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Part 1 of a 3 part series
“My name is Jeff Moore. I’m a proud second-generation restorer. With my brothers Scott and Ryan, I work for our family restoration company, ATI Restoration, the company our dad, Gary Moore, founded 34 years ago.“
Born into a stereotypical blue-collar household, Dad learned the value of hard work and determination early on. While still in high school, he began working in the carpet cleaning and restoration industries. Dad entered the restoration business full-time after college, going to work for a multi-generation restoration contractor.
ATI’s story, from startup to America’s largest family-operated restoration company, is one of how our father shaped us, our company’s growth, and, ultimately, the growth of the entire restoration industry. Dad never expected my brothers and me to work for the family business, but he taught us the value of hard work and determination. Lessons that continue to guide us and our company today.
My brothers and I started at the bottom, working as technicians, and moving up to operational roles like project manager, estimator, and project director. We were exposed to complex jobs, large losses, and catastrophes. Between the three of us, one has been involved in every significant event since 2001, from 9/11 in New York to Hurricane Katrina in New Orleans.
As a leader in ATI’s mergers and acquisitions department, I’ve had the opportunity to meet hundreds of restoration company owners. I’m grateful and humbled to have been welcomed with open arms into their personal and professional lives. I’ve also been blessed to serve the restoration industry as vice president of the Restoration Industry Association’s board of directors, helping elevate and educate hundreds of restorers.
The most common question independent restoration owners ask me is how to grow their business or expand into adjacent or additional markets. While there is no one-size-fits-all answer, I always start by sharing my family’s journey. Whether you started your business yesterday or have been in operation for decades, our story is relevant, irrespective of revenue or number of jobs performed annually.
To Be or Not To Be
That is the question all restorers must answer. I’m talking about whether to be in the insurance game or not. The restoration industry can be broadly divided into two categories: those who play the insurance game and those who don’t. Both strategies have their merits, but the approach to generating work with insurers versus negotiating it on your own is very different.
Throughout my career, we have always played the insurance game. If you want to work within the insurance industry, there are numerous ways to generate revenue and profit from restoration jobs. The most common approach is getting to know your friendly neighborhood insurance agents, who may be independent or direct writers.
Independent agents can write insurance backed by one of dozens of different insurance companies. Direct writers only write policies for the carrier they represent. Visiting insurance agents can also benefit franchise companies with limited geography, as agents tend to write insurance for customers close to their offices. Your best strategy is ensuring the agent and everyone in their office knows your name and number, and staying top of mind through frequent visits. When one of their insureds calls looking for a contractor, your name should come to mind first.
Another approach is to get to know insurance adjusters in your market. Insurance adjusters are often the gatekeepers for restoration projects, as they are the ones who assess the damage and recommend restoration contractors to policyholders. Adjusters can also help you stay up to date with industry trends and best practices. They possess a wealth of knowledge and experience in the industry. Collaborating with them can give you valuable insights into policyholders’ needs and insurance companies’ expectations.
Insurance adjusters go by several titles, including adjuster (smaller claims), senior general adjuster (medium claims), and executive adjuster (large and complex claims). By establishing relationships with adjusters, you position yourself as a trusted partner in the recovery process and increase your chances of being recommended for restoration projects. Insurance companies often have preferred vendor programs, which allow contractors to receive referrals in exchange for agreeing to specific terms and conditions. Building relationships with adjusters increases your chances of being included in these preferred vendor programs and receiving more referrals.
As with agents, adjusters can be independent or work for a single carrier. They may be inside desk adjusters or outside field adjusters who are walking projects and meeting customers in the field. Developing a relationship with an insider desk adjuster is incredibly difficult. Building a relationship with an outside field adjuster is much easier.
Independent adjusters tend to handle more complex, significant losses and juggle many projects at once, making them an excellent place to start building relationships. However, they tend to have relationships with several restoration companies, so it may take time to build rapport and start getting on rotation. Adjusters can refer only one job to a contractor for every five jobs they receive. But once you’re on rotation with an independent adjuster, they can send you anywhere from $50,000 to several million dollars in revenue per year, depending on their qualifications, experience, and job size.
Working with public adjusters for referrals can be even more lucrative since they tend to work with the most significant losses. Our company does not work with public adjusters, but we understand the merit and value of doing so, if it’s right for your business. The downside of working with public adjusters is they usually charge a fee or take a percentage of the insured’s compensation, ranging from 5% to 12%. They may also expect you to reduce the claim amount by that percentage, affecting your margin. Nevertheless, losses in these projects are often exponentially more significant. Public adjusters’ primary role is to ensure that the insured party receives adequate compensation. Every claim may work against the insurance carrier, making the project challenging, complex, contentious, and sometimes litigious. Although these jobs generate significant revenue, they may take a long time to pay out, sometimes months or even years.
Early in my career, I took on the dual roles of project director and regional manager in our San Bernardino/Riverside location in Southern California’s desert region. As a project director, I recognized the importance of fostering relationships with independent adjusters. My rule of thumb was cultivating connections with five adjusters who consistently referred losses to me. This strategy proved highly effective, yielding annual revenues ranging from $3 million to $10 million. Over time, these relationships deepened and evolved into personal friendships. Before long, we were celebrating birthdays, weddings, and even swapping dog-sitting. These connections generated substantial projects for our company and long-standing personal friendships for me.
That experience taught me the value of investing time and effort into building and nurturing professional relationships. Trust, camaraderie, and shared experiences are at the heart of creating mutually beneficial opportunities. By recognizing the potential for personal connections to drive business success, we can harness the power of relationship-building to achieve extraordinary outcomes.
TPAs
TPAs, aka program work, account for 25% of the restoration industry. A third-party administrator is a company that provides operational services such as claims processing to another company. Insurance and self-insured companies often outsource their claims processing to a third party. Thus, such companies are often called third-party claims administrators. A TPA sits between the insured, the contractor, and the insurance carrier. It’s essentially an adjusting group that reviews estimates on behalf of the insurance carriers and has a network of contractors who perform services.
Half of all restoration companies generate revenue from TPAs in some capacity or another. Program work offers both advantages and disadvantages. The disadvantages include having a TPA audit and critique your estimates. Sometimes, after the TPA has critiqued them, the insurance carrier’s adjuster may critique them further. On top of that, the contractor typically pays a fee to the TPA. The typical fee is 5-6% but can range from as little as 4% to as much as 10%. That fee comes right off your top-line revenue and eats into your margins.
While margins are lower, the administrative burden is higher. From photographing the site to filling out paperwork, the administrative overhead is exponentially more costly and burdensome than other projects.
The advantage of program work is simple: revenue. Meet their performance metrics, and TPAs will introduce you to many insurance companies and losses. These jobs can generate substantial revenue for your company.
At our company, we discovered one of the seeming disadvantages of TPAs, the additional administrative burden, was actually a positive. The additional time we allocated to inspect, estimate, and complete a project improved our business. Aligning our company’s policies with our TPA partners improved our processes and overall performance for TPA and non-TPA work. While it is the most challenging work you will ever do, program work will elevate your company’s performance and make it more competitive.
One caution: it’s possible to do too much program work. As a rule of thumb, you never want one customer generating more than 10% of your business. Because a TPA by nature works for many insurance carriers, that doesn’t strictly apply; however, I would not recommend generating more than half your revenue with a TPA. As with any customer, TPA or otherwise, you’re only as good as your last job, and you’re only as good as your worst employee.
Even at our company’s size and scale, we occasionally upset carriers, individual adjusters, and customers, which has prevented us from getting work from a particular carrier or TPA. We’ve been kicked off programs entirely for nonperformance in particular markets. One day you receive a letter stating you are no longer doing business with that carrier, no explanation, no conversation, and just like that, you’re done. If that carrier represents a substantial portion of your business, it can be hard to recover, especially if you’ve added staff and overhead to handle that workload.
I recall one particular TPA relationship that highlights the valuable lessons we learned from losing a customer and how we worked to replace that revenue. One of our offices was pleased to be activated as a preferred service provider for a major carrier. This account became our number one customer at that location, generating a staggering $5 million annually. That relationship helped propel the office to one of our flagship locations—a true beacon of success.
We did extensive work and provided exemplary service on numerous jobs for many years. However, we eventually hit a rough patch. It wasn’t the TPA that removed us, but the carrier itself, citing three separate issues on three different jobs. Three strikes, and we were out. We received an immediate suspension notice and would not receive another assignment again, ultimately leading to our deactivation from the program.
Losing this account was undeniably a devastating blow. We bid farewell to $5 million in annual revenue with that carrier under the TPA umbrella. Despite this setback, we refused to allow adversity to define us. We redoubled our efforts to ensure customer satisfaction on every job and worked diligently to diversify our client base to mitigate such risks in the future. It was an agonizing journey that tested our resilience and determination.
I’m pleased to report that our unwavering persistence finally paid off. In 2023, we were reactivated by the carrier. It had taken nearly a decade, resulting in a staggering $50 million loss of business. But as an office and a company, we are stronger for it. While we are grateful and excited to welcome back the account, we won’t soon forget the bitter pill we had to swallow, especially considering the extensive work and exemplary service we delivered for them for many years.
This experience is a poignant reminder to avoid over-concentration with any one client. While we should always strive to provide exceptional service to every client, we must remain mindful that any customer, even the largest, can be lost instantly. It is a sobering reality emphasizing the need to continually diversify our portfolio and treat every client with utmost care and attention.
If you’re interested in pursuing program work, I recommend you check out the TPA Scorecard provided to members of the Restoration Industry Association. The RIA is the oldest and largest non-profit professional trade association dedicated to providing leadership and promoting best practices through advocacy, standards & professional qualifications for the restoration industry. The TPA Scorecard is the restoration industry’s answer to Yelp or Google reviews. Surveying contractors about their experience with TPAs helps other contractors make informed decisions and ultimately improves the restorer/TPA relationship. It’s the only way for restoration owners to gauge how TPAs are performing from the point of view of the restoration industry.
RIA’s 2023 TPA Scorecard ranked the following TPAs: