Though no one likes to see a tragedy, there’s one form of work a contractor can always rely on: storm damage restoration. After Superstorm Sandy in 2015, insurance companies and FEMA paid out just under $300 million in insurance claims to rebuild flood-damaged homes. And it doesn’t take a cataclysmic event to require storm damage restoration: even the typical hailstorm can cause roof damage, and it doesn’t take a flood to know that a leaky window can cause drywall damage and mold problems.
So, who’s fixing all this damage? Could your contracting business benefit from this kind of work, and is there enough of it to support you? Let’s take a look at the pros and cons of storm damage restoration, and find out if it can be the good kind of windfall for your contracting business.
The good news is that, done correctly, storm damage restoration can generate huge revenues for your business. The Federal Emergency Management Agency has paid out over $81 billion since 1992, and yes, contractors have benefited from a huge chunk of that. Here are some of the other pros to storm damage restoration:
- There is a lot of work and no real barrier to success. As mentioned, storms keep happening, so restoration is always a necessity. If you do this type of work anyway, your company is already set up to handle the jobs. For example, if you normally specialize in roof replacement, your contracting business is already positioned to take on hail damage jobs. The contingency to keep in mind about this, however, is the cash deficit you must carry during storm damage restoration jobs (see below).
- The work is easily scalable if you have both the systems and a defined process in place. This is especially true for companies working along coastlines subject to hurricanes, or in landlocked states comprising “Tornado Alley.” The goal is to have a replicable system in place for the most common SDR jobs in your area. This allows you to act fast and efficiently, from generating leads through the close of the job.
- Profits can be steep if you are positioned correctly and have efficient sales people. Your sales team has to have an efficient process to find, bid and close these jobs. The faster this process, the more jobs closed. Remember, this is also a very competitive space, so speed and efficiency are key to success.
In short, the bad news is that if you don’t set-up and execute on these jobs correctly, it can be very difficult on your business. It is important to keep these possibilities in mind:
- Storm Damage Restoration can be a cash flow killer. Insurance companies typically take a few weeks to pay their tranches, while other companies pay a lump sum sometimes a month after completion. This means your contracting business has to have enough cash flow to cover the gaps. If you’re using a business line of credit, then you must remember to include the cost of that capital when calculating your profit margin. Also keep in mind that if repair work is occurring during the storm season, there could be further delays due to weather conditions.
- There’s a negative connotation to storm damage restoration in the industry. If you are insensitive to the unique needs of a client facing the devastation of their home, it only helps to promote the negative stereotype that certain contractors are “Storm Chasers.”
Keep in mind that your client is at their most emotionally vulnerable during this time. Only salespeople with the best people skills should be handling these leads.
- It’s difficult to predict when this kind of work will be available. Though there is definitely a Hurricane Season and a Tornado Season – and winter always seems to provide plenty of storms – it’s not easy to predict when storm damage restoration jobs will occur. This creates complications with handling cash flow or estimating quarterly or annual revenues.
Process Is Everything
With these pros and cons in mind, what is keeping you from bidding on this kind of work? What steps do you need to take to overcome those hurdles and take advantage of this potentially lucrative opportunity? Remember, somebody is getting this work: why not have it be you?
If you’ve never done storm damage restoration and are now considering it – or if you’ve done this work on-and-off and want to get more of it – don’t be scared or intimidated: be focused. The contractors who are making big money from storm damage restoration are the ones who have a workflow process in place that is simple, efficient and above all, replicable. They have created a template for these jobs from beginning to end and can apply it to every storm damage restoration job.
Oftentimes, this means having separate workflow processes for each kind of storm damage restoration project: one for flood damage, one for roof damage, etc. Certain workflows will be the same, like how the work is done and who signs off on its completion. But other workflows will be unique to the project, such as how your sales team engages the client, or how payment is collected from the insurance company. Remember that important motto – go with what you know. If you specialize in roof repair, then your company is already poised to profit from roof repair work due to storm damage. Companies making big money from this channel know their capabilities and stick with them. No need to reinvent the wheel here.
Look at the pros and cons of storm damage restoration and see how they apply to your contracting business. Then ask yourself, am I only a few steps away from taking advantage of this profitable channel? If the answer is yes, consider the workflows and processes necessary to get started…and look forward to increased revenue in 2020!