The Untold Story of How the Average Restoration Company Owner is Broke and Miserable.
There is no greater tragedy than for a man to earn 2 million dollars and have nothing to show for it.
Not only is it possible to make 2 million dollars and be broke, it is common. How sad.
In this article, I am going to tell John’s story. How did he get there? How can you avoid the same fate?
If you own a restoration company, this may be the most important thing you read this week.
Why Trust me?
In case you don’t know me, my name is Shane O’Dazier. I grew and scaled my own restoration company (and I have the scars to prove it). This story of John is a bit of my own story and some of my friend’s stories. Either way, I don’t want it to be your story – enjoy.
John’s Story
It is 5:30 am. The sun is breaking over the horizon on a muggy summer morning. As John pulls into the parking lot he drives past his fleet of vans and trucks.
With a coffee in one hand, John digs into his pocket trying to get the keys to his office. He flips on the lights, throws some mail on his desk, and sits down to begin his day.
His morning ritual begins with digging through yesterday’s mail. 3 checks are supposed to arrive any day now. He is expecting over $100k this week!
He starts by creating four piles:
- Junk
- Checks
- Bills
- Stuff to check later
As he sifts through the mail, his stomach starts to churn as he realizes there aren’t three checks today. Instead, he has a stack of bills and 1 check. One check is better than no check, right?
John focuses on the envelope with the check-in it.
He tears it open, flips it over, and then he sees it.
The mortgage company is listed on the check!
While John has a check for $68k in his hands, he can’t use it until Bank of America signs off on it.
John will have to wait another 4 to 8 weeks before he can get these funds released to him.
To make matters worse, John has a $45k Amex payment due in 3 days and payroll on Friday.
With his head in his hands, he slumps forward in his chair.
He has about 20 minutes to pull it together before his first employees arrive.
John’s restoration company makes over $2 million per year. He has a fleet of trucks and vans and 15 employees.
While he has $350k in receivables, he has $25k cash on hand and he needs $65k by Friday.
It’s worth mentioning that we wouldn’t have a problem if the checks that were supposed to arrive had arrived. But the reality is that they didn’t arrive – so we do have a problem… and it is a big problem.
This is what we call the cash flow rollercoaster.
John’s company looks great from the outside. But, once you get past the 145 Google reviews and a fleet of trucks and equipment, there is another story behind the scenes.
His $2M restoration company is barely profitable. It eats a ton of cash, has too much turnover, and he secretly hates it.
Said another way, it is a $2M dumpster fire.
How did he get here?
There isn’t a single lesson to learn about John’s story. But, there are several things you should know about John and the errors he made while building his company.
The reality is this: unchecked growth for growth’s sake is not a good thing.
Said another way, building a BIG company shouldn’t be your goal. Building a highly profitable company is a far better goal.
As you know, I grew and scaled my own restoration company. Now I help other restoration companies grow their company by using the same things we did at my own company. My company’s name is RestorationProfits.
Notice I didn’t call the company RestorationRevenue.
Profit and Revenue are not the same thing!
If you could only have one, which would it be? That is why we went with RestorationProfits.
Here’s the deal. Most people make one simple, yet fatal mistake from the very beginning.
They set the WRONG GOAL
Whatever you aim for, you have a really good chance that you will achieve it.
The problem with John was that he didn’t have a true goal.
Like most other people, John didn’t know what he wanted.
So, without a clear goal on what he wanted, he set an arbitrary goal which was this: BUILD A $2M COMPANY that has 15 trucks.
And what do you know, 3 years later, that is exactly what he had.
John’s problem was that he set the wrong goal. He focused on revenue, not profits.
If you have been in the restoration business for any length of time you will be familiar with the “look at me picture” where a restoration company hires a photographer to capture all their trucks, employees, and equipment.
I’m not saying that it is a bad thing to be proud of your company. Nor am I saying that you are wrong to take a picture like this.
What I am saying is that setting this as your goal is not a good goal to set!
This is the company that John built and it was eating him alive.
Rather than focus on top-line revenue, John should have focused on profitability.
We have another article that shows how to grow your company. It advises focusing on profit first. It uses our 136Method. With the 136Method we teach you how to scale your company while earning 1 million dollars per year per truck. It is a great article and you should read it after you finish this one.
But for now, I want to take you deeper into John’s company so you can learn more about why he wasn’t as profitable as he should have been.
The Wrong goal
Now we know that John set the wrong goal. He wanted to get bigger and make more money. He didn’t mention anything about profit.
This is a problem because the fastest path to get MORE MONEY is just to go for BIGGER JOBS.
Not only did he have the wrong goal, revenue instead of profit, he optimized the business for the wrong thing (revenue).
The fastest path to more money is bigger jobs. The fastest path to bigger jobs… reconstruction projects aka recon or rebuilds.
Let’s talk about reconstruction
Am I against reconstruction or rebuilds? Not really, well… maybe I guess. Here is my problem with it…. It is much harder to execute at a high level.
Most restoration contractors are NOT general contractors. Reconstruction or rebuilds are essentially construction projects that should be executed by a general contractor.
My point is this: Emergency services (water damage restoration) is FAR DIFFERENT than construction. The company’s structure is different. The workflow is different too. I can’t overstate how different these businesses are. Yet the entire restoration industry has somehow decided that these should somehow go together.
Emergency Services (water damage restoration) are like a trauma room. The reconstruction or rebuilding part of the project is closer to rehabilitation.
Know that the doctor who does your trauma surgery to save your life is not the same doctor who teaches you to walk again. Not even close.
My problem with restoration contractors doing reconstruction is that they simply aren’t that good at it. And for those guys that do offer reconstruction services, 95% of the company’s problems are related to the reconstruction side. So why do they do it? So they can get to that 2 million dollar number – foolish!
Now I am fully aware that many (if not most) of you reading this currently offer reconstruction services.
Here is my question to you: If you could make the same amount of money but ONLY DO WATER – would you?
Most companies that offer reconstruction do so because they don’t have enough water-damage jobs to support the business.
Notice that not having enough water damage jobs is a clear problem that we can fix!
Problem – Don’t have enough water damage jobs to support the business
Solution – Get more water damage jobs
Notice the solution is more water jobs – NOT offer reconstruction services!
Now you guys are getting me fired up and off-topic… back to John’s story.
Another big problem with John’s business is that his 2 million dollar company was a bloated top line that was full of break-even reconstruction projects.
Looking at numbers
Once you get inside John’s numbers, this is what you will see:
- $2 Million in revenue
- $1.3 Million reconstruction
- 400k Water damage mitigation
- $300k Mold / other
Recon 1.3M – 10% profit = 130k
Water 400k – 70% profit = 280k
Mold 300k – 40% profit = 120k
John made more profit on the $400k of water than he did on the other $1.6 million!
Once you see the numbers this way it is much easier to see why his business is simply a house of cards.
That’s $580k to run a company with 15 EMPLOYEES!
Now do you understand why he is flat broke?
But at least John has his ‘look at me picture’ to show for it. Remember the picture showing all of the employees and trucks…?
Isn’t it nice to have such a vivid reminder of our ignorance?
You should know that we have had multiple clients make this much profit with just a SINGLE TRUCK!
Yes, you read that right, a single truck.
Let’s look at Lloyd
Let me tell you about one of the guys now. His name was Lloyd.
He had been stuck at the $400k mark for about 3 years. At that time he was doing mostly mold work. After he joined our program, we showed him how to turn those mold jobs into insurance claims for water damage. His revenue exploded to over $900k.
Here was his company structure:
- Owner – in the truck
- Technician – in the truck
- Girl in the office
$950k revenue
$550k PROFIT
Not bad.
Here is my point, this is the power of optimizing for profit.
Which company would you want?
John’s $2M dumpster fire with 15 employees – OR – Lloyd’s $1M truck?
Everybody makes fun of Chuck in a truck…
Well, this is a Chuck that I’d like to be!
So what is the first step in building a highly profitable company? You start with optimizing for the most profitable job type – Water.
You say goodbye to the job types that don’t give you what you want – Recon, I am talking to you…
John’s $2M dumpster fire has 15 employees. It might seem impressive, but Lloyd’s $1M truck is where the true profit lies.
Lloyd’s revenue skyrocketed to $950k, with a profit of $550k.
The power of optimizing for profit is evident in his success. The key is to prioritize the most profitable job types, like water damage claims. Then, let go of less lucrative job types.
Focus on what brings the most profit, as Lloyd did. You can build a highly successful company.
Learn how to scale your own restoration company
If you want to learn more about how to scale your water damage restoration business using our 136Method click here to read the article.
If you want us to help you scale your business click here to book a free 20 min call with our team.