The Best Way To Lose Money In Storm Damage Restoration

Hold on…don’t you mean “The Best Way To Make Money In Storm Damage Restoration?”

No. Lose money.

And it’s not because it’s a losing proposition. Quite the opposite, actually. There is a ton of money to be made in SDR. Some firms specialize in it and make amazing money solely from SDR work. It’s an incredible way to both supplement your income and establish your beans in the marketplace. But if not done right – if you make critical mistakes along the way – you’ll find yourself on the losing end of this lucrative business.

But we want you to make money. We want you to be successful. So we’re happy to share the five mistakes that will lose you money in storm damage restoration.

Mistake #1: Not knowing the insurance process

To sell SDR jobs you need to know them, inside and out. You have to understand how and when the insurance pays, how to call claims in, how to submit certificates of completion, everything. Most of all, you need to really know the process before you start going after these jobs. You can lose your ass quickly if you can’t effectively close out a job or miss an adjuster meeting that you didn’t know you were supposed to attend.

Mistake #2: Eating deductibles

This is an unfortunate practice that happens a lot in SDR and it likely warrants its very own blog post. However, for the purpose of this list, just consider it no bueno. First off, it’s illegal. It’s called insurance fraud and it will get you in trouble. That is because in order to effectively absorb a $1,000 deductible, for example, you need to lie to the insurance company on the certificate of completion to get the entire RCV amount compensated. The only way to do that is to draft an invoice that says you charged the customer a certain amount (which you didn’t) and now, voila, you have lied to the insurance company and committed fraud. It’s unethical and really just not a practice you want to get into.

Mistake #3: Working with insurance clients like they are normal clients

Continuing on the topic of money, deductibles and bidding for a moment, you will run into customers who have gone through this process before and who are going to ask you to bid their SDR job. They essentially got their insurance scope of loss and their ACV check and now they “know how much everything costs.” So they want you to give them your number. That’s not necessarily the worst thing in the world (see mistake #4) because you can avoid doing some of the line items on the scope of loss that you might have otherwise taken on.

But you need to be clear up front with these customers and treat them like a retail job, meaning, when the work is done, you get paid. You don’t submit things to the insurance company, you don’t consult with them on how to get depreciation released, you don’t do any of that. If they want to work with you as an insurance customer, you need to take the SOL and do the work for the dollar amount the insurance company pays – and they pay their deductible. Otherwise, work done, time to pay. When you break it down for them and they start to realize they don’t know what half of those things are, most of them will hand over the SOL. But be prepared to set the expectations.

Mistake #4: Taking on too much scope

Very seldom does a roof with several missing shingles and hail damage not come with some interior leaking, drywall and insulation repair and paint. The problem is, most roofers aren’t painters. Most flooring contractors are not drywallers. But these scopes of loss can be significant and it’s easy to want to take it all on. Not a problem if you can handle it but, in my experience, it’s actually better to say no to some of the line items and potentially lose the job than take it on and lose your butt because you don’t know the first thing about finishing floors or replacing cabinets.

Mistake #5: Not collecting the whole ACV

ACV stands for Actual Cash Value and it is the dollar amount that the insurance company typically gives to the homeowner as the initial payment. Then, when the work is done, and the COC is submitted, the insurance company releases the remainder of the money (depreciation). In most cases the ACV check is 40% to 50% of the entire RCV or Replacement Cost Value (the whole claim amount). That’s a lot of money for customers to fork over. But you need to get it!

As we have discussed previously, SDR jobs can chew up cash flow like crazy. Considering that your costs on jobs are usually around 65% to 70%, you are going to be upside down out of the gate after you buy material and pay the crew. So why are you going to only take 10% or 15% as a deposit? Get the customers to have skin in the game and remind them, it’s not “their” money, it’s yours. That money was given to them to pay the contractor they select. If they won’t fork it over now, they likely won’t fork it over later. At least, not without a fight.

Be diligent, be careful, dot the i’s and cross the t’s and you will find that SDR jobs are an incredible way to supplement your business’ income.

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