Nearly every contractor has tried at one time or another to become active on TPA programs, and most are unsuccessful. It’s not that the requirements are so intimidating – they’re not! There is nothing extraordinary or surprising on the list of requirements. Insurance companies and the TPAs that represent them require that companies who receive work from them meet the basic and standard requirements of our industry. So why do most contractors fail to get approved? It’s the process man, it’s the process! That’s right … it is the process that leads to most declines. The contractor fails to complete the application in full, they answer questions incorrectly, they don’t understand what is being asked, they don’t have the right company financial statements … they just make mistakes.
Floating construction costs, and waiting 60 days for payment can be a company killer! When should you expect to get paid? BEFORE the job ever starts! “Oh, yes! Great idea,” you say, “but how do I pull that off?”
If you’re not, I don’t blame you! There were days when I boasted of a single insurance agent bringing me over $300,000 of work a year, year after year. Those days are gone for most of us. Why?
Have you seen a restoration company doing less than $500,000 of revenue with a General Manager? Or, the first manager hired is the Operations Manager? Titles matter!
In a word, NO! Why do we try to incentivize workers? Is it because we want more out of them than we would otherwise get? The definition of incentivizing has to do with motivating others. We try to motivate them to work harder, smarter, more efficiently achieving better results. So, we attempt to motivate by offering percentages of revenue, or profit, or of equity as a carrot in the hope their behavior changes because of it. Does it work? NO.
This is true of many things in life. We don’t know what we don’t know, but when the light comes on and now we know it, life becomes better. This is true with TPAs.
We know what psychrometrics and moisture maps are for … but what in the world is an affected room sheet? It’s a means to record every chargeable activity completed during a mitigation job. Mitigation technicians are notorious for failing to record many of their most common tasks. They forget little things like removing backsplash, tack strip, blinds and curtains, heat registers, faucets, or the use of carpet masking, furniture blocking, or floor protection, and a lot of other stuff.
Nearly every contractor has tried at one time or another to become active on TPA programs, most are not successful. It’s not that requirements are so daunting – they’re not! There is nothing extraordinary or surprising on the list of requirements.
The key to job profit is controlling material and labor costs. However, we all know the larger the job, the smaller the profit. But, do you know why? Because we lose control of the job!! I coached one restoration company known for its high volume of large-loss jobs. Sure, they knew how to reel it in, and how to get it done, but not how to make a profit. One job I found that Xactimate paid $80,000 for labor to complete the scope of repair. The company, however, spent $120,000. Not only did the project manager spend every nickel the company was paid for labor, but then took another $40,000 right out of the wallet of the owner and spent that too.
Every owner dreams of the money they will take out of their business. Perhaps its to buy a bigger house, take more vacations, or sock money away in a retirement fund. Most contractors take a salary, and that’s it. Everything else stays in business. We talk about rolling it back into the business to support growth, but the truth is it just gets used up by the business.