One of the challenges in making predictions is being blindsided by items you could never have seen coming. Before last year, imagine someone telling you the country would be shut down for months, you could not go to a restaurant or church service for months, college basketball would stop the week before March Madness, and most schools would be closed for months (or in some cases, a year). Plus, imagine hearing riots would break out in major cities across the country and the U.S. House of Representatives would be stormed and temporarily occupied, 10 major hurricanes would make landfall, large portions of the West would suffer from catastrophic fires, and the list goes on. I am sure you would think that person was an idiot or was in need of major psychological assistance. When you look at my predictions for 2020, written last January, they seem fairly mundane and reasonable in retrospect. 

Being a critic or having the benefit of hindsight is much easier in times like we are currently experiencing. I like to think anyone can lead a company during good times and real leadership is required in challenging times. Your business survival in 2020 proves you have added to your leadership skillset and have the ability to adapt to unusual and unknown circumstances. The ultimate person you will become years from now is the result of the experiences, successes, and failures you encounter between now and then. 

Here are a couple of salient points that are relevant and worthy of a full article at some other time.

  • Restoration is vital and needed regardless of economic or social influences. 
  • The health of the indoor environment is becoming more essential. 
  • Outside people, companies and equity firms are realizing restoration is a great, long-term industry. 
  • Restorers are uniquely suited to diagnose, triage, and treat very challenging and unusual situations on a micro and macro level. 
  • The value of faith, community, family, and our close interpersonal connections are essential as we move through a challenging and uncertain world. 

As in years past, I will critique and grade my predictions from last year prior to making my predictions for 2021. I feel this is a necessary practice to establish credibility for my thoughts on the coming year. 

When I think about the critical issues that impacted restoration last year, I think I still have some credibility, but you can be the judge. I recall my friend Mark Springer, president of RIA, calling me in April or May to ask permission to be critical of my predictions in a written commentary for another industry publication. His commentary discussed how sometimes we simply cannot see the crazy curve balls coming at us and the reality is that as small business owners we have to be aware and nimble. 

That being said, let the critique begin! Keep in mind, these predictions were written very early in 2020. 

2020 Trends Reviewed

Prediction #1: Labor Shortages 

Labor shortages is my number one challenge facing the restoration industry in 2020. I have worked with several great companies in the past year that have had to limit their growth due to a lack of good people to fill open roles. This is a function of a national unemployment rate of near 3.5% and much lower in many areas. With the overall lack of available workers, it is essential that your business has a plan to both find new staff and to retain your current workforce. 

Grade for this prediction: D

I have mixed feelings about this issue. The reality is most restoration companies are currently limited by access to great staff in all positions of their business. My biggest criticism of this prediction comes from the statement that I identified this as the biggest challenge facing restorers in 2020. It was a problem, but the biggest challenge for most companies was figuring out how to deal with coronavirus – both as a health issue and also the reality of operating a business in that environment. If I would have predicted that, I would expect you start calling my Nostradamus! 

Prediction #2: Consolidation of Systems

In the past decade, many new software systems have been developed for the restoration industry. I think this is the year the various software programs will start to communicate together, or their will be a further consolidation of suppliers. Next Gear has been at the forefront of this movement. I predict they will continue to consolidate or incorporate new technology into their system. Restoration contractors are working to get more streamlined expectations from vendor programs and also less redundancy from the various insurance companies and TPA’s. This movement is being driven by the PIRC group and also through the RIA’s AGA movement. I do not think this is a situation that will be solved – but I do think there will be progress. For this reason, this will be tough to measure and it is a continuum rather than a destination. 

Grade for this prediction: C

I think I was early with this prediction and it was somewhat qualified in the prediction, but in reality there was not noticeable movement in this area. The reality is more, disparate software programs continue to be introduced. They all solve real problems being experienced by restoration professionals, but they are still not communicating with each other. I did expect more consolidation and perhaps it was coronavirus that slowed that trend or the fact that most are speaking different languages, and creating the link between programs is an immense undertaking. I am excited to watch companies like KnowHow, Encircle, AskAime, and Next Gear continue to work toward solutions in this area. The groundwork is being laid today for a more streamlined tomorrow. 

Prediction #3: Mergers & Acquisitions

The pace of consolidation in the industry has been remarkable. There are more and more large companies purchasing as well as new equity companies entering the industry. There are no signs of this process slowing. I am not sure if it will increase, or if it can. Over the past year, the acquisitions kept getting larger. I am not sure if it happens this year, or in the next few, but I believe some of the companies making many of the purchases will consolidate. Restoration is a big marketplace, so there will be many players. As far as I know, there are at least three companies performing more than $1 billion in revenue. There will be more likely this year. Last year, all three of these companies completed very large transactions. Small acquisitions and mergers will continue, but you can expect several very large transactions again this year. I wish I had insider information on this (I do not); just doing my best to read the market. 

Grade for this prediction: A

The pace of acquisitions has been steady and is very evident. I am consistently getting calls from either individuals or equity companies looking to learn more about the restoration industry. 

Prediction #4: AGA Progress

When the idea of the Advocate and Government Affairs movement was imagined, Mark Springer stated in his introduction article that we are in danger of waking up one day and having an unrecognizable industry. The changes that are underway from pricing, to communication, and relevance are potentially detrimental to creating a successful and profitable business. This frightening thought caused Mark to lay out a clear plan for change to advocate for restoration professionals across the industry. The original article clearly laid out a plan that could salvage the industry as we know it. I don't think that this movement will cover for poor management decisions, but I do think that it takes steps to make your management easier. It is important that this is not seen as an adversarial attack on our clients. That being said, it is essential that we advocate for the professionalism of our industry. The restoration industry is very fragmented and if we do not join together, our voices will not be heard. As a group we will be able to create a unified message on issues that impact every one of our businesses. 

Grade for this prediction: A+

The only challenge with this prediction is not enough companies are participating, or even know about the work of the AGA. Here is a quick list of items that have been accomplished:

  • Improvement with Xactimate pricing feedback and movement on some consistently underpriced items, which touches over 90% of restoration companies. 
  • TPA and Third Party Consultant Position Papers reviewed and submitted.
  • Industry advocate in place and making real progress in representing industry challenges. 

Prediction #5: Unions in Canada

I am not sure if this is a Canadian challenge or if this will make an impact south of the border. I am aware of two shops that unionized in 2019. The process for a union taking over a shop in Canada is much easier than in the States. Word on the street is the unions are looking to make inroads in the restoration industry because it is a good source of labor for other areas of their union. The union has had success in a national player’s office and a franchise member. I am not certain of the impact they will have; it is dependent on the companies being targeted. As an employer, I am not aware of your abilities to fight the union movement, but I know there are a lot of rules that need to be followed. 

Grade for this prediction: Incomplete

The reality is this is a slow-moving process. There is a lot of groundwork to be laid, and that continues. As of today, I believe this is a Canadian challenge as they have very different laws around this issue. I believe in the U.S., the new president and Congress will be more favorable to labor unions, but there is a long way to go to create much movement in the US market. 

Prediction #6: Technological Advancements

Technology is advancing rapidly and is now helping companies create real efficiencies in their businesses. The most obvious trends last year were in the area of estimating and scoping. Matterport and Docusketch have automated the image capture and dimensioning process. In turn, companies have massively improve efficiencies in this area of restoration. I am working with several clients who are using this technology to allow remote estimators to prepare estimates from their desks. This has always been possible, but the new technology allows for much greater speed and accuracy. If the estimator is able to specialize in writing estimates rather than driving to and from jobsites, then the productivity increases substantially. This technology can be combined with artificial intelligence and machine learning to improve the details and accuracy of the scopes. I understand that Next Gear is working on this technology as well. I am also aware of a company called Ask Aime that helps identify potential missing items in Xactimate. Technology is also being used to better communicate from the field to the office, and from the restoration company, to the client and the insurance company. 

Grade for this prediction: A

Whether it was a natural evolution, or the virtual work world enhanced the pace of change, technology is rapidly impacting how restorers operate. If technology did not have a major impact in your business, then you are falling behind. 

Prediction #7: Blockchain

It is not likely a 2020 issue, but it will be in the next several. You should keep an eye on blockchain technology. Blockchain will allow for effective and secure communication between several parties without additional needed technology. Blockchain is the technology that is behind Bitcoin, but it is much bigger than that. This will likely transform our economy and the systems and resources that we have become accustomed to for everyday transactions. Your clients will likely find you, compare your services and potentially pay for your services using Blockchain technology. Many insurance companies are aware of the potential for blockchain technology and will be integrating into their businesses in the next two to 10 years (I know that is a big timeframe, but I suspect this will take on several iterations and even some creative destruction before it is widely adapted.) 

Grade for this prediction: Incomplete

Since this was not a prediction for 2020, it is not really possible to grade this idea. Bitcoin and other crypto currencies are becoming more recognized which will impact the acceptance and understanding of blockchain. If this technology were used for public elections, it would assure a more timely, accurate, and secure election. That is an entirely different story and potentially volatile, so I will not go there. 

Given the uncertainty of the world in the last 12 months, it would be easy to cause every prediction to be irrelevant. That being said, in your role as an owner or leader of a small business, you need to look into a crystal ball and chart a course to navigate uncertain waters. They key in navigating uncertainty is to study trends, make a deliberate strategic plan and be very nimble so you can adapt quickly as needed. 

Stay tuned for my 2021 predictions, appearing in the April 2021 issue of R&R and even sooner on!