The industry playing field has changed, is changing and will continue to change. You can’t read the minds of the people who are making the changes, but you sure as heck need to be adjusting to the changes that have already happened. Your future success in business is contingent upon your responses and your timely responses to the changes that have already happened. Notice that I’m not asking you to anticipate where the future of the industry is going, just where it is today.

A major change in the industry has been the increase of business being controlled by TPA’s (third party administrators). The start of TPA’s started with USAA partnering with Xactware and PRISM. The process allowed USAA to better monitor the job progress on a real-time basis through the use of Xactware software and PRISM facilitating the job progress. This started the beginning of improving contractor job performance and job quality standards. As a result of this process, one large company within the program last year completed in excess of $36 million. As a result of that action, the industry has continued to attract investment companies that are purchasing and consolidating restoration companies.

A second major change has been the track that the State Farm program is taking. They are continuing to keep the program in house, but they will not be requiring contractors to use a specific materials supplier as was required in the past. 

A third major change has been the purchase of Alacrity by Lowe’s. Alacrity is a very capable company and they are now owned by a very capable materials supplier.

So what can you do to respond to the changes that have occurred in the industry to date?  Let me suggest a list of five things that you might want to consider doing:

1. Decrease your overhead and then control it at the level that will allow you to be competitive for the type of jobs you want to do. Let me give you a target to shoot for - get your overhead down to 10%. This does not include owner compensation or net profit. In order to accomplish this action, you must get all of your job costs into your direct job cost where they belong! Another way of thinking about this is to make sure that all of you labor hours are billable hours. Labor is your biggest expense and the easiest place to lose money. Hey, I didn’t say it was going to be easy to do! But think about it, why wouldn’t you want your estimators only bidding jobs that you are going to do. Maybe the idea is to let your competition do the free estimates for the companies that want it done for free!
2. Increase your use of software throughout your company. The idea is that you use the software that you want used in the company. Different companies have different needs for different software. It depends on the sophistication of the culture of your company as to what is needed. Rather than waiting for the “perfect” software to come along, pick one – any one - and get started. As you begin to use the software you’ve picked, you will begin to realize what is needed to improve your company’s performance and profitability. You will then make the necessary adjustments that will allow you to get better than you already are.
3. Know where business is coming from and what you have done to get that business. The first half of this idea is that you need to keep track of all requests of service from potential clients. What has been proven over and over is that this data cannot be kept in your mind, because the mind cannot remember everything that the company needs to be remembered and then be used to focus the business development efforts of the company. The start of keeping track is a hand-written list with the end of the process being an electronic method (software) that can be viewed by all computer stations in the company. It does not matter what you use, because as you begin to see the power of what it gives you, you will “get it” and then begin the process of “getting it” better and more quickly.
4. Standardize your product that you are delivering to your clients. This is a difficult process, but it becomes obvious as to what needs to be done, as you observe the results and look ahead to the needed changes. The first goal that you need to achieve is to be on time and on budget in each and every one of your jobs. Two things happen, when you go down this path: a) you will begin to see the job in the eyes of the insurance carrier and the policy holder and b) you will begin to see why your profit is not flowing to your bottom line, causing you to change the way that you bid for all of your future jobs.
5. Trust your system - but verify your system on a frequent and random basis. At first look, this appears to be a penalty move by checking on what is being done and what is not being done. In reality, this process keeps everyone on task and continuously focused on the outcome of each and every job. This effort has multiple effects and outcomes on the future of the company. Unless a company is profitable, there is no future for anyone in the company.

The industry was slow for most contractors in 2013, but it was a banner year for the insurance industry. I would suggest to you that the insurance industry has already completed my list of the five items above. If you continue to do what you did in 2013, you may get your 2013 results or less than those results in 2014.

Here’s to wishing you a more profitable year in 2014!