Property Restoration – A Blueprint to Failure

In the pursuit of beating out competition and embracing the latest equipment and product innovations to “save labor costs,” only one party benefits—and it’s not the restorer. While these are not the exact words of the late great Marty King, the message is clear. 

As a surge of new restoration businesses, estimators, and consultants emerge, a “new” challenge has arisen: survival. This challenge has been at the forefront of every company’s priority list, with most searching for the magical one-size-fits-all solution. While such a solution does not exist or may never, today I will outline a blueprint that will lead you to failure.

A common trait that we all have at some point in our lives is stubbornness, leading to the inability to confront and conquer the comfort of what used to be. Look around you: everything is evolving. Yet, by learning and embracing change, we hold the power to shape a better future; and if we don’t, someone else will do it for us.

Legal Pitfalls & Financial Missteps

Imagine you borrowed a contract template from another contractor without tailoring it to your specific business needs and/or local regulations. A few months later, you face a dispute because the contract included clauses that are not enforceable in your state. Worst, the client sues you for breach of contract, and you spend a fortune on legal fees trying to defend yourself.

Each state has its own rules about what a contract can and cannot have, which may or may not be enforceable. By not investing in local legal counsel to draft a contract, you are likely to encounter repeated challenges and potential legal consequences. 

Solely relying on a software program to estimate project costs, believing it to be 100% accurate, comes with risks. Midway through the year, you realize your expenses far exceed your revenues, and your business is in financial trouble. Without understanding your financials, expenses, target margins, etc, you acquire this feeling of discomfort when providing the bill and most likely undercharge your services.

Joining a network of third-party administrators, hoping to gain more work volume, could backfire if the expected volume doesn’t materialize, leaving you with high fees or fewer projects than anticipated. Additionally, using a fixed pricing model that does not account for rising costs in your area can be problematic. Assuming that the same pricing and methodologies apply universally, regardless of market conditions, can lead to pricing that is either too high or too low, affecting profitability and client satisfaction.

Actionable Advice:

• Invest in local legal counsel to draft a customized contract.
• Stay updated on local regulations and industry standards.
• Regularly review your finances, possibly with a CPA.
• Adjust your pricing model to account for local market conditions.
• Assess network potential return on investment carefully.

Communication, Documentation, and Billing Errors

During a restoration project, unexpected issues arise that require additional work. Failing to document these changes or communicate them to your client can lead to disputes when they receive the final bill. Failing to make a good faith effort to cooperate with all parties involved and avoiding documenting any changes to the scope of work leads to disputes and project delays.

Have you ever completed a restoration project but feared the client would reject a high bill? So you end up hiding sections of your scope/documentation, only to realize later the project costs you more than you billed. Providing only photos of readings without interpretation (the true story) leads to confusion about the drying process, equipment usage, etc. Fear of billing too much and avoiding detailed documentation to justify your charges will lead to confusion and disputes. When changes occur in the scope of work, inform the client (property owner) and document the discussion and result.

Actionable Advice:

• Document all changes to the scope of work and communicate them to the client.
• Issue a change order to clearly outline expectations and reflect the updated value.  
• Maintain clear and consistent communication with all parties involved.
• Be transparent with billing and provide detailed documentation to your client.

External Control & Risk Neglect

Allowing external parties to dictate your restoration methodology can lead to substandard work and delays. Suppose you comply, only to find out later that the adjuster’s or TPA’s methods were outdated and ineffective. Remember, you are the professional, and ultimately, you will bear the consequences. Letting external parties dictate the methodology, scope, and pricing of your restoration projects can undervalue the overall project and be detrimental to the client. Insurers are obligated to pay the ‘usual and customary’ and/or ‘reasonable’ cost of repairs. Thinking that allowing external parties to control the project will ensure quicker payment or fewer disputes is a mistake, as it opens the door for documented consequences. You must provide your client (the property owner) with a scope, and allowing external control could breach this contract.

Understand this: you have a duty to your client and your client only. If your client decides to open a claim, you are positioned between the client and the available funds. Ensure your scope is well-defined so your client can determine their reimbursement eligibility, as it is not your responsibility. Your duty is to educate, advise, and/or warn your client about their situation so they can decide what they are willing to allow you to perform.

Skipping risk management practices such as exposing the risk in your thorough documentation and clear contract terms can lead to a lawsuit from a client who claims you breached the contract or damaged their property. This oversight can lead to loss of credibility, increased liability, disputes, and financial losses. Proper risk management helps to mitigate these issues and protect your business.

Actionable Advice:

• Maintain Professional Control: Keep control over project methodology, scope, and pricing.
• Define Scope Clearly: Provide a detailed scope to the client to avoid contract breaches.
• Educate Clients: Inform clients about their situation to help them make decisions.
• Document Thoroughly: Keep comprehensive documentation to protect against legal issues.
• Implement Risk Management: Follow robust risk management practices to mitigate liability and disputes.
• Flexible Pricing: Adjust pricing structures to fit the unique needs of each project and your business.

Conclusion

Understand legal matters, set clear terms, and define your scope of work. Invest in local legal counsel to draft enforceable contracts to avoid challenges. Customize your pricing based on your financials and local market conditions. Communicate effectively, document thoroughly, and justify your actions.

Success is neither magical nor mysterious–it’s the result of applying the right strategies, learning from challenges, and continuously improving your approach. With these practices, you can avoid common pitfalls and steer your business toward long-term success.