It’s the first weekend in December. You go to your spare bedroom to pull out the Christmas decorations. First you notice the smell; musty. When you move the boxes you discover the problem; mold. It covers the wall, up to about 4 feet behind the boxes. You do just a couple things IMMEDIATELY. You leave the room, closing the HVAC vents and the door. You call us.
Here’s where we can begin to talk about price. I’m going to hit this head on. Professional restoration services DO seem expensive. They seem expensive like auto repairs and dental work seems expensive. Let’s talk about it, but first a note about how the employees of Clean As Can Be Services think about profit.
WHAT IS MY CLEANING AND RESTORATION COMPANY ABOUT?
It’s about serving others. “Our mission is to make the world a better place to live by developing long-term relationships between employees and customers, based on quality service and mutual care.” You will see this mission statement condensed as, “Great Employees. Great Customers. Connected.” So, where are the dollar signs in the mission? They are not there because we are a values driven business, not a profit driven business.
Do we need to make a profit? Of course, because if we are not profitable the business closes and the opportunity to “…make the world a better place to live….” goes away. Profit benefits both employees and customers. Better profit means better employee, vehicles, and equipment in your home or business. It means the company is part of the community for decades or longer, not just years. Profit takes care of the families that call this company their vocational home. And the better we do that, the better longer they stick around and the more engaged they are in their work. You win. We win.
But profit is an outcome of implementing our mission statement every day, not the solo target every day. We are a purpose driven company. This distinction is one I insist on in my company because, as a Christian, I know that as we approach all of our work “as unto God” and “serve one another” we are doing the right thing.
My team members are not all Christians. And this is not a Christian Company. The concept of a business, non-profit or for profit, as a “Christian company” is flawed. Jesus saves people one at a time, through a personal encounter; not as a group of people working toward a common goal. However, every member on my team gets it. This is a values driven company. Most of them know that those values are congruent with Christian values.
Now let move onto the actual dollars and sense of the matter.
“Well of course we can charge less for this work, Mrs. Jones. I’ll be glad to send our lower performing employees and older, less efficient equipment. We will be there when we get there, but not sooner then everyone finally roles into work tomorrow. How does that sound to you?”
We all know that would never fly, and it shouldn’t. Everyone expects Great Employees when they call us. And that is what they get if we are in a position to handle the work.
In a restoration situation a Great Employee is one that responds well to the emotional and technical demands of the situation. The employee has to be comfortable entering a situation that is, for the customer, a crisis. This includes how the employee responds on the phone, how quickly they get to you, and how they appear and act when they get to you. We spend a great deal of time selecting for this potential and nurturing it in our employees. (If you disagree by what you have experienced with my staff, please call me.)
The technical demands of the work is also significant. For our company to get someone certified as a Water Restoration Technician and certified in Advanced Structural Drying is an investment of about $8,000.00. This gets them just to the point where they can investigate and remedy a basic water or mold loss. If they have some project management and people leadership skills, and a couple years experience, they can run a full project. If we don’t make that investment, they don’t have the skills and knowledge to do their work well. You suffer and we open ourselves up to huge business risks.
It varies from state to state, but a professional restoration contractor can hold liability for the outcomes of their work for years. For example, lets say we come into your home following a sewage back up. We remove the sewage from your basement, extract the water, clean all non-porous contents and structural materials, remove and dispose of all porous materials, handling them like hazardous waste, and dry out the structure. A year later you find significant mold growth in the areas we treated. In this scenario, assuming you took care of whatever allowed the water intrusion in the first place, we may be liable for the mold remediation. If there health related issues that can be attached to that new mold growth, that may be on us, too.
From our employees perspective, they are hauling heavy equipment in all weather conditions, possibly wading through water in your basement that contains any number of harmful materials. They deal with mold that can damage their health. Workers compensation in the restoration business is expensive.
The skill and risk demands of the restoration industry are high. This means the staff development and insurance costs are quite high.
To the numbers above we have to add capital costs. What does it cost to take care of an average water damage situation? Let’s assume we are called to a modest three bedroom ranch with mixed floor surfaces of carpet and tile where a clean water break has released an average of 3 inches of water into the home. This is a relatively small, straight forward loss from the perspective of a restoration profession. Yet, you will see about $40,000.00 of equipment in your home to work through this loss in the best possible way. That’s just the equipment, not the full cost of running the operation. Getting into the restoration industry in any sizable way is not cheap.
PRICING FOR THE WORK
Now we have to price the services. This is an interesting and complex part of the equation. You might be surprised to know that our pricing is, in many ways, set for us by the insurance industry.
Here is an illustration of a pricing norm you are familiar with. Your car needs repairs. You go to a professional shop with certified technicians. They diagnose the problem, plug some data into a software system, and hand you an estimate. Included in that estimate is every cost of doing business, all labor for doing the repair, plus parts, plus profit, associated with that repair. Your auto mechanic didn’t write that software. They adopted if from automotive repair industry and inserted their own data.
Restoration is just like that but on a much larger scale. There are industry norms for virtually every task, all materials and supplies, use of the equipment, and labor rates for particular tasks, right down to the tape we use to seal a door with plastic to create a drying chamber.
These industry normative pricing standards are driven by data collection from insurance companies. The insurance companies use a software system to set normative pricing for the restoration industry. Even though these pricing structures are only suggestions, they are normative benchmarks. Legally, we can charge whatever we want, low or high. However if too low or too high the business goes away.
If we shoot too high we will be stonewalled by insurance companies and locked out of business. They will not refer work to us. These pricing structures act like price regulation, like what you might see for tobacco or alcohol. But’s its done through business practices rather that legislation.
Working at too low of a price suggests to both the insurance adjusters and home owners that we are hacks, and who want to refer or work with a hack? So, generally, we charge about what the insurance company expects. If what we think should be done based on the IICRC S500 standards doesn’t agree with what the insurance company thinks should be done, we side with the customer because the customer has hired us, not the insurance company. As an independent contractor, we are not beholden to the insurance company. (This would be a good time to read other blog posts such as Picking Your Restoration Contractor, Nine Questions to Ask Your Claim Adjuster, and Four Professionals You Need to Know for Disaster Recovery.)
THE DIFFERENCE BETWEEN EXPENSIVE and NECESSARY EXPENSE
Why are diamonds expensive? Two reasons. Limited supply. Perceived value. Restoration services are like diamonds. In fact, I’ve heard stories of couples pawning jewelry to pay for remediation of a sewer back up. That is not about expensive restoration services. That’s about poor financial planning by a home owner. When you have a broken water pipe or an ice dam allowing water to create a place for mold to grow, you want a professional to fix it. There are not many restoration companies around that provide a fast response, are certified and treat people well. In general, rarer products and services are priced higher in our economy.
So “expensive” correlates to perceived value. What value do you place on having your home well taken care of? When I ask people this question in person, they pause, mouth half open, and say something like, “Well, whatever it takes.” In reality, that statement is moderated by, “But not more than I have.” In this context “expensive” is usually about what this will cost you compared to what you have in the bank, not to what it is really worth to you if done really well.
It’s not about the absolute value of the services, just like the price of a diamond, Mercedes or Super Bowl tickets is not about the absolute value of those items. The “seems expensive” part is at least influenced in part by the Florida Spring Break vacation you have been promising the kids, going to fix the family room after a basement flood. That, indeed, is costly. But it’s necessary. And it’s valuable.
I know that last paragraph rubs some people the wrong way. “How dare he talk my poor financial planning while at the same time talking about how good and valuable his services are.” Well, if that last paragraph bugs you I’ve done my job, because I’m trying to get you to see two important points. First, make sure you have your home insurance deductible set aside from all other planned expenses. Second, make sure you know what your policy covers. If you do these two things, professional restoration services will not seem as expensive, and you will feel totally awesome about how well you prepared for the eventual.
Without exception, customers that follow this advise do not label restoration services as expensive. They just consider such services as a necessary expense.
As mentioned, profit is an outcome of our work, not the reason we do the work we do. But, the more profitable we are the better employees and customers are served, my family included. Profitability means staff stick around, grow in skill, work habits, and customer service interactions. Profitability means customers stick around because they have an overall better experience with a business that is making a profit and investing that back into the company. Employees win. Customers win.
Circling back to the beginning, I choose to own this business and we choose to offer restoration services throughout north central Wisconsin because our customers need us to do so. We were told my insurance carriers and customers that this is an undeserved market when it comes to contractors that know what they are doing and will do so through values based work. Also, it is the outcome of a well run business. It is what allows us to do this well.
This is my ministry and this is what restoration services pricing is about.
Until next time….
Eric Nei the Cleaning Guy