Fire & Water Restoration Companies

Overview

Let me explain my relationship to the Fire & Water Restoration industry. I have been a business broker selling main street businesses for 25+ years. I also am a CPA that does the necessary due diligence when a buyer finds a business they want to buy. I have done my share of fire and water restoration companies over the many years. Lastly, I own a landscape inspection company that does inspections for insurance adjusters on their claims received when it involves damaged landscaping, usually due to fires or floods.

In this article we are going to talk about the pluses and minuses of being in the restoration business. We will also address the reasons to buy or not buy a franchise. ServPro™ is the largest franchise in this industry.

The Restoration Industry

The restoration industry is also part of the construction industry. In some cases, half of a restoration’s income can be handling the emergency of protecting the property from further damage or theft and the other half of the business is the new construction necessary to rebuild or repair the damage. This can involve rebuilding interiors after a flood or fire or rebuilding a whole house that burned to the ground. To rebuild real estate, it really helps to have a construction background. You can quickly learn the short-term actions of how to dry the water damage so as to stop mold and mildew from occurring. To re-build whole building takes a contractor’s license and the education that comes with that license.

The profit margins in this business are good. The opportunities are very good if you fully understand real estate construction and understand social media marketing. The various franchises out in the marketplace teach you the ins and outs of this business and take a small or even a big commission if it is on all the volume of work you do regardless of the source of that work. That would include the cost of rebuilding whole houses. There are nice profit margins in the clean-up area, but not in new construction. Many companies in this industry, do not bid on the re-construction because of the tight margins. When the restoration company is a franchise, paying any commission should be on restoration only. If you buy a franchise, it is a valuable education that the franchises’ give you. It is a very helpful education, but when you pay the franchise company large sums of money year after year, and even while you are developing your own sources of leads for work, it becomes counterproductive and very expensive.

Servpro™ gives its franchisees a territory and they are supposed to work within that territory. The franchisees make money, but at some point, they object to paying the franchise fee year-after-year and that is when the successful franchisees usually sell. The owners sell with the idea of starting the same business, without being in a franchise because they have already spent years developing their sources of leads. When I look at companies for sale in this industry, they usually are franchises that are making money. I am talking about $500,000 to $1 Million net profit per year.

Looking at the Profit and Loss Statements, shows they are paying $200,000 in franchise fees in many cases. When I asked one franchisee how much of his business is coming through the franchisor, I was told it came to only about 25% of the business. That means that three quarters of the sales volume, the owner has developed and created on his own, through other sources and this volume he is still required to pay the franchise fee. Many of the sources develop, also require a referral fee. Who wants to pay two referral fees?

Think about buying an existing independent restoration company or better yet, think about starting your own. If you want to start your own, hire an experienced manager who can teach you the business and go to the industry certification classes, talked about below. In two or three years, you will be able to run the business yourself, if you already have the required contractor’s license. If you want to hire a consultant, they are also available, for a lot less then joining a franchise. I can help you in that direction.

Training to be in the Restoration Business

The Restoration Industry Association (RIA) has Certification Training Courses.

Advanced training courses and certifications for restoration and remediation industry professionals are available by RIA! This is the perfect way to get ahead in the restoration industry by becoming a Certified Restorer (CR), Fire Loss Specialist (FLS) for fire damage and fire restoration specialization, Content Loss Specialist (CLS), Water Loss Specialist (WLS), Environmental Restoration Specialist (ERS) and/or a Certified Mold Professional (CMP).

Summary

This is a good business to be in. The cost of entry into this field is expensive. It takes hundreds of thousands of dollars for equipment, and the required training is extensive, but again the rewards can be great. It is one business that is depression proof. As long as the property owner has insurance on the property, he will file a claim for flood or fire damage. So, these claims are filed regardless of the economic conditions. Buying a franchise may make some sense to an inexperienced buyer but in a couple of years, they wish they did not have the franchise payments.