Last month, the yield on the 10-year Treasury note became less than the yield on a two-year Treasury note. Without going into an economics lecture, this event has preceded the last seven United States recessions. According to CNBC, the average time for a recession to occur after this event is less than two years. Copper prices are down 13% this year which signifies a slow down in home building. GDP growth has slowed dramatically and S&P earnings have been about a third of what was expected this year. The writing is on the wall.
For many of us, this won’t be the first time we’ve faced this. The restoration company I manage in Southern California had barely incorporated when the world was smacked in 2007 by the worst economic meltdown since the Great Depression. We weren’t worried at the time; restorers would brag at every industry event how “recession proof” the restoration business was and boy were we wrong.
All of a sudden, we found ourselves seeing three scenarios when we were called out to inspect new claims:
- Homeowner is out of work or down on their luck and decide to keep the settlement and do the work him or herself using handymen and sub-contractors.
- Homeowners hire us to do the work and keep the money after we’re finished.
- Homeowners who had major water or fire claims took the settlement, paid off their past due mortgages, and walked away with the remaining settlement.
They say those who forget history are doomed to repeat it and today I am grateful for the wounds we suffered in the last recession that serve as a reminder.
If you’ll remember, Allied Restoration owner and fellow Restoration Coach O.P. Almaraz and I did a video series a couple of years ago on the 4 Ways to Increase your Restoration Business that will give a great background to the philosophy that led to these three executable strategies.
The restoration companies that succeed and thrive in a poor economy and into the future are going have to bring new meaning to what it means to be a “full service restoration company”. I’m not talking about doing both mitigation and construction or adding lines like personal property or asbestos (although these can be great options for companies looking to grow their relationships with their customers).
The future of restoration is not in mitigation or reconstruction alone. There is an enormous opportunity for restoration companies in prevention.
I hope I didn’t lose you with that thought. Preventing fire and floods may sound like a threat that could cost you disaster dependent business, but we have found the exact opposite. In the last five years, we have tripled the size of our company with higher profit margins and successfully set ourselves apart in one of the most competitive markets in the country by helping our clients not only deal with losses once they happen, but preventing losses before they occur.
Leak Detection Devices
The first time I heard about a device that could automatically cut off supply lines if a leak had been detected in the home probably felt similar to the good folks at Nokia watching Steve Jobs demo the iPhone for the first time. The high net worth insurance carriers began to catch on to this trend and it wasn’t long before they instituted programs offering to pay for leak detection devices to be installed after a claim. Since this program has been instituted, we have taken advantage of this opportunity to perform additional work for our client at no out of pocket expense to them.
Market-intelligent restoration companies are installing these devices after each claim even though on the surface it might appear that this could cost them a potential repeat customer. The truth is that the more services we provide for our customers, the more valuable we are to them and the more likely they are to call us in the unfortunate event they do have another claim.
Disaster Prevention Services
The last two years have seen devastating wildfires tear through some of the highest end communities in Southern California. What is so appalling about these events is not merely the damage they cause, but the fact that according to a DisasterSafety.org show as much as 90% of wildfire home ignitions could easily be prevented with some simple prevention actions.
After seeing countless homeowners return heartbroken to find their homes gone, we resolved to get in front of this. We started by putting together a presentation to educate Insurance agents and brokers on how to teach their policyholders to following simple strategies for wildfire prevention in their properties. We went on to form relationships with companies that could spray homes in the wildfire areas on a regular basis to prepare them for the inevitable next fire. While onsite at homes in wildfire areas, we teach our superintendents and project managers to offer to (profitably) quote on services like enclosing eaves or cutting back brush to create defensible space.
There’s no reason why a similar program couldn’t be prepared for other damage that could be prevented in other natural disasters.
“Owning the Home”
In case you aren’t aware, digital market forces have required plumbing companies to become digital marketing experts to scale their companies. Yellow Page ads have been replaced by pay per click, Facebook ads, and YouTube channels. Another strategy many have adopted is to take on HVAC and electrical work to become a one stop shop with yearly membership programs where they perform maintenance for a nominal fee.
This strategy for being a one stop shop for all maintenance needs is often described as “Owning the Home”.
As restoration companies, our relationship with homeowners is kind of like a parent’s relationship with a teenager: they don’t know you exist until they need you. To get in front of this problem, many restorers have resorted to bribing the homeowners’ trusted plumber to get invited in when the homeowner calls them. It’s time to take a page from the plumber’s playbook and create a valuable long term relationship with the homeowner that isn’t about “waiting for something to go wrong”.
What would it do for your profits and the value of your company if you had a sizable percentage of your business coming through a recurring monthly business model that let you maintain top of mind awareness with your past and future customers? This strategy has been a seven-figure needle mover for both our restoration company and the clients we provide restoration training for.
The Recession is Coming. Are you Ready?
Today’s customer has never been smarter or more empowered. You can get 10 quotes to clean your house from local reputable company within three clicks on Yelp. The marketplace has conditioned us to be impatient and require full transparency. We used to be able to offer two to four-hour windows for arrival, but today’s consumer expects to be able to watch a driver’s entire commute to their home. They have options and they aren’t afraid of using them.
With nothing but options, who is a customer going to call: The company that comes in and grabs their 75% profits on the flood mitigation and refuses to serve them anywhere else or the company that prevents the damage before it starts? Who are insurance agents going to trust?
In the end, the greatest way to be valuable is to create value.
We have found that by changing our role in our client’s lives from reactive to proactive, we become the company at the top of their list to call if they ever have claims in the future in the same or other properties. Preventing claims where possible helps ensure you get every claim that isn’t prevented.
If you’re interested in learning how you can start executing on these and other strategies, we will be presenting them at our upcoming Restoration Mastery Warrior Weekend in Beautiful San Diego, California this November 7-9. We hope to see you there!