The 5 Foundations of Building a Profitable Restoration Business: Part 2

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In Part One, we covered the first two foundations of building a profitable restoration business: Technology Stacks and Technical Knowledge. In this article, we’ll tackle the remaining three: Estimating For Scope, Pricing For-Profits, Simplicity Through Consistency, and Making Your Business Feel Like Home.

These five foundations are key to the success and growth of your restoration company. If you’re tired of money worries, toxic culture, and the thought of closing your doors, it’s time to focus on these five.

Estimating for Scope, Pricing for Profits: The Key to Maximizing Your Bottom Line

This third foundation is crucial, I’m telling you! Every estimate, every single one, has to have a detailed scope of the project and a pricing model with a profit margin included. No exceptions.

Let me share a story with you and let me know if this sounds familiar. A while back, I was approached by a $6 million restoration company, and they had a major problem: their estimates were wiping out all their profits. At that point, they were down 10% in profits, and that’s no small loss, let me tell you.

In a $6 million company, losing $100,000 for every $1 million worth of work means a yearly loss of $600,000 in profits (10%). That’s not just a bad month or quarter, it’s a sign of deeper issues.

The problem with a negative profit margin is that it’s not just the negative number, but also losing the profit they planned. It’s like two layers of damage. The first layer is the money they should’ve made from the profit margin that has evaporated, and the second is that the company has to pay for all the costs to complete the job.

For the $6 million company, if they aimed to grow profits by 10% ($600,000) and ended up losing 10% (-$600,000), they’re not just breaking even, they’re actually losing $1.2 million! #mindblowing

When the first layer of profitability gets eroded, it’s already too late. Accounting departments are slow to show the results, and by the time they do, the damage is done. And then comes the second layer of unprofitable jobs, and it just keeps getting worse. The company is actually paying to do the work for their customers. Insane, right?!

Simplicity Through Consistency

When I first started my consulting business, I took on every client that called. I thought everyone who reached out respected what I did and would pay up for the services that I provided. But man, was I wrong! I ended up working for free on more than one occasion because clients would tell me they couldn’t pay my invoice, because the money went somewhere else. 

I was taking it all to heart, negotiating and basically begging for at least a partial payment. It cost me a whopping $30k in unpaid invoices until I figured out a solution. By taking a closer look at my processes, I found a way to improve. Instead of invoicing after the job was done, I switched to a pre-pay system and offered a 100% money-back guarantee for my services before the client was scheduled. If they needed more services, I’d generate an invoice, but I wouldn’t start until they paid in full. And I did this with every client to keep it consistent.

This simple change made a big impact. It helped my clients by giving them clear parameters around time and resources they could afford. It helped me by freeing up time from chasing unpaid invoices, eliminating frustration over lost revenue, and keeping everything consistent with every account. This allowed me to work more with clients who trusted me and valued my services.

“Make a Simple Change, Make a Big Impact”

Have you ever stopped and looked at your business from the perspective of the customer’s journey? It’s a different look altogether when you go from your first call to closing the file. Where do you see confusion, resistance and what areas keep coming up as places that cause you friction.Leaders need to have frequent check-ins with employees to gauge where they are in their role and develop a personalized success pathway for the employee. 

When you’re evaluating your processes, keep in mind that every change is based on the idea that the customer journey is nothing more than a set of repeatable checkpoints that you guide customers through. When customers encounter friction, different emotions will occur from fear, anger, disconnecting and hovering. It’s a sign they’re either not a good fit for your business or pushing the limits of your structure. In these cases, warning signs are clear and it’s time to pivot – ignoring them isn’t an option. If you do, you’ll pay the price with lower customer service scores, expenses for mistakes, or operating outside of the job scope and parameters, all of which leads to lower margins. 

The most successful restorers have order in their organization through processes that are repeated on every job by their entire team, from the top down.

Making Your Business Feel Like Home

You know the saying, “when we are done, your house will feel like home again”. But what about your company? Does your “house” feel like home to your staff and crew? 

I was lucky enough to have someone close to me show me how to make this a reality. My dad worked for the federal government, and he was all about upskilling workers and pairing them with the right employers. When I started running my businesses, he taught me how to lead a team by serving them.

He’d always say, “Your business is run by the people who show up every day. They can’t control where they come from or what happens, but they want to contribute and need to feel like they can. If you’re leading, you gotta serve to get the most out of them.”

Making your business feel like a home is how people build the culture. Your staff experiences are a reflection of how you and your leaders run the company.

Sometimes, when you stop and think about how your business gets in trouble, the answers are almost always right in front of you. Did you hire the best of the best? Or did you hire anyone with a heart beat?

Are you leading by example? Or are you expecting others in your company to lead?

Did you invest in education and the latest technology and tools for your team? Or are you cutting corners and “getting by”? 

Are you loyal to a team that is not serving the best purpose of the company? Or are you always looking for amazing people to add to the team?

How you run the top of the organization affects how it runs on every level. Morale, efficiency, and effectiveness only rise to the level of the people you are surrounded by. If you’re hiring unqualified workers or not investing in them, a negative atmosphere will fester and grow into a toxic culture.

As a leader in the business you have to make hard decisions and lead your team. That means that it takes time for people to find their way, build trust through working through hard projects and as the trust builds between you and your team the quality of your business grows with it. 

Building a Business With the 5 Foundations

I’ve heard older restorers say, “This business isn’t like the good old days.” I agree! Today, we’ve got the best equipment, best training, best technology, and more money-making opportunities than ever before.

Today is the good old days, and those who focus on building a profitable business will keep experiencing the “good old days” far into the future. 

I’m giving you the tools I used to uncover the weaknesses in my business. I successfully reinvented my business based on these five foundations, and my business stopped suffering, I made a future for my team, and our company was a house that was a home where they could become restoration pros. If you want to save yourself time and get focused quickly feel free to download a free copy of the Profitability Workbook at www.profitablerestorer.com.

In the next article “Building a Risk Fortress Using  Field Documentation” I will share with you how to build a fortress of data around your files to protect your company from profit thieves. Your files are the wall that keeps your company safe from risk, allows you to keep and invest profits, and prepares your business to adapt to the changes in the market. 

And remember! Every dollar counts!

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Kris Rzesnoski

Kris Rzesnoski, CR, WLS, is the vice president of business development at Encircle. Kris guides the technical development of Encircle’s solutions to ensure they exceed industry expectations. With over 15 of years of experience in the restoration industry, Kris is committed to driving Encircle’s delivery of intuitive, easy-to-use solutions that allow contractors to improve productivity and profitability. Kris sits on RIA’s Restoration Council, Canadian Education Committee and is the chairman of the Estimating Committee.

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