The Disaster Division as a Separate Diversification - Levels of Commitment
July 6, 2011
After the first two parts of this series, I may have some of you seriously doubting whether you should even attempt getting into disaster services. Let’s talk for a moment about levels of initial commitment.
If your list of services has not yet expanded to the point of including fire restoration services, if, indeed, you aren’t quite ready to make that major a commitment in terms of additional vehicles, personnel, equipment and facilities, there is a method of gradually “sneaking in the back door” of the disaster market.
This effort typically involves establishing water damage restoration services. When water restoration services are established first, your investment in time and money is considerably lessened and your reputation for responsive, quality service is solidified. Yet you wind up with basically the same marketing strategy, the same paperwork, and you wind up making contact with the same agents and adjusters.
Eventually they will be instrumental in the success of the “fire” diversification when you decide to expand all the way into a more complicated, full-line restoration service. At that point the transition into fire services is fairly easy, because a solid foundation is already in place.
OK. Suppose you are ready to make the full transition into fire services. Does that mean you have to go out and purchase a new facility, all new vehicles, and bring in “a cast of thousands” who sit around your new facility and wait for the first fire claim to roll in?
Obviously not! While you should have your eyes open for an appropriate facility that will serve your needs during initial expansion, do not anticipate filling up five to six thousand square feet immediately. The time will come for that if your market area has the potential you anticipate. For now, simply start looking around, taking your time, and using judgment in selecting that “just right” facility.
Second, vehicles don’t have to be purchased new. Hauling capacity is important, and you’ll find that large-capacity trucks aren’t quite as much in demand as standard vans used by tradesmen in a variety of services. Usually there are several used step-vans or “cube” vans available in most markets, usually at used car lots. They may not be operated as economically as smaller vans, but they are ideal for hauling quantities of equipment and personnel to the job site. Also, they enable transport of contents in move-out situations.
Don’t forget to put a sign on that van that specifically promotes disaster services!
Next, what about the people needed to staff a fledgling disaster diversification? Several dozen people sitting around your facility waiting for you to generate work is the last thing you need! Interestingly, a disaster diversification can be launched with no new people added to the payroll – that is, if the other diversifications of the company are truly diversified.
What does that mean? The only logical time to launch into a new diversification is when, and only when, the original division of the company is operating autonomously
Once an appropriate supervisor (again, beginning as a part-time worker) has been identified and partially trained, this person can take over the interviewing process needed to line up other part-time personnel to place in an on-call status. Ultimately, the supervisor will channel most of his or her effort in three areas: selecting part-time personnel, coordinating with routine subcontractors, and providing working supervision on the job site. Meanwhile, you will be able to channel more effort into marketing your service for rapid, though organized and efficient growth.
Note that, instead of a “cast of thousands,” so far we’ve hired only one 30-hour-per-week person in our transition into fire services. This is a very practical, time-proven method for making this orderly transition.
The next question is, “Just how diversified do I have to be?” More specifically, “Do I have to be a construction contractor?”
For pure simplicity and to facilitate coordination, insurance representatives normally prefer to deal with as few contractors as practical. That is, unless they are given sufficient justification to deal with separate contractors when processing individual claims.
Just what constitutes “justification?” Well, several factors are involved; things like getting the contractor to respond quickly enough. Construction contractors aren’t noted for responding rapidly, in terms of getting things moving and attempting to save surfaces that can be ruined quickly by the effect of acid soot residues. They aren’t noted for making valiant attempts using cleaning technology to save surfaces that they perceive to be more easily (and more profitably) torn out and replaced, since that’s the technology many construction firms emphasize.
Of equal or greater importance to insurance representatives is the monetary factor. As will be emphasized throughout this book, the insurance company has basically three approaches it can take to the restoration of any surface, structure or contents. It can clean (least expensive alternative), resurface (more expensive), or it can replace (generally the most expensive, though often unavoidable). Remember, each successive alternative becomes progressively more expensive and, usually, more complicated.
Finally, there is the matter of service coordination and mark-up. For reasons explained in later chapters, the ability of the cleaning restoration contractor to coordinate directly with adjusters is extremely important; still, of more importance to insurance representatives is the money involved in mark-up. They must constantly ask themselves, “Is it really necessary to ‘tack on’ to every cleaning estimate 20% to 24%, just for the convenience of writing one check to a general contractor?”
The issues of the motivation to salvage items (with the related monetary savings), and the savings of mark-up become prime sales points in convincing agents and adjusters to suggest two types of contractors on each job. One is a cleaning-restoration contractor (often called a mitigation contractor) who can respond rapidly, clean instead of replace, follow through more efficiently, and save mark-up.
The other party to the process is a licensed construction-restoration, or “general” contractor, who can provide construction services (carpentry, plumbing, electrical, painting), concentrating on the things he does best. Remember that your primary effort is to sell insurance representatives on the idea of saving hassle, time and money!
In summary, if two contractors are required to properly process each job efficiently and cost effectively, so be it!