How to Start a Restoration Company: What Do You Need to Know? January 19, 2018 – Posted in: Blog
Over the past 36 years, there has been over 200 climate and weather disasters across the U.S. These events have cost over 1 billion, and have made restoration a growth industry.
Each region of the country experiences different types of damage. The southeast has a prevalence of tropical cyclones while winter storms are most punishing in all of the east coast states and along the Gulf Coast.
Flooding is a danger in most states — especially Texas and the lower Mississippi Valley. The western states, especially California, are hit hard by wildfires frequently and the southern central states experience extreme local storms.
The number and severity of natural disasters means starting a restoration company can be a lucrative venture. Starting any new business requires proper planning, though.
This guide will help you determine if the restoration business is a good fit for you, things to keep in mind and what you need to get started.
Things to Consider Before Starting a Restoration Company:
Before you start buying equipment and hiring employees, there are a few things you will want to consider.
To Franchise or Start From Scratch?
When starting a water restoration business, you have two options. You can start your business from the ground up or you can purchase a franchise. There are benefits to both approaches, so the decision is based on your individual situation. Research both before deciding.
Buying a franchise can get your business up and running faster, but it may require a bigger upfront investment. Usually, a franchise will require some training and even working for another franchisee before you begin your own operation.
When operating a franchise, there are rules and procedures to follow. You have to operate your franchise the same way all of the others are run.
Building your restoration business on your own may allow you more flexibility — but it will also require more knowledge. When you build your own business, there is no one to tell you how to run it.
You have to figure it out yourself or find a mentor or partner to help you. You can make your business unique and it will stand out in the market.
But with either a franchise or your own homegrown business, there are some additional considerations.
Is There a Need for Restoration Services in Your Area?
Any restoration business, whether franchise or homegrown, requires customers who need your services. You need to consider whether there is enough need in your area to sustain a growing restoration business.
Do some research into the number of storms and natural disasters in your area in the last several years. Also, check out the number of existing restoration companies around. Try to find out if they are very busy or if they struggle with slow business.
Do You Have the Appropriate Training and Certifications?
Before you open up shop, make sure you have the right certifications for the type of work that you plan on doing.
Getting into the restoration business can feel slow, since you need to begin by getting your certifications. Analyzing and remediating damage are specific skills you have to learn. When handling mold, for instance, there are safety protocols you must follow for your crew and the homeowner.
Find out when the appropriate certification courses are offered in your area to begin building your timeline for starting a restoration business.
Ready to Get Started?
To recap briefly before we continue, these are the key concepts you need to consider before starting a restoration company:
- Should I buy a franchise or start from scratch?
- Is there enough need for restoration services in my area?
- Do you have the required certifications? If not, how long will it take to get them?
With the answers to these questions, you can make an informed decision about whether to start a restoration company now or not. Once you’ve addressed these items, it’s time to move forward with the process of starting your business!
Moving Forward and Project Considerations
Like other construction industry businesses, restoration is based on projects. Before you begin to build your business, you need to decide what type of projects you will work on. Fire and water restoration and mold remediation all require different skills and equipment.
If you are completely new to this industry, you may want to start with a narrow focus — fire restoration, for example — and then add services on from there.
Location, Location, Location
The other consideration when deciding how and whether to limit your services is your location. If you are in the northeast, focusing solely on fire restoration may not provide enough work for you. The weather conditions in the southeast could be more likely to promote mold remediation work.
In a coastal area, water restoration from flooding could be your main business focus. Focusing your business on one aspect of restoration could make it easy to promote your services to a niche market.
The Downside of Limiting Your Services
Limiting your focus, though, could also limit your ability to grow your business. It limits the jobs that you can pursue and if you specialize in damage mitigation, your customers will also need to work with a contractor to handle any serious property reconstruction when your part of the job is complete.
It could be easier for customers to hire one company that can handle both mitigation and reconstruction, unless you’re able to network and partner with other providers in the area and offer these partnerships to clients. The same could be true for a situation that involves water damage and a mold infestation if you only do mold remediation.
When you are on a job site performing restoration work, you are only getting paid for half the job. If you were able to do the reconstruction also, you could more than double your revenue per job.
For these reasons, you may want to consider starting a full-service restoration company that handles all types of damage mitigation and reconstruction. The decision will ultimately depend on your location and its service needs, your resources and areas of expertise.
Permit, Licensing and Insurance Considerations
Licensing and permits are important in the construction and restoration industry. Start with a business license to establish your company’s name and type of business activities. You may also need a contractor’s license depending on your state or local requirements.
Many states require a company to have a contractor’s license if they are performing work valued over a certain amount, which can vary from $1,000 to over $4,000.
You can learn about the qualifications at your local county clerk’s office. Licensing requirements vary by state and region. The clerk will have a form for you to fill out and file for a nominal charge.
Depending on the regulations in your area and the type of work that you plan on doing, you may also need a construction permit – also sometimes called a “building permit.” These permits are issued per job, so you will become familiar with this filing process.
Check with your local building department to determine what information is needed. You may need a signature from the property owner, so be sure you leave enough time to complete this. You cannot begin work until you have a construction permit in place.
You also need to have the appropriate insurance policy in place before you can begin any work. The amount and type of insurance required is dictated by the state. You need to insure your equipment against theft, your business against lawsuits and your workers against injury.
Employee Hiring Considerations
It would be difficult to run a restoration company without any employees. You cannot do all the marketing, estimating, remediation and reconstruction on your own. So, first decide which jobs you are best at — and then hire employees who can help you do the rest.
You may want to run the business from an office while your employees handle the hands-on work if you have business, legal or accounting experience. If you have some skill and experience in construction, you could hire an office manager to keep the business running while you work in the field, meet prospective customers and estimate new jobs.
It is a good idea to hire at least one person with some of the certifications required to operate your restoration company. Certification and training will be important on all job sites.
With two people in the company who can lead a work crew, you could operate two separate jobs at the same time or continue work at a site if one or the other is unavailable.
Knowing how many jobs you can accept in the same timeframe can be difficult at first and will depend on the size of your staff. You may want to start with just one employee until you get some projects. As your workload increases, you can hire additional people.
Remember, too: Once you hire someone, you will have to pay them even if there is no work coming in. Be careful not to overextend yourself by hiring too many people early on.
Equipment and Supplies Purchasing Considerations
You cannot accomplish restoration without quality equipment. Before buying any tools or equipment for your first project, you’ll need a commercial vehicle. The vehicle serves two purposes: marketing and transportation.
Be sure to have your company name and phone number clearly visible on both sides of your company truck. Showing up on a job site with a clearly marked truck full of equipment will make your company appear organized and professional.
The equipment you purchase for your restoration business will depend on what type of services you plan to offer.
For water restoration projects air movers are essential, you will also need dehumidifiers and air scrubbers. Fire restoration often involves remediating water damage, so some of the same equipment is necessary.
You may also need power washers, extractors and a number of smaller items, like power cords, cleaners and safety equipment for your crew.
- Always buy commercial-grade equipment for your water restoration business. These items are made to last and are meant to run for hours or even days at a time. When you are on a job site, you need your equipment to work reliably. Faulty equipment can slow the job down and add costs. Renting equipment because yours stopped working can ruin the profit margin on any job.
- Another tip for starting your restoration business is to buy in bulk. You may have only five employees, but you should buy masks and gloves in bulk. You will always use safety equipment and you will get a better price when you buy it in larger quantities. Bulk-buying is also available on most equipment. You will likely need multiples of many pieces of equipment, such as air movers. Let the equipment dealer know you are interested in multiple items and see what he can offer you. Contractor mix packs can be purchased as a great way to get a variety of equipment at bulk pricing for a lower cost per unit.
- Repeat purchases could also get you a discount at some equipment dealers. For things that you need frequently, like PPE for your crew, cleaning chemicals and building supplies, you may be able to get discounts as a regular customer. Sometimes, opening a contractor account will earn you a discount on your purchases. Shop around for the best deal before purchasing your equipment and supplies.
Stocking up on equipment and supplies is an important part of starting your restoration business. It’s easy to go overboard on initial purchasing, though. Purchase the equipment you need to begin working on restoration projects, but resist the urge to buy too much. You can add to your equipment when business picks up and you need additional items.
Training and Certification Considerations
Training and certifications are especially important in the restoration and reconstruction industry. When you are working on a restoration project, your company is responsible for the safety of your crew and the future safety and health of the homeowner.
Some types of damage can be unseen, hidden inside walls or under cabinets. You are responsible for removing or remediating all of the damage so that future problems do not develop.
Figure Out Which Certifications You Actually Need
It is important to know what certifications are required in your area. Check with the building department or similar government office in your county to learn about the various certifications required.
You may want to check with local colleges or training centers to see where you can get the training you will need. Talking to local restoration business owners might be helpful, also.
The certifications you need will depend on the type of services you expect to provide. Water damage restoration can involve working with mold, which may require special certifications.
Air quality is another subject you will have to study if you plan to perform fire restoration. Often, it is the toxins you cannot see that are most harmful.
The Institute of Inspection, Cleaning and Restoration Certification (IICRC) is an international industry standard you will want to investigate. IICRC offers several different types of certifications, like Water Damage Restoration Technician and Applied Structural Drying Technician.
Certification courses are given online and in various locations throughout the country. Check to see if an IICRC contractor is giving a course in your area. Then, there are several steps you need to take to secure IICRC certification for your restoration business.
You can also find discipline-based certification courses through the American Council for Accredited Certification (ACRC).
All your technicians should complete at least one certification program. It may be a good idea for them to pick different concentrations so your company as a whole will possess detailed knowledge in different areas of restoration.
Employees with training in water damage assessment, cleaning science and mold remediation can help you build a strong team of restoration professionals.
Having the right equipment and a trained group of employees will make your restoration company competitive, but you still need to get the jobs to grow your business.
New businesses often struggle with letting people in the area know that they exist and what services they offer. At first, you don’t have any satisfied customers who can spread the word about your work.
You need a marketing plan. Here are some restoration marketing strategies to consider:
- Business Name/Logo on Your Company Vehicle: Name recognition is an important part of marketing and branding. People like to hire a company they are familiar with — especially if they are dealing with property damage from a natural disaster or a fire. These are emotional times in people’s lives and they will lean toward the familiar.
- Business Cards: Everyone in your company who interacts with customers needs a business card. They are a handy way to be sure your company name and contact information are getting out to the public. Business cards leave a professional impression and help with word-of-mouth marketing, too.
- Networking: Since your business relies on getting customers in a certain geographic area, networking with local organizations is important. You have a specialized service to offer, so think about who might benefit from that service. Anyone who owns property may at some time need your services. Talk with realtors and insurance agents about introducing your company to their clients.
- Website: If you don’t have a website, your business does not exist to many potential customers. The internet is the new yellow pages and the place where people go for information. Create a clean, easy-to-use website for your business that includes all necessary information. Let the world know what services you provide, the certifications you have, who you’ve worked for in the past and how to reach you. With a website in place, you can take advantage of internet marketing that is often less expensive and more effective than print ads. There are ways to increase your website ranking in search engines, too, so that when people look for a restoration company in your area, your website will be immediately visible.
- Google My Business: A Google My Business account will ensure your business information shows up when people search the internet for restoration companies in your area. It is easy to set up and some of the best advertising you can get. Google often puts Google My Business listings above search results for related search queries. These listings include photos, phone numbers, website links, reviews and other business information that makes it easy for users to review your business’ service offerings and contact you.
- Create Brand Awareness: People cannot hire your company if they do not know you exist. When your business is new, it’s especially important to get your name out there so people become familiar with it. Look around your community and notice where you see company names. You want your company name in all of those places. Consider sponsoring local sports teams and getting involved in other community-based activities. Any time you donate money to a cause, be sure your company name and logo will be displayed.
- Referral Marketing: This is more of a long-term strategy, but you need to establish a system from the beginning. As your business begins to develop satisfied customers, provide an incentive to those people to refer someone they know. You can start with your friends and family. Give them a small cash reward or other incentive for referring a new customer.
- Directory Listings: Your local Chamber of Commerce or business association has a directory of local businesses. Research all of the directories in your area and your field and find out how to get your business listed. Realtors may have a business directory they provide to their clients moving into the area. Insurance agents are likely to have their own business directory. These listings are usually free or very inexpensive and they are another good way to advertise your business.
Marketing is a creative endeavor you need to engage in to get your business off the ground. As a business owner, you should always be thinking about where your customers gather and how you can get your company name and information in front of them.
Have a Marketing Plan for When Disaster Strikes
Most people are not prepared for a natural disaster or a fire to strike their property and often restoration professionals are not prepared either. Be prepared when a disaster strikes with a business strategy for getting your name out there to people who are in need of your services.
This plan may include:
- Email blasts
- Other forms of advertising
Having these prepared ahead of time will help you focus on getting right to work helping the people that need it instead of trying to get flyers printed and emails drafted. Depending on the extent of the disaster, printing marketing materials may be nearly impossible directly after a natural disaster strikes.
Set Your Business Goals for Your Restoration Company
A restoration company helps people when they are experiencing a traumatic event. Having your home damaged by fire or flood is something most people do not anticipate and it leaves them feeling scared and vulnerable.
A good restoration company can restore peace-of-mind and put people’s lives back together quickly and safely. Helping people gives you a good feeling.
An even better feeling comes from running a business that meets or exceeds its profit goals. You cannot continue to help people if your business is running in the red.
Setting realistic goals for your business can help you turn a profit and keep providing necessary services for the people in your community.
Start by setting profit margin goals for each type of job you do. Mold remediation, water damage restoration, fire cleanup and reconstruction are all separate streams of revenue for your business.
Be sure that when you estimate these types of jobs, you know what it will cost you in equipment, supplies and labor to complete the job. On top of that cost, you will add a percentage that represents your profit margin.
The net profit for your business is the revenue you take in on all jobs minus the costs. When calculating your net profit at the end of the year, be sure to subtract your overhead expenses like rent for your office space and insurance premiums. By checking your net profit quarterly, you can see how your business is doing.
Profit Margin Benchmarks for Restoration
Net profit margin can be expressed as a percentage of gross revenue. These are standard profit benchmarks for the restoration industry:
- 20 percent = Excellent
- 15 to 20 percent = Good
- 10 to 15 percent = Average
- 5 to 10 percent = Poor
A net profit margin of less than 5 percent makes it very hard to stay in business. You will not have the cash flow you need to service your customers properly. Consider this when you set your profit margin goals for each type of job. If your profit margin goals all exceed 20 percent, you will be creating a small cushion for projects that go over budget and bring in a smaller profit than expected.
Tips for Increasing Your Net Profit
Setting profit goals and checking net profit are ways to ensure that your restoration business is profitable. In your first year, the profits may be small because you are purchasing new equipment and getting your business set up. After that, you should be able to increase your net profit. Here are some tips to help you do it:
- Save on Equipment: Buying in bulk will help you with the costs of equipment and supplies. Also, be sure you buy quality equipment to save on repair and replacement costs. There are other ways to save money when buying equipment, too. Shop around to get the best deal and use your buying power to negotiate discounts. When you save money on equipment and supplies, you bring down your overhead costs and increase your profits.
- Save on Subcontractor Work: Anytime you have to hire a subcontractor, you lose a little control over the job and the budget. Whenever possible, develop the ability to handle work in-house, so you don’t need subcontractors. When you work with subcontractors, try to pay them by the job instead of by the hour. This way, you are not paying extra if the work takes longer than they initially estimated or they are working inefficiently and they are not able to pad the bill by working slowly. Try to cultivate relationships with the subcontractors you need frequently. They may be willing to give you a better rate since you bring them regular business.
- Cash Flow Management: Cash flow can be a hidden drain on your profits if you do not keep it under control. Treat small expenditures with as much attention as large ones, because they can add up quickly. Be sure to track every dollar you spend, attribute it to the right job and claim it as a tax write-off when appropriate. Tracking purchasing and inventory carefully will keep you from wasting money on excess inventory. Consider using tracking software to help increase the efficiency of your operation.
- Do What Makes You Money: Jobs with higher profit margins increase your net profit, so you want to focus on getting more of those types of jobs. Figure out which type of job brings you the highest profit margin and concentrate on getting those jobs. Set monthly targets for yourself and your team so everyone knows what the priorities are.
Another element that affects your profit margin is time management. For yourself and each of your employees, you want to benefit the most from the time spent working. It can be easy to calculate this for your employees because you know how much you pay them and what they accomplish each day.
When it comes to your own time, especially if you are working on marketing the business or estimating jobs, your hourly benefit to the company may be harder to track.
Keep track of the tasks you perform each day and how much time you spend on each one. Whenever possible, roll that time into the cost of an associated job. Estimating, for example, should be charged to the job once you get it. If you see a significant drop in profits on those jobs, you may need to raise your prices to accommodate this unseen overhead cost.
Increasing your net profit is something to work on every week. Remember that there are two sides to this equation: the money you bring in and the money you spend. Higher revenue is no good if the profit margin shrinks. Estimating is an important part of controlling profits.
At the end of each project, review the budget to evaluate how close it mirrors the estimates. Brainstorm ways you could lower the costs on the next job, either with more efficient materials purchasing or better time management.
When you see where you are overspending on jobs, you can increase your profit by tightening your operation. If there is no way to lower costs on a job, maybe you should consider increasing the price.
Track your net profit quarterly to see how your business is doing. You may find that you have a busy season and can make changes to increase profits during that period next year.
Adjusting your staffing to fit your business is another way to increase profits. With more employees, you could take on more jobs. If they are the higher-profit jobs, your net profit could grow.
Make Your Restoration Business Plan
Starting a restoration company is a large undertaking that requires a good deal of planning to be successful. You need a business plan that incorporates equipment purchases, employees, certifications and marketing. When you have the right information and the funding necessary, you can get started on your fire restoration business.
It is important to understand the licenses and certifications required to start your restoration business. There’s a lot to know about restoring a property that has experienced significant damage from fire, water or mold.
Restoring personal possessions can be an artful pursuit and is usually done under the pressure of emotional homeowners who are displaced and unhappy.
There is a lot of practical knowledge that can be applied to drying out certain materials. Mold is also a scientific consideration. Knowing how it grows, where to look for it and how to prevent a future outbreak is essential in restoration work. The health of your clients and your crew depends on it.
Health and safety also rely on restoring the structural integrity of a building where people live or work. Engineering and construction principles are tested under flood or fire conditions. Each restoration job is unique and the clients will rely on you to get it right.
The right equipment will make your work easier and more efficient. Water damage is a time-sensitive situation that requires a restoration company to move in right away. The longer water, mold or fire residue remains in places where it does not belong, the worse the damage can become.
When your equipment is right-sized and well-maintained, you are ready to move in and begin the job. For time-sensitive jobs, this could make the difference between landing a restoration job or having it go to your competitor.
The professionals at Aer Industries can help you choose the right commercial equipment for your restoration business. We have been servicing the restoration industry for almost 20 years with air movers, air scrubbers and industrial dehumidifiers to handle big and small jobs.
Our equipment is heavy-duty and reliable in all climates. We offer a variety of sizes to handle large areas and work in hard-to-reach spaces.
Let the professionals at Aer Industries help you equip your new restoration business with bulk supplies and contractor mixed packs that will save you money. We will be here for the life of your business providing maintenance and support on all the equipment we sell.