There Are 3 Types of Restoration Companies – Which One Are You?
Determining who you are helps to determine if you want more out of your company than you are currently getting.
- The mitigation-only company is by far and away the largest segment of restoration companies. Every franchise is by nature mitigation-only and most independent restoration companies begin offering mitigation-only services too. These typically include water damage, mold remediation, and perhaps some scheduled services for carpet and duct cleaning.
Typically, this type of company rarely grows above $1 million in annual revenue. With an average job size of $2500 it takes 400 mitigation jobs to produce $1 million in revenue. You can see the challenge a company faces in trying to push that number to 500 or 600 annual jobs. This difficulty causes most to plateau in size at $1 million. I know many mitigation company that have plateaued at $500,000 twenty years ago. They just continue to lumber along at that mid-point year after year after year.
- More and more mitigation-only companies are looking for ways to increase revenue and have begun claiming the full-service title, but they just dabble in construction. They secure the job from the homeowner and for a fee pass it to a general contractor who runs the job from start to finish. The “construction partner” is introduced to the customer, and following the hand off the mitigation company disappears.
Many companies following this practice receive as much as 20% (Overhead & Profit) for the referral. This adds a modest amount to total revenue and some owners are satisfied with this arrangement.
- Other contractors have figured out that the greatest opportunity in our industry is to genuinely become full-service. They make the change in mindset from being a mitigation company who dabbles in construction to becoming a serious-minded construction company that gets most of its business in the insurance industry. When this occurs, the company can grow as large as it wants.
Xactimate pays above average wages in most marketplaces, and with good project management a 50% per rebuild profit margin is achievable. 100 rebuilds nets $1 million in revenue with industry high profits. Nearly every large restoration company has made construction services the primary focus of their business and marketing efforts are primarily focused on rebuild.
Once a restoration company becomes a general contractor many other construction opportunities may open up for remodel, fire services, government agencies and any other construction related work. The pathway to growth is narrow for a mitigation-only company, but it is wide open for a full-service company offering remodel and repair services.
Restoration company owners should carefully consider their long-term plans and what they want out of their business. If they want more work, more profit, or more personal wealth than they have a renewed commitment to growth can be chosen. Which will it be for you?
Reference: 9-Month Coaching Plan – The Business Transformer: Double, Even Triple Your Business in 18 – 24 Months
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