest significant time and funding into a business which requires 24 hour per day 7 day per week availability? How will this decision affect my family? Can I utilize my existing employees and resources, and what additional equipment & training will be needed to get the restoration business off the ground? What type and size facility will be required? Do I join one of the many restoration marketing groups or franchises or do I go at it alone? How long will it take to begin seeing returns on my investments?
Perhaps the most important question often overlooked by start-ups is do I really enjoy helping others in need? Not only are empathy and a true burning desire to assist people in their time of need prerequisites, they are the mark of all successful restoration contractors. Understanding the physcological dynamics involved in working with people who are emotionally charged and often times distraught, will be the cornerstone of your restoration business.
It is very easy for beginners in the restoration industry to get caught in the yes we do it all trap. The only drawback is that without a sound infrastructure, and more importantly the proper experience, and financial resources, saying yes to every request is a sure way to drive a company into a hole that is nearly impossible to climb out of. Staying focused on your niche service is of paramount importance, especially in the early stages.
Now that you have answered some of the important questions it’s time to write your restoration business plan. Like carpet cleaning or any type of business for that matter, you must have a sound business plan. Yes, you can do it without a written plan, but the odds of your survival increase exponentially with a written plan. Never has the Fail to Plan, Plan to fail, axiom been more accurate then with the restoration industry.
Writing the Plan.
First question - what do you want your repair firm to look like in three, five and ten years from the time you start? An excellent source of information in assisting you in getting an ideal of what the typical restoration company looks like is the ICS Magazine annual restoration survey.
Second question - How do you want to position your company? Do you want to focus on one area of specialization and position yourself as an expert? In example do you want to be considered the most knowledgeable drying firm in your area? Maybe you want to be known as the company with the fastest response time. Or do you want to offer several disciplines and be known as a generalized type contractor. Do you want to stay focused locally, or perhaps develop a regional firm. Perhaps the lure of wealth from storm chasing peeks your interest?
These are important questions because your marketing program and you companies Unique Selling Position USP will be built around your answer to these questions.
A word of advice to start–up restoration entrepreneurs. Resist with all your mite the temptation to build your service company in the image of your average competitors. If you take a close look at the nation’s most successful restoration companies you will note that most have become successful by operating outside the proverbial “Box”. There is a strong correlation between long term success and a companies willingness to take risk and implement methods that were not necessarily accepted industry wide at the time of their inception. Top down drying and thermal imaging are two perfect examples.
There are numerous service niches or profit centers available to the restoration contractor.
- Extraction only
- Complete drying services
- Deodorization services
- Thermal Imaging Services
- Pre-loss Inventory Services
- Drywall repair and painting
- Smoke and fire cleanup
- Pack outs and storage services
- Reconstruction services
- Insurance Consulting
- Carpet cleaning
- Loss scoping & Estimating services
- Duct cleaning
- Document reclamation
- Electronics cleaning
- Continuing Educational programs
Studying each potential profit center to determine who or what group of people could benefit from this offering will lead to the discovery of many possible target market groups.
- Plumbers
- Insurance Agents
- Property Management Companies
- Insurance adjusters
- Claims Managers
- Risk Managers
- Certified Industrial Hygienist
- Fire & police departments
- Consumers
- Roofers
- General & Sub Contractors
- Local governments & state agencies
- Schools
Competitor Analysis
A critical piece of the business plan building process must include an accurate assessment of the competitive field. Researching your competitors involves much more than a quick drive by of their facility. A great place to start is with the companies website if available. Adjuster and agents who work with your competitors are usually receptive to sharing useful information regarding your competitors, so long as they feel it is being used for the right reasons.
What to look for;
- Look for trends and indications that the company is moving a certain direction.
- Determine the company’s philosophy’s, their mission.
- What are they really good at?
- What do they do differently from the next company?
- Where are they getting their business from?
- What do they do poorly?
- Are their employees long term or are they cursed with a high employee turnover?
- What associations are they affiliated with
- Are they actively involved in the community
Know Thy Market
You must know the value of the market in which you plan to do business. Once you know the total size of the pie, estimating your potential share of the pie becomes much easier. There are many companies such as AM Best that specialize in assimilating facts and figures regarding the insurance industry and their loss ratios. Knowing the insurance industry’s loss ratios will allow you the opportunity to estimate your potential market share based on your planned marketing budget and the number of competitors competing for the same pie.
Here is an example of what your market share analysis might look like.
Market Potential For ACME Restoration
(Residential Properties Only)
ACME Restoration will provide restoration services in a two county area with over 461,000 residents and 184,000 housing units. (This information is readily available from census data for each county or state you plan to service) Insurance statistics show that approximately 9% of insured homeowners have an insured loss of the type that we offer annually.
Households in our proposed service area (60 mile radius from office.) 184,000
Un-insured households (estimated 15%) 184,000 x 15% = 26,600
Total Potential market 184,000 – 26,66 = 157,400
Homeowner claims annually (9% of insured homes) 14,166
Non-structural losses (liability, theft, other = 30%) 4,249
Total potential market (households) 9,917
Average loss estimated $3000 $29,751,000
Target market share (10% of losses) $2,975,000
Market Share objectives year 1 is 3.1% = $1,131,221.00
Market Share objectives year 2 is 4% = $1,459,640.00
Market Share objectives year 5 is 10% = $2,975,000.00
It is important to project realistic market share figures as part of your plan. If you are seeking outside financing for your business this will be one of the first areas of your plan to be scrutinized by your banker. It would be un-realistic to project a 10% market share for the first year for a company that has little experience in the industry.
Development Plans
Each year of your plan should clearly list your development plans and major benchmarks.
An example might look like the following;
Year one;
Major Benchmarks;
- Being Assigned 20 jobs per month
Developing monthly press releases
Being signed into at least two major insurance carriers Preferred Vendor Programs
Hiring a full time marketing rep
Hosting 4 Agent/Adjuster Seminars
Obviously there are many other equally important issues that the restoration contractor will face when doing business. For those that decide to enter the wonderful world of insurance repair you have chosen a rewarding occupation!
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