Jack Dennison is an entrepreneurial business leader who has successfully established numerous business startups prior to entering the restoration industry. Business Development has always been Dennison’s strongest capability and the area of his greatest success. Dennison writes for a number of industry national and international trade magazines and is a prolific blogger. He hosts webinars for U.S. franchisors in strategies to accelerate revenue growth and improve profits, and hosts The Restoration Entrepreneur Podcast. He is a conference speaker, author, and is a recipient of the Lifetime Global Who’s Who Top Professional Award.
Following a decade of work from startup to hyper-growth, the Dennison’s full service restoration company was active in five of the seven major Third Party Administrator Networks; the company was a partner with nearly 30 major insurance carrier preferred contractor programs; and was licensed as a General Contractor in fourteen municipalities.
The Dennison’s company had received many local, state and national awards including Contractor Connection’s Golden Hammer Award as a Top Performer; Forbes Magazine selected them for the Best in Business Colorado Construction Award; and Professional Remodeler awarded them America’s Top Remodeler Award.
Over the span of their work the Dennison’s full-service Restoration and Construction Company achieved an average annual growth rate of nearly 50%. In 2012, the company was honored as the single fastest growing minority owned company in the entire State of Colorado.
Have you ever used a consultant or known someone who has? You likely were presented with an array of forms to complete, a series of reports to prepare, and a lock-step one-size-fits-all approach to your needs. Too often consultants start with themselves, not with you, the business owner.
Some consultants build their practice around costly seminars, or ask for out-of-reach fees you can’t afford, and in the end you are given general recommendations leaving you to figure out how to implement them on your own. The Restoration Entrepreneur is not that!
At The Restoration Entrepreneur our coaching style is highly personalized and individually customized. We don’t begin with forms or reports but with lengthy in-depth conversations that lay the bedrock for mutual understanding of your current situation and what you want to achieve for your business.
Ample time is devoted to discovering the best opportunities to grow your business, as well as exposing profit killers that are eating away at your current business profits. Actionable plans grow out of our assessment and our business experience, and are realistically tailored to meet your goals.
We experienced extraordinary success in our restoration business. We developed best practices in business development, internal operational efficiencies, and profit generation that will translate into your success today! We will help you learn how to achieve these successes for yourself in your business.
At The Restoration Entrepreneur we coach through a series of highly focused and very affordable coaching plans. We promise to zoom in on your specific interests. Take a look at the available coaching plans under the Services tab. I am confident you will find one of them that directly targets your most important needs.
Each Coaching Plan is 12 months in duration. Call me for a FREE 30 MINUTE CONSULTATION and I will tell you about our pricing plans. You will truly be astounded at how affordable this cutting edge service really is. Affordability should be the least of your concerns when you are looking for help!
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AM: You get two different estimators writing the same house, you’re going to get two very different things because there’s no consistency.
JD: They have different sketches, so the dimensions come out different and they call the rooms different. One guy this morning called the room a sitting room and I’m not even sure what the mitigation guy called that same room, but it’s the sitting room and they have a different order, so if you’re trying to do a review, one guy starts with the living room, the other guy ends with it or it’s tucked away in the middle. I mean, it’s just… And then the line items themselves, so he’s got removing cabinets on items 54-56 and then replacing them on item 79-82. So there’s no sense of system and that makes adjusters mad, it makes them suspicious of you and you can’t do a review that way either. As an owner, I did reviews all the time and if I couldn’t compare an apple to an apple it took me three times as long.
AM: Yeah, it telegraphs to the adjuster what level– how classy the organization is, for lack of a better term. These guys can’t get their numbers straight, they’re not even capitalizing the first letter of their rooms, you know? Those little details, they tell an adjuster whether or not someone knows what they’re doing.
JD: Yeah, I like the way you said that. I think telegraphing, you know, your level of experience is– that’s good language, because I think that’s exactly what you’re doing.
AM: Alright, well let’s get into it. I’m going to do an intro, just a little flow, and then– are you ready?
JD: I’m ready.
AM: I’ve got my coffee, you got your coffee?
JD: I’ve got my coffee, I’m gonna take a sip, too. I am. Started and hacked and I’m ready.
AM: Alright. Welcome to the Claim Clinic. This is Andy McCabe, I am your claim doctor. I have the pleasure this morning to have Mr. Jack Dennison on the phone with me. Jack, how you doing this morning?
JD: I’m doing great, Andy. Great to be here with you this morning.
AM: Jack, if you guys don’t know, is just an incredible wealth of information and knowledge. He’s been in the restoration industry for longer than, probably, he’ll admit, but we’ll see if we can get him to admit that a little bit later. I’ve been following him for a while, he’s got his own podcast and I was just very happy to have Jack come on the show. So Jack, why don’t you tell the audience a little bit about yourself, what you’ve got going on and how you got started in restoration?
JD: Terrific Andy, thank you. Well, I’m a restoration company owner; started off as a franchise, ended up leaving the franchise when I became full service. When I became full service, our company just absolutely exploded. We figured out how to grow a business, how to perform the various areas of our responsibility– mitigation, technician fire, large loss, all of those things. And our company just really grew and so we eventually sold it after about a decade of work. I was sixty-two at the time, so I was at that point where I was looking towards retirement, got the business to a point where I felt we could sell it and have the financial reserves we would need to do what we needed to do in retirement and so we did sell it. We sold it at the top of the game, we sold it for top dollar and once I got out, I was contacted by a number of our friends that we’d met over the years and they said, “You were so successful, you did so well in so many areas; tell us what you did,” and that question opened the door to start The Restoration Entrepreneur. We formalized that and put processes and systems and teaching materials into place and now I coach restoration owners on how to grow their business much along the lines that we grew ours.
AM: OK. Now what part of the country were you operating in?
JD: Our primary population base was Colorado Springs. We went all the way south to the New Mexico border and north to the southern Denver Metro, so it was about a two-hundred-mile swath of coverage and had multiple offices and had a lot of fun.
AM: Nice. So The Restoration Entrepreneur, you’ve got online resources, but your main focus is one-on-one coaching, is that correct?
JD: That’s right. I coach. I believe that that’s the best way to bring about change– the accountability, the encouragement, the specificity. I’m not going to give some general guidelines to follow and then hope that you can figure out how to implement it. I walk with people and answer questions and I am specific and I’m practical to a ‘T’ and my client contractors find that to be very helpful. What exactly do you do in order to grow your business?
AM: Yeah, no fuzzy language here– tell me what to do, what is the next step?
JD: That’s right, that’s right.
AM: So let’s talk about the next step. You’ve got a book out, an e-book that just came out last week. What’s that called again?
JD: It’s called How to Grow Your Restoration Business and it’s actually the second edition to that book.
AM: Second edition, OK. Well I have printed my copy– I haven’t read it yet, I’m ashamed to say, but things get busy. So let’s give us a ‘Cliff Notes’ version of How to Grow Your Restoration Business and why people should go look for this thing and download it.
JD: Well, when I first wrote the book, trying to create some space in the marketplace demonstrating what we did as an owner and that’s what the book was based upon. “This is what we did, this is what we learned, this is what we think about the things that we did,” and so it was just a compilation of our learning experience and trying to provide something that had some substance to it that could be of help to others. Then, after coaching contractors for a year, my learning expanded. I became more sharp, more clear, began to see experience through the eyes of others, in terms of what exactly do they need and what resonated most, what was most helpful, so I revised the book just a couple of months ago and now the second edition is available. And so it’s all about two things; when I talk to restoration owners about how to grow your restoration business, they are always interested, as I was, in two things. One is how do you accelerate your top-line revenue growth and how do you improve and protect your bottom-line profit? And that is what The Restoration Entrepreneur is about, those two fundamental issues and that’s what we exclusively focus our help on.
AM: How much of this is applicable beyond the restoration world?
JD: When you’re talking about profit, you’re normally dealing with operational issues and operational efficiencies. You’ve got to know your tools, you’ve got to manage well, you’ve got to know your numbers. When it comes to revenue, it really has to do with where are your best sources of revenue? What I find with contractors, and I’m sure across the board, is that they try to connect one-on-one with the customer; they’re trying to find ways, through their website, pay-per-click, Google ads and so on, of trying to get directly to the customer and I’ve found that that is not the best way to grow your business. Instead, these other ways are expensive, everybody’s doing them because everybody can get to them, and so a lot of competition and so the results are pretty meager and I don’t find many contractors who are happy with what they’re getting for what they’re paying. What you need to do is to connect with the referral sources– who are the people who are coming in contact with the masses of the product that you’re trying to sell? And so in the restoration industry, when someone is ankle-deep in water in their home, they’re not going to jump on their computer, contrary to what many people say; they’re not going to pull out their smart phone and do a search and look at the twenty-five restoration companies in their area, none of whom they know anything about. They’re going to call people and the three people they’re going to call is either, they’re going to call a plumber and say, “Come turn my water off,”; they’re going to call their insurance agent and say, “Please help me”; or they’re going to call the 800 number and that’s going to be immediately dispatched to a third-party administrator for assignment to one of their local contractors. So those are the people who have the buckets full of business and it’s the referral sources that any contractor of any kind wants to connect with because that’s where most people are going, that’s where the greatest volume of work is at and if you can open that gate, it can become a flood gate.
AM: Yeah, that resonates a lot with the conversation I had with Rich Brawn (?)19:16 at 1-800-Restore talking about beating the streets and finding those referral sources. I was surprised to hear that both of you advocate that over SEO and blogging and Google Ad Words and things like that, so that was eye-opening for me. I’m a Gen X-er, I’m right in the middle of Gen X, I grew up with technology, I am comfortable getting out there and playing with SEO and keywords and meta-tags and all this stuff and what I’m hearing is, “Do that, but really, you need to get to the source,” and that’s people, right?
JD: I think that’s absolutely true. I think it’s a matter of are you going to be happy with 2-3% growth per year, or, in my company, we average over a decade of time an annual average growth rate of nearly 50%. So we were doubling our business every 1.4 years and you don’t do that through ad words and website SEO. Most and perhaps every large restoration contractor has built their business, the breadth and the speed of their business growth, on the backs of program work, the backs of TPAs and these kinds of groups who have a lot of work and if you can establish a relationship with them, you’re going to be on the rotation to receive a good portion of that. In our case, we were on nearly thirty preferred contractor programs, but that’s not all that we did. I mean–
JD: We’re on thirty preferred contractor programs.
AM: How do you manage something like that? I mean, it sounds unwieldy.
JD: Well, you know, it’s one of the challenges of ownership, is you start off doing two-hundred thousand, and then you’re doing five-hundred and then you’re doing a million and then you’re doing three million. It’s like with any growth industry, the owners have to be able to adapt and change and often times you’ll meet contractors who have reached their level of capability and if they don’t let go, if they don’t release and empower others, if they can’t make the personal changes, then they become the boggle net for the million-dollar cap-out, because that’s where most contractors reach their limit, owner-operators, of capability and most don’t grow beyond that because they don’t make the personal changes that empower the internal changes needed to continue grow.
AM: Because you simply can’t manage much more than that.
JD: Not one person.
AM: Not one person, yeah. I’m tapped out– project manager estimator is tapped out at about 1.5 million and that’s with support staff.
JD: That’s right.
AM: So let’s talk nuts and bolts on that for a minute. I worked for a company who had four or five, given the volume in a given year, teams of three people and it was a project manager estimator, essentially a sales guy, and a coordinator, which is an admin assistant more than anything else, behind a desk, and then a superintendent. So those three people would manage certain aspects of the business as it came in and the way they had it set up was one team had State Farm PSP, another team had Farmers, another team had Allstate and maybe one other TPA. Is that similar to what you guys had setup?
JD: That’s not the way that we organized ourselves. I think the two fundamental ways that contractors organize for construction, where you have higher volume, higher revenue, is, in a much more complex environment, of course, with construction than with mitigation, is around a team of specialists or a team of generalists. A generalist would be your typical write-and-run. So the estimator is going to sell the job, he’s going to write the job and he’s going to run the job as a project manager and so you say, “How many jobs can a write-and-run person oversee at any one time?” Well, you know–
AM: Not a whole lot.
JD: Eight, ten– not a lot. Or you have a team of specialists where you have an estimator and his primary job is to do the take-off and write the estimates. Well, he can punch out ten estimates in a day. I mean, he can do ten roofs in a day. You have a project manager who can oversee fifteen to twenty jobs, showing up every other day– and that was our requirement, every other day you’ve got to be on site; it may only take fifteen minutes to look at cleanliness, talk to the customer, supervise the work of the contractor, make sure that you can’t see the drywall match, the textures match, clean cut-ins, that sort of thing. So it doesn’t take long and you can oversee fifteen to twenty jobs. And so the larger you get, the more volume you need out of each production person and the write-and-run, there’s just so much to do in that combination of activities, you just can’t handle those many jobs to keep track with doing fifty jobs at once, doing twenty jobs, thirty jobs at once. AM: I t’s a recipe for failure. You’re a jack-of-all-trades and master of none, truly. I don’t know how many times I found myself as the sole estimator, sole project manager, oh and by the way, here’s another couple hats– you’re the marketing guy.
JD: Yeah. So a specialist way is really geared for growth and that’s the direction that we went and so we just– how many estimators do you need? We ended up with three and they were just always pundant (?).
AM: Right. Now back to the revenue question, where do you see revenue being generated? And I’ll tell you where I’m headed– I believe revenue is generated in two places. On the mitigation side, it’s generated with the water damage technician actually doing the work; but then on the recon side, I believe revenue is generated with the exactimate estimate. Now, what do you see?
JD: Well those are elements of both sides. What I like to talk about, and let me say something specifically about the points that you’ve raised, is what is the best way, the most rapid way, for a mitigation-only company to grow and what is the most rapid way for a full-service construction company to grow?
AM: Two different things, for sure, yeah.
JD: So for a mitigation-only company, they’re by far, their best opportunity to accelerate their top-line revenue growth is to become full-service. I used to talk about that all the time and so here’s what the numbers look like in a situation like that.
JD: So let’s just say that you’re a typical mitigation company who’s tapped out at the maximum that you can manage and that’s about a million dollars. The average size of mitigation’s about $2,500, so you’re somewhere around four-hundred jobs– now, that’s a lot of jobs. The reason they don’t get to two million is how in the world do you create a flow of eight-hundred jobs a year and do it year after year? It just doesn’t happen. So four-hundred jobs, which is a lot, at $2,500/each, roughly, average– so you’ve done a million dollars of revenue. If you add full-service at about an average of $10,000 for the typical rebuild, now you’re looking at four million dollars of revenue and at 50% profit, which contractors can and should earn on a per job basis. You’re looking at two million dollars of profit, alone. So let’s cut that in half– people are saying, “Nah, that’s just not going to happen. We’re not going to do that.” So let’s say you’re doing a million dollars of mitigation and you cut that by 50% and you do two-hundred construction jobs; that’s two million dollars of revenue, one million dollars of profit and your profit out of adding full-service is more than what you’re currently doing in your mitigation side. So the reason that many mitigation-only contractors don’t add full-service, don’t add construction, is because everybody’s telling them they can’t– it’s too hard, too many problems, the margins are too skinny, you’re going to fail. And the truth is that becoming full-service, again, if you know how to implement it, you know what it takes, you don’t have to become a master builder– it’s just not that hard. So if you want to grow a mitigation company, become full-service, and it takes some time to ramp up; you’re not going to one year do nothing and the next year you’re going to do two million, but over a period, you can double and triple your current business by adding construction services. On the construction side, for the construction company, the full-service, rather than focusing on revenue, “We’ve got to get more jobs, we’ve got to get more top-line money,” their best opportunity is improving their profit margins per job and, therefore, increasing their net profit; that’s where their big opportunity is at. Because most construction companies are doing 25-30% profit out of their construction services.
AM: That’s fair.
JD: So they’re doing two million dollars, their net profit is probably 10% on that, so two-hundred thousand dollars. But what if you could double that? What if you could get from 25% per job to 50%? What if you could get from 10% net profit to 20% net profit? There’s nothing that you can do that will bring about greater returns more quickly than focusing on improving and protecting profit, which is an operational issue and when you learn how to do that, now you’re really starting to keep the money that you’ve earned and that adds to cash flow, cash reserves, personal wealth– nothing will change your company more than improving your profit margins.
AM: And that leads you into the next book you’ve got coming out, Stop Your Profit-Killers, right?
JD: It really does, thank you for saying that. So what we’re about is accelerating top-line revenue, that’s How to Grow Your Restoration Business, and we’re also about how to improve and protect your profit margins and that’s what the second e-book is about, Stop Your Profit-Killers Dead in Their Tracks.
JD: And so with those two e-books we will have provided a free, pretty comprehensive service for both of the issues that are fundamental to us.
AM: I can’t wait for that one to come out. So let’s recap– so I can understand, so everyone else can understand, if you have a 50% profit margin on your construction, that completely changes the metrics of what I am used to operating under. I am in the 30-35% if you’re really hustling, 35% GP on the recon side; if you’re adding 15% gross profit to your recon jobs, that just almost turns the game on its head.
JD: Well, if you’re doing a million dollars of construction revenue and you increase by 15%, that’s an additional hundred-and-fifty thousand dollars that goes straight to the bottom-line. All your fixed costs are already in place, so it doesn’t cost you more to do a better job and it goes straight to the bottom-line. What would a hundred-and-fifty thousand dollars on a million dollars of revenue do for most contractors? I mean, it’s a game-changer.
AM: I like that. Your fixed costs are already covered and that’s what I try to do on a mitigation side with the 24-hour tech system, is increase the revenues because your costs are already there. You’re already on the job site, you’re already incurring labor and equipment and whatever else– let’s just do a better job at picking up the dollars that are sitting there by systematizing that and increasing your revenue there. So increased revenue on the mitigation side–
JD: So some contractors–
AM: I’m sorry, I interrupted. Go ahead.
JD: Just that some contractors look at 50% profit and they say, “Who are you cheating?”
JD: No, this is doing all the right stuff in all the right way. We did it through program work in which you’ve got the TPA and the insurance carrier and the customer looking over your shoulder.
AM: Just drilling on you.
JD: No one’s getting cheated, everyone’s getting paid– your subs are getting paid better than they’re getting paid now. You just have to know how to control material costs, how to control labor costs, how do you exactimate as a key management tool, how to access wholesale distributors for your materials, like your flooring– flooring is the single largest line item on any repair bill. So what happens in most situations is the contractor will send the customer down to Home Depot or Carpet One or some other outlet and so of course the customer says, “Well how much do I have to spend?” “Well, you’ve got twenty dollars/square yard.” So what do they do? They spend $20.50/square yard and you take nothing off of your materials. Or you can access wholesale distributors that will provide materials to you for 35-50% below that and look at what you’ve just locked in, in terms of increasing your profit per job off of that one item alone.
AM: Oh yeah, that’s what we’ve done with–
JD: And there are other building materials that you can do the same thing with. So there are incremental factors, like wholesale distributors, and you put about three or four or five of these together and you’ve suddenly gone from 25% to 50% and once you figure out how to do that, you can do it every time.
AM: Yeah that’s what we did– do they have Contractor’s Furnishing Mart over there in Colorado?
JD: I don’t recognize that name.
AM: CFM. We have those on the west– and it might be a west coast thing. But that’s what we would do. They’re a wholesaler but their showroom had retail pricing so you would send your customers in there to pick out materials and they would have their budget according to retail price but then you could source it from CFM for less than that, for wholesale, and you were able to get your margins that way. What happens, though, with the TPAs and the programs that take the flooring out? They do the flooring themselves, how do you get around that?
JD: And there are some and every time that happened, I mean, flooring was our biggest money-maker so every time that we were on a program, and there are a few carriers who have their own, we were disappointed because the best money-maker was removed. Fortunately, most don’t do that; but those that do, it’s just one of those things that you have to realize that you’re not going to make any money off the flooring– somebody else is going to do that.
AM: Yeah, that’s the unfortunate reality of the programs, is what they are. And my perspective has always been the TPAs just take so much margin out of the reconstruction, it’s getting harder and harder to make money, but that’s not what I’m hearing from you.
JD: No, my perspective has always been, and I hear– I spend a lot of time on LinkedIn in the groups and meeting contractors and hearing their concerns and TPAs are always getting shot at and often times it’s by those who are not active with them, honestly–
JD: So they don’t really know what’s going on.
AM: Guilty, that’s me.
JD: But the other thing that happens with TPAs is that outside of a TPA program, you have adjusters and everyone’s trying to save money and a lot of them are quite eccentric and they have some of the most peculiar personal limitations, requirements and they do just beat you up and they can do that, pretty much, at will.
JD: In a program you have program requirements in which it’s stated very clearly, “For this issue, you do this, you don’t that. You charge for this, you don’t charge for that. You use this line item and not this line item,” and so all of that is clearly declared; it’s an agreed upon approach to estimating by both the carrier and their adjuster and the contractor and if a contractor tries to step outside– I’m sorry, if an adjuster tries to step outside of that, you have recourse. So I think you’re actually more protected in a program because all of those peculiarities and preferences are declared up front and you have something to fall back on than outside of the program and then when you compare that with the volume of work that they can bring you, it’s just a no-brainer. I mean, every large contractor has built their business on the back of program work and their key challenge is to diversify so that they’re not overly dependent on a single source. So there are eight national third-party administrators; we were active on five of them. If one of them went away, well, we’ve still got the other four and we have other work that we did– government work, local fire services, other resources from local professionals. So you don’t want a single light contractor connection– everybody knows them, everybody pursues them. You don’t want 90% of your work coming from contractor connection. If 90% of your work is coming from five or six TPAs, that’s not a problem. If one of them goes away, you’ve got the other five, as well as other sources of revenue as well.
AM: That’s interesting– I want to go back to the personality issue that you brought up, that’s very interesting. I had something happen this week that you just connected the dots for me on. Lion’s Bridge is AAA’s TPA. I’ve got a couple clients on Lion’s Bridge and they send me their work and I estimate it for them so I’m constantly in exact analysis, having note-taking wars back and forth, for lack of a better term, and an issue came up where a particular desk adjuster asked me to remove flooring, carpet, out of closets in the hallway and my experience is closet is a sub-room of the main room– if it’s a bedroom and the closet has carpet, there’s not a matching issue, there’s not a doorway issue, right? You just do both, right?
JD: That’s right. You’re absolutely right, I agree.
AM: So she asked me to take the carpet out of the hallways closet and so I went back to the program rules which were kind of fuzzy in that area, but then I went back to the previous five or six estimates that I’ve written and just lined them up and said, “This estimate, this claim, this claim, this claim had a bedroom with a closet in it and we OK’ed,” we as a team, me and Lion’s Bridge, “OK’ed the carpet; how would you like me to address this?” So going back to the program and the rules are already in place, she was able to come around and say, “Oh, OK. It’s paid for.” No question. But it was her individual training, or lack thereof because she was probably fairly new, that she didn’t understand the program. And so what I heard you just say is that’s a good thing. You have a program to have the rules in place so everyone’s on the same page, you don’t have to bicker about that stuff.
JD: Yeah, I love everything you just said, agree with everything you just said. I think that was spot-on and as you indicated, we don’t know, when we’re dealing with a desk adjuster, or any adjuster, what kind of experience they have. I mean, they’re not general contractors, some of them are brand new, they’ve just gone through their own training, so they’re just trying to figure out how to approach things and so you’re right; a closet should be a sub-room of the larger room, flooring is taken care of when you drop and fill for that room. And so she’s confused. She’s got the power, she says, “We’re not going to pay for this,” and if there was nothing to fall back on, what are you going to do? It’s your will against the adjuster’s and often times the adjuster’s are just going to dig in and say, “This is how it is.” But where there are program requirements, there’s a history, there’s commitments that have been made previously and this is how eight others have done it– you’re the odd-man-out. It’s like, “Oh gee, maybe I did make a mistake,
and there is something to appeal to, other than to a supervisor.”
AM: Right. Right. Because who wants to go to a supervisor over $120 worth of flooring?
JD: It hurts relationship when you have to do that.
AM: It really, really does. Wow. Good stuff, Jack. Once again, I just want to thank you for taking the time to share with me and my audience and I’m excited to see where things go. Speaking of where things go, where do you see this industry ten years from now? What are the major changes we’re going to see as restoration contractors that will affect how we do business?
JD: Well, I have a webinar in which I talk about what I believe are the three major trends that have occurred over the last decade and they’re only picking up steam moving into the next decade. One is that we’re moving towards full-service– one call to one contractor who can do it all. Customers demand it, most insurance carriers and TPAs prefer it, so we’re definitely moving in that direction. Secondly is the movement to third-party administrators, almost every carrier and all the big ones now. Most recently, Farmers has done the same thing. So instead of doing their own program, American Family, they’ve closed their national programs and now they’re administering their claims volume, both mitigation and construction, through TPAs. Now Farmers is going through, it looks like, three TPAs of the eight, so they’re diving their work up.
AM: Really? What are those TPAs?
JD: It is Nexus, let’s see…
JD: Nexus, Lion’s Bridge and First Repair Choice. Those are the three that they’re currently working with. So there is a movement towards third-party administrators and it’s a way of saving money for the insurance carrier, but it also ups the anty, in terms of quality. See, in the past these national accounts that several of the large franchises continue to manage, well those are declining, that’s part of the trends. Those are declining in numbers because ten years ago, when they were really going full steam, the focus for a carrier was on coverage. Who is out there that if I get a job in Boston or I get a job in Los Angeles, there’s going to be somebody on the ground that I can send this to?
JD: Well, there were primarily two of the franchises that were broadly represented across the country to be present in most major markets.
AM: Yeah, (?)43:45 .
JD: So the issue was coverage and that’s where the national accounts came from. The problem is that there are some really good franchises and some really poor franchises and today the issue for carriers is not coverage, but customer service and satisfaction and customer retention and the time at which a customer is most vulnerable to retention is during a claim.
JD: They don’t like the insurance company, the policy limits, the adjuster, they get sideways with the contractor, so they pay out all this money and then they jump ship and go to another carrier. So the focus is upon retention and in order to retain, they have got to have a superior customer experience.
JD: So the program for coverage, in which there’s good and bad, doesn’t provide for that. The TPAs who manage at a high bar of excellence, high benchmarks and accountability, they keep the best, work with the best, require you to be the best, to help ensure the customer gets the kind of superior experience they expect. So there is a movement away from national accounts and to TPAs and that’s going to continue for the reasons, and others, that I have just given. And then the third major trend is a movement away from direct contact with the customer to these referral services where that’s where the growth is going to come from, that’s where the power is at because they’re the ones who have the assignments to make and so even with the government agencies. You know, I introduced my client contractors to three government agencies, they’re at work in every community. They provide grants to local home-owners that range in size from seven to seventy-thousand dollars. Well, contractors want to know those guys. They want to get on that preferred contractor list, they want to start getting some of those assignments through the government, doing these kinds of remodels and rebuilds for seven or seventy-thousand dollars and the way you do that is not trying to find the customer, because you’ll never find them; you’ve got to get involved with the agency who has these buckets of business that they’re going to send downstream to a reliable, dependable contractor and at least be on the list so that you’re competing with a small group, rather than with a large group, for who’s going to do the rebuild for that particular person.
AM: Alright, let me have you re-frame that, because I’m not quite clear what that means– moving away from direct contact with the client.
JD: Website SEO, Google ads, Yellow Pages– all of those are attempts to help the customer find you.
AM: Those are direct to customer, OK. So there’s going to be more of a move away from that.
JD: Yes. To the referral services that are going to provide you those direct contacts, like the TPAs, the government services, and others.
AM: To the TPAs, OK. SEO, direct marketing-type stuff. OK. Speaking of referral sources, there’s non-TPA referral sources. Home Adviser is one of the big ones. Guys are paying Home Adviser ridiculous sums of money for maybe referrals that they’re sending to multiple contractors at the same time. Talk to me about that side of the market and marketing and referrals.
JD: Contractors that I talk with that we read about in group discussions on LinkedIn and other sources on the internet all seem to express a dissatisfaction with that. As you said, the cost is high, the return is low. You get out there, you still have to compete for the job and sell it. There may be two or three others that are there or somebody has been there before you and someone’s coming after you. So a lot of work, a lot of activity, and a very low return.
AM: Very low return.
JD: So very few are satisfied with that. I even think about it from a marketing standpoint. So with TPAs, another affirmation for them, is that with your marketing dollars, do you want to put that money into these sources, Home Adviser and so on, pay money for work you hope to get or would you rather pay a 4 or 5% to a TPA for work that you’ve done and where are you going to put your marketing dollars? Well our company put our marketing dollars into TPA relationships, we grew fast, grew well and most of our marketing dollars were invested there.
AM: Now 4 or 5% seems low to me. I know for a fact DKI is 7 and 8%, Code Blue is even higher than that when you factor in the “discounts” that you have to give. What is the average take or the average cut a guy can expect to hand over to use a TPA or be on a TPA program?
JD: Well, Nexus is 5%. The last I heard, the last I knew, Contractor Connection was 4– it’s possible they’ve gone to 5, but it’s not above that, and so that I think would be the industry average, about 4-5%.
AM: OK. And I’m not sure what the numbers are on Lion’s Bridge, but someone can go out on the comments and let me know, how about that?
AM: Alright. Well, we’ve been talking for about fifty minutes here and we’ll probably do a segue somewhere in between and cut some of this out. Let me take a look at my notes here. Where else do you want to go, Jack?
JD: Well I think we’ve talked about some really important things– about what’s the fastest ways to grow a mit, versus a construction– I think all that stuff is really key. I mean, those are vision issues and hopefully inspirational issues for people. So I feel like we’ve covered a lot of really good stuff and happy with what we’ve done.
AM: OK. Then let’s wrap up with talking about your coaching services and I might throw in something about what I do for a living and then I’m going to talk about the upcoming PLR show. Let’s talk about shows, in general. This is not going to come out before I have to go to Toronto, but let’s talk about that. Alright, I’m just going to put a marker here for me here.50:37 Alright Jack, this has just been mind-blowing with how much information. I’m sure I’m not alone feeling like I’m drinking from the fire hose, as it were. But let’s circle back and I want to talk about your business, The Restoration Entrepreneur and what it looks like when someone comes to you and says, “Hey Jack, I think I’m ready to grow my business and I think I want your help.” What does that look like and how do you bring people into the fold?
JD: Well, I coach through a series of coaching plans. Currently there are eight different plans that are focused on the specific issues that a client contractor could be interested in. So for example, one is the revenue generator. It is a plan, it’s specific, it’s practical; how exactly do they go about increasing their top-line revenue? So it’s about introducing them to TPAs, government agencies, local fire services, local professionals. What do you do, exactly, in order to increase your top-line revenue. There’s another called the profit maker and it’s designed for full-service companies who currently have a construction services division, but, like one contractor I was speaking with already this morning, his net profit for construction is 21%– well that’s 1% above ONP, that means he’s spending all of the money on material and labor that he is getting paid. So let’s focus specifically upon the operational efficiencies of construction services and how to we improve that to get to a 50% profit margin every job, every time, and so it focuses specifically on that. I have a coaching plan called the startup ignitor. So I get called by contractors, “Should I go franchise, should I go independent?” And what would the services look like to help them get traction in that first year and implement, organize a well-running, effective, growing business from a startup. And then lastly, the fourth of the eight examples, is the retirement achiever. So people are getting ready to sell– well, I sold my business, I know a lot about what it takes. I know what sellers are interested in, I know what buyers are interested in and how you improve your revenue, how do you improve your profit over the next couple of years in order to get yourself to a point where you can get top-dollar when it comes time to actually put your business on the market and sell it. And so it always relates to accelerating revenue and improving and protecting profit, but there are different contexts and interests that contractors have and I tailor my coaching to meet those interests.
AM: So you’ll come out for an initial consultation, perhaps spend some time in somebody’s business and then take a step out and do the majority of your ongoing coaching via phone and email?
JD: Well, you would be surprised, first of all, if you knew what I charged, because it is affordable to a ‘T’. So my guys just love that because it really does not cost a lot and part of that is I don’t make on-site visits, I don’t need to. Everything that we do, we can do by telephone, internet and email, and desktop sharing and I’ll get on the computer with them and share a desktop and get into exactimate and get into their estimates and we go through a review and I show them these special features and I show them how to use exactimate as a key management tool and it can all be done right from my office and from theirs. We’ll talk two, three times a week about issues they face and we will coach for a full year of intensive help in whatever their issue is and it might be both, revenue and profit.
JD: And help them make the changes they need and solidify those changes, so when the year of coaching is over, they know what they’re doing and how to do it and how to maintain it.
AM: I like to hear that because that’s pretty much what I do with my exactimate estimating business, is people don’t understand that I don’t have to be on-site to write a good sheet. I get all my estimates and scopes and pictures via a shared drive, whether it’s DropBox or Google Drive, and I write my estimates from there and a lot of time I interface directly with exact analysis and upload assignments on behalf of my client contractors and I don’t leave the beauty of my office– I’m sitting in it right here in Bend, Oregon. So with technology, there’s a lot we can do remotely and still provide top-notch services and coaching.
JD: Yeah and let me not miss this opportunity to say this– I know you, Andy, and I know the Claims Clinic and the claims delegates and I know you first-hand because I recommend you to my client contractors.
AM: I appreciate that, thank you.
JD: When they’re moving into full-service, one of the biggest issues is how do you do a take-off and how do you get an estimate written and some of them, at that point, don’t have the money to go out and hire a full-time estimator. So what do I do? Well, you know that I send them to you. You have a systematic approach for a take-off, so you teach them how to do it; you write the estimate for them; your fees are just wonderful. It really works, you’re prompt, you’re comprehensive and there are outsourcing services that are available for some of these key issues that a person might face as they’re moving into construction and you’re one of them. And as you know, in my client contractors, a handful of them, are using you right now and we’re happy with the service that you provide.
AM: Thank you so much. It’s an honor to help your clients and I can’t thank you too much for that.
JD: Well deserved.
AM: I’m blushing. I’m blushing here. OK. Let’s go on to– I’ve got the PLR show coming up. I’m having a breakout session over two days on what I’m calling Mitigation Money-Ball and hoping to show folks how to game-ify mitigation to increase this front-line revenue that we’ve been talking about and this will be the second show I’m going to this year, the first one was RIA, and I’m conflicted when it comes to shows, as far as the return on time and investment for folks going to shows and I wondered what your take was. Is there fifty different opportunities to go different shows every year that have to do with restoration, should people go to shows? The Contractor Connection Convention, the insights, all this other stuff– are there ones that they should go to that are better than others? Or should people just stay home and concentrate on their business?
JD: As a business owner, I went to two shows a year, Contractor Connection and RIA, and the reason that I went is to look for resources that would help me do my business. I have written a blog about perhaps the single most life-changing moment that I experienced as a restoration owner and it came as a result of a workshop that was presented at Contractor Connection and I write about it and it’s on my website, but the lights came on and I made some decisions as a result of that and what contractors don’t have– they don’t have it locally, they don’t look for it nationally or regionally– is somebody who can help them with the issues they face. So they just keep doing the same thing they’ve been doing and they don’t know what to do, so they don’t do anything. They just do what comes naturally to them and that’s why you end up with a 21% profit ONP because you haven’t found ways to bring about change. So finding resource people, whether they’re coaches or through other materials, you’ve got to find help to do a better job, because running a business doesn’t come intuitively to 95% of the people and so you need help. I’ve written a blog about Coaching Makes Him Better and I’m referring to Peyton Manning who, with all of his skill and all the wonderful this MVP is in the National Football League, he just goes on record all the time that says, “Coaching makes me better.” Well, if it makes Peyton Manning better on an ongoing basis, I’m sure it would help any contractor, because sometimes all you need is just a couple of insights, a couple of changes. I was talking with a contractor who’d been in the business for ten years doing three million dollars of work, full-service, and we were doing a desktop share and I was showing him some things in exactimate where suddenly he just started to roar with laughter, he was just belly laughing. And when he finally got control of himself and started to explain his behavior, he said, “I’ve been doing this for ten years and I have never seen that before–”
JD: “And now that I see it, I know exactly what to do with that and that’s going to make a huge difference in my business.” Well, what’s the value of a single insight?
AM: Oh yeah.
JD: So go to these. Pick and choose one or two and those that are going to give you the best access to resources dealing with the subjects that are of greatest interest and value to you and make yourself available, form a relationship with the speaker, continue to talk with them thereafter. Most are willing to give away a ton of stuff for free in conversation because we love this– we all of this, this is why we do it. We love talking about this stuff. So find somebody to give you some help and if it’s a process that needs to occur over time, get a coach, let them help you.
AM: Absolutely. I couldn’t agree more. I’ve got a couple accountability groups that I’m a part of and I’m looking at coaching, personal coaching. There’s just a lot to that and it takes the realization that you don’t have all the answers and that’s OK.
JD: It is, that’s right. We don’t.
AM: Well Jack, it’s been a pleasure. How can people find you and reach out to you and learn more about you?
JD: Well my website is GrowMyRestorationBusiness.com or you can search for The Restoration Entrepreneur and I am always available, always interested. Free thirty-minute consultation, anybody, any time, any subject. Love talking about this stuff and I’m always available and if it looks like I can be of greater help over a longer haul, then we can talk about coaching, but we don’t even need to do that– I’ll just help as I can.
AM: Have you got a 1-800 number we can use?
JD: It is 800– oh wait a second here. I use my email or my cell phone most often, but the 800 number is 800-655-1598.
AM: 1598. Perfect. Any parting shots out there to newbies to the industry?
JD: Don’t be afraid. This is an industry of great opportunity. Of course, for a new person, the first year is the most dynamic, the most dramatic and so if you’re going to start a restoration business, do it as a full-service. Just another number, because I love these comparative numbers, so if a new person, new company, starts off and they do one mitigation job a week for a year, that’s $130,000. If they do full-service and do the rebuild as well, it’s $630,000. So if you want traction, even if you did half of that– I mean, you can live off of $300,000 in a year’s startup, you can subcontract all your work, so don’t be afraid. There’s a lot of opportunity out there, you just need to know how and once you know how, it’s not difficult to do. So you can grow your business, you can grow your business and there are people out there who will help you do that.
AM: Awesome. Jack, thanks once again. I’m looking forward to seeing how we both grow over the coming years and thanks for coming on.
JD: Thanks for allowing me. I really appreciate it and I enjoy you.