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Archive for the 'loss' Category

How to Profitably Scale Your Business Using a Salary Cap

Integrating and Implementing a Salary Cap in Your Business

Sports fans understand the concept of a salary cap because most of the major professional sports leagues have some version of a salary cap. In business the term salary cap is used to define a determined payroll limit that restricts the amount of money to be spent on wages and salaries for a specific period of time. Some restoration business owners do not think about how their business could benefit from establishing a salary cap.

As a restoration business owner your single biggest expense is likely labor– the salary/wages that you pay to your employees (including yourself) and the money paid out to subcontractors or vendors for labor. If you want to impact your overall success and your profitability, then you need to start by looking at your labor productivity as the biggest component in your business.

In a growing business, labor costs can quickly balloon out of control. When small businesses are making the transition to medium-sized businesses it is possible to fall into a dangerous feedback loop of borrowing and spending. As you scale your business, your costs will grow, and it is tempting to see break-even (your previous measure of success) as sufficiently safe growth.

Greg Crabtree is the author of Simple Numbers, Straight Talk, Big Profits, and one of the great ideas in his book is the recommendation that every business should self-impose a salary cap just like the one that NFL teams deal with every year.

How to Calculate Your Salary Cap:

To keep the math easy we will use an example of a business that generates $1,000,000 in revenue. In this example the business owner has determined that they want a 10% pre-tax profit from the business after paying themselves a reasonable market wage.

The non-salary costs were calculated by adding up all the fixed costs like materials and subcontractors, and operating expenses like rent, utilities, insurance, communications, and advertising, etc.  This would also include the cost of goods (less labor and management labor) for $1,000,000 in revenue. In this example the non-salary costs are $400,000. As you can see, that means the salary cap is $500,000, which includes all labor costs.

A simple calculation can help you determine the total labor costs allowable with your current revenues.

Labor CAP Formula:

LC = (total revenue) – [(0.1 x total revenue)] – (non-labor costs)

($1,000,000) – [($100,000)] – ($400,000) = $500,000

Here is an example:

If the current payroll expense is more than $500,000 (and the other numbers are correct) then this business is not going to hit the profit target and the business is at risk. That gets us back to the labor productivity idea- the key is to generate $1M in revenue from that $500,000 of labor, and if you want to be more profitable than 10%, then you either need to cut your salary expenses without impacting your productivity (do more with less) or grow your revenue without increasing your salary (again do more with less…or technically the same in this case).

At BDA, we believe that every restoration business owner has the right to expect that their company can deliver to them what they want out of life- freedom and the ability to create wealth.

Make it a prosperous month!  Stay tuned for next month’s article.

Will Proposed Insurance Bills for New York Backfire?

Insurers fear that a collection of nine different insurance bills up for consideration in the New York state senate will backfire, placing the state on the “worst insured markets” list.


Lawmakers, looking to help insured affected by Hurricane Sandy, have recently approved a post-Sandy insurance reform package that has several methods to better serve policyholders affected by Sandy and other related disasters. This includes:

-Establishing a “homeowner’s bill of rights”
-Creating standards for hurricane windstorm deductibles
-Restricting an insurer’s ability to cancel or not renew a homeowner’s policy
-Reducing time frames to settle claims

One group that has been vocal in the fight against these bills passing is the American Insurance Association (AIA). Believing the legislation is “misguided”, the AIA warns legislators and the public that this group of bills can create a scenario similar to that of legislation that passed in Florida after 1992’s Hurricane Andrew, also intended to help and further empower policyholders who suffer from catastrophic weather. Those laws backfired, creating a 40% decrease in insurers in the state of Florida and consequently, shrunk the insurance marketplace.

For New York, AIA warns that following in the same footsteps similar to Florida will create a tight marketplace where insurance will now come into a situation of high demand, low supply and increased premiums to the policyholder. Part of the increased cost to policyholders may come from the fact of putting more litigious power in the hands of consumers against insurers, which will get passed back down to the policyholder’s premiums eventually.

AIA also stated that insurers have closed 95% of all Sandy related claims with $5 billion going directly to New York with a 1% complaint rate, further defending AIA’s stance that this legislation is unnecessary.

With two weeks left in the legislative session, it remains to be seen if the Senate will bring the measures to the floor.

Maryland Joins Other States In Banning Contractor Rebate Offers

Earlier this month, Maryland joined other states that are putting the kibosh on contractors who offer rebates to homeowners as a way to secure the repair contract. These contractors typically come with a shady motive behind the rebate, as they will perform substandard and inflated work, leaving the homeowner with a property not restored to pre-loss condition and affecting the overall value of the home.

These contractors use rebates of the homeowner’s insurance deductibles as a way to dangle the “carrot” so to speak in efforts to secure the contract. The homeowner, who sees savings of hundreds of dollars, believes they are getting the deal of a lifetime. In the end, they are disappointed to find that subpar materials and questionable or downright improper repair was performed.

In the cases of area-wide catastrophic weather damage, storm chasing contractors of the predatory nature will knock on the doors of homeowners who are under a great amount of stress and need even more urgent repairs. Once the shady contractor is able to get in and secure the contract by offering the rebate, they again perform substandard repairs, or in some cases, ask for a large amount of money up front and disappear completely with no work done, and never to be seen again.

It’s also important to note that a homeowner’s policy may not cover the repair of the fraudulent work done by the shady contractor. (To read more about Maryland joining the fight to stop scrupulous contractors in their tracks, click here.)

This type of fraudulent actions tarnishes our industry and makes it harder for honest contractors to assure their customers that they will follow the Standard of Care and follow the guidelines, ethics and practices set forth by our major industry associations and institutes. In order to help protect their reputation in the community, restoration contractors can use a variety of methods to get out their “good news stories” and spread customer testimonials, both online through their website and social media platforms. There’s also more direct marketing tactics you can use as well to spread the good word about your company.

Are you facing sales and marketing challenges that you need help with in order to grow your company? If so, reach out to us at info@theBDAway.com or, call us at 777-773-9956 and we can setup a brief time to talk about them and how BDA might be a good fit to help you get to the next level.

Upcoming Seminar: “5 Stages of Small Business Growth for Restoration Contractors”

Join us at Contractor Connection on Wednesday, May 21st, for this exciting seminar presented by the President of Business Development Associates, Tim Miller.

Business growth often triggers other business challenges. Business owners tend to approach growing their company as one long continuum from the day they open to the day they retire. When in fact, there are distinct stages of growth, with different challenges, stressors, and potential outcomes. Growing companies can greatly profit from advanced knowledge of the challenges they are likely to face at each step.

This course will explore the five stages of growth for a small business while applying it to our specific industry. Detailed explanation of what each stage looks like, and suggested steps to successfully navigate those transitions, will be included in this course.

Upon Completion Of This Course, Attendees Will Be Able To Gain:
• The Ability To Identify Which Stage Your Business Is At In The 5 Stages of Small Business Growth
• What Obstacles Are In Their Way Of Growing Their Business At The Current Stage The Business Is In
• Suggested Steps To Be Taken In Order To Move Their Business To The Next Stage Of Growth
• What The Future Stages Of Growth Are To Come, and The Challenges, Stressors and Potential Outcomes of Each Stage

This course will be presented twice at Contractor Connection on Wednesday, May 21st, from 1PM-2PM and again from 2:15-3:15PM.

You can learn more about the upcoming Contractor Connection conference in San Antonio, Texas, by clicking here.

Unable to make it to San Antonio? Check out another upcoming workshop held in Columbus in August: “Sales Mastery for Restorers.” You can learn more by clicking here!

Property Claims Report: Severity and Frequency of Property Damage Increases, Yet Overall Customer Satisfaction Remains High

J.D. Power and Associates recently published their 2013 Property Claims Satisfaction Study, which measures the satisfaction level of 5,500 customers who have reported claims for property damage under their homeowner’s policy between May 2011 and January 2013.

Of the approximate 8% of homeowners that reported a property claim in the U.S. during that time period, the average settlement amount increased to $8,517 as compared to the prior year where the average claim averaged in at $7,937. Contents settlements have increased approximately $250 from year to year while the average repair settlement in 2013 came in at $7,844 compared to $7,151 in 2012.

Out-of-pocket expenses for homeowners nearly doubled, as the average amount in $1,945 increased to an average of $3,888 in 2013.

The survey covers five factors of their experience filing the claim: settlement, first notice of loss, estimation process, service interaction and repair process.

While customer satisfaction with the overall claims process remained high (despite 2011 and 2012 marking a historic number of claims due to catastrophic events) one aspect of the claims process represented a 9 point decrease in customer satisfaction as compared to previous years: the service interaction process.

This drop is being explained as being caused by the homeowner reporting claims through call centers (direct channels) versus directly through their agents. 68% of customers used direct channels in 2013 to report claims, up 11% from 2012.

For those that reported claims directly through their agents, satisfaction ratings were 50 points higher than those that reported claims through call centers. The decrease in or lack of personal interaction, attention and service helped contribute to the dissatisfaction amongst those that reported claims directly to the call center versus reporting the claim through their agent. (It should be noted that the study did find a few direct carriers that did have scores that were complimentary to those who made claims directly to their company).

Although the industry is showing a shift towards direct channels, can insurance companies bring the same personalized attention to the policyholder that will not only create overall satisfaction during the property claim process, but also enough to to retain those policyholders?

And, as the restoration contractor performing the work to bring the customer’s property back to pre-loss condition, you also play an important part in the claims process. Doing good work and being nice to the customers is important for any restoration contracting business. But, it’s not enough for people to decide to choose you as their restoration contractor, whether it’s the agent referring you or the policyholder deciding to choose you over the other two contractors that have given estimates.

If you are a restorer looking to find out more about how to position yourself more uniquely, check out this BDA blog entry that we posted at the beginning of the year.

If you’ve got goals that you have set (or still looking to set) for 2013 that are not on pace to reaching fulfillment, or, you’re still waiting on weather, good luck or program works to be the driving (and unpredictable) factor for growing your business, it’s never to late to redefine your company and gain a unique competitive advantage in your marketplace. (And for goodness sake, don’t wait until 2014 to do something about it!).

For those restorers who are looking to gain that unique advantage and are ready to predictably grow their business, you might be the right fit for the “The BDA Way.” To learn more about how BDA is helping other restorers secure millions in new business, visit us here to find out more information.

“Zombie Properties”-Not Just in Movies and “The Walking Dead”

For all you zombie fans, when we mention the phrase “Zombie Properties,” your mind might be conjuring up images of the disheveled and abandoned homes you see in zombie flicks or the popular TV Series, “The Walking Dead.” The homes are left unattended and have basically begun to rot away due to lack of care and possibly being exposed to the elements. The home’s owner has fled for safety or unfortunately, become a zombie (or a zombie snack).

In reality, the term “zombie” properties does refer to the vacant homes that have indeed been abandoned by their owners due to foreclosure by the banks (sans any actual zombies). In fact, a recent Reuter’s special report has indicated that there are 301,874 zombie properties across the nation, with Florida topping the list, and Illinois and California coming in second and third, respectively. Florida’s #1 spot in the zombie property rankings could be due to the longer than average time for the foreclosure process to complete, causing the homeowner to become frustrated and walk away all together.

With another 10.9 million homeowners at risk of foreclosure, a spike in these zombie properties could be apparent, as many homeowners continue to struggle with payments in a tough economy and owe more on their home than its actual worth.

The report also found that although the homeowners walked away from their homes due to financial hardship, they did not realize that they were still responsible for the associated taxes and bills of that property. Even worse, some of the homeowners who fled their homes due to receiving a foreclosure notice from the bank later found out that the bank never pursued the foreclosure fully, thus abandoning their home and letting it succumb to unnecessary damage.

Zombie properties are known to attract the criminal element and become a inviting place for squatters and vandalism, thus worsening the condition of the property–all this on top of whatever damage is being incurred from improper or complete lack of the home’s upkeep. Upon returning to their property, the homeowner will not only find letters stating they owe back taxes, but also services for graffiti cleanup, property repair and more.

For the company charged with restoring these properties, these properties can be extremely difficult to deal with, as the extent of damage can be severe and the party responsible for paying them might have a different take on what’s necessary to bring it back up to par. Plus, until the home is sold, the same people that vandalized it in the first place could likely return after the damage was initially repaired. In some cases, the responsible party will want the contractor to perform only wants necessary to make the property look cosmetically presentable-without getting to the root of the problem and truly restoring the property to the Standard of Care. (e.g.: “just paint over that mold-the next buyer will never know”).

It’s extremely important for anyone restoring these types of properties to effectively communicate to the respective party what the proper Standard of Care means and why the property should be restored as so. If the respective party wants you, the contractor, to cut corners, would you walk away or cut the corners, thus compromising the safety and health of those involved? That’s a big gamble to take on the latter option!

What’s your experience with these types of properties? Post your feedback or comments!

And, if you’re looking to predictably grow your business without relying on those that compromise the integrity of your restoration company’s practices, programs, weather or good luck, Business Development Associates, Inc. might be a good fit for you. We are a sales and marketing agency specializing in the restoration industry, generating millions of dollars in new business with proven and effective systems. You can learn more about us by visiting our website here.

Climate Change High On The Radar for Insurance Carriers

With 2012 recorded as the warmest year on record in the lower 48 states and also noted as the second most extreme weather year in U.S. history, insurers have climate change high on their radar.

The recent Ceres report, Insurer Climate Risk Disclosure Survey, shows that while extreme weather is regarded as the new “norm,” many insurance professionals are just beginning to think about how this severe weather will change their business. Climate change is being seen as a major financial threat to the insurance industry. Insurance carriers are looking to put strategic plans into place to deal with the topic of climate change in the coming years as carbon pollution increases worldwide and contributes to the increased problem of global warming. These strategies are aimed to manage their risk from rising sea levels, extreme wildfire, more droughts and severe heat waves in the coming years and decades.

The survey explains that there are five primary motivations for insurers to take action on climate change including:

-Impacts on revenue and profits
-Emergent risks from the future events triggered by climate changes
-Exposure of their insured who are will be exposed to the effects of climate change, both personal and commercial lines

Developing CAT models that anticipate climate changes and the consequential effects, plus advocating and supporting the reduction of carbon emissions are among the suggestions to carriers from Ceres.

Other strategies could include rate hikes for both personal and commercial accounts in disaster-prone areas, especially if carriers feel they will have difficulty enforcing hurricane deductible clauses in their policies. Reducing the supply of policies available in a a given area is another avenue being discussed.

In the restoration industry, losses can originate from both natural and man-made causes. While counting on weather, programs or good luck is not a predictable way to grow your business, knowing how to “pay attention” to those that can refer you the work, and even more so, being prepared for those moments are key to predictably managing your business for optimal growth.

Spending Increase on Personal Lines; Commercial Rates Remain Steady

According to new research by Bankrate.com, more than a third of Americans spent more on insurance last year, while 52% spent the same, and only 7% spent less.

Of those that spent more on insurance in 2012, 62% said they did so due to rising premiums. The second biggest reason for increased insurance spending, according to survey respondents, was due to the purchase of a new home, car, boat or recreational vehicle.

Spending increases on multiple types of insurance was also seen, including homeowners, renters, life, auto and health coverage.

On the commercial side, rates are expected to continue rising later on in 2013 due to above average losses, low investment returns and receding reserve releases. The occurrence of a hard market is not in sight as of now, as both competition in the insurance marketplace and capacity remains high, and price increases continue to differ across the board.

Some suspected that commercial insurance rates would have started to rise in early 2013, but Superstorm Sandy’s effect on the market is predicted to stall or even out current rates that at one point had seemed to be improving.

Insurers across several types of lines and industries will continue to adjust their pricing and coverage in efforts to maintain their profitability. In addition, the rising severity of losses means that carriers to look more closely when processing claims to ensure the claim and the circumstances that caused the loss matches the coverage currently carried by the insured. For restoration contractors, this could result in further challenges with insurance companies, uncovered losses and angry policyholders who didn’t realize their lack of or gaps in their insurance coverage.

Mobile and Tablet Usage Rising-Is It Right For Your Mix?

There is no question that smartphones and tablets have not only revolutionized how we engage with each other both personally and in business, but both technologies continue to provide greater marketing opportunities for both B2B and B2C purposes. And everywhere you look, it seems that everyone has one, and for those that are has a lower adaptability rate, (for example, the Silent Generation), they too are gradually increasing in their consumption of the latest technology.

And for marketers, increased mobile and tablet usage means the ability to leverage various tactics and strategies in order to communicate and provide interactive opportunities with their company, from QR codes, push messaging, Mobile Apps, mobile and tablet friendly Websites, sharing abilities, interactive TV, mobile banner ad opportunities, location-based marketing and much more.

For the consumer, the immediate gratification of finding information or products they want is also a big plus, as they can quickly perform a Google Search or buy the item they just saw on TV or in a magazine in a matter of minutes. For the company that consumer is buying from, the ability to maximize on the consumer’s impulse and need for immediate information or for the product itself can be result in shorter buy cycles and quicker profit. And to top all this, the rising market penetration rates of both mobile devices and tablets have marketers looking at a way to start shifting part of their marketing mix over to this new communications platform.

To give you an idea of how entrenched mobile and tablet technology is here in the U.S., below is a quick snapshot of US smartphone users and penetration into the population from 2010 and projected into 2016. In 2010, smartphones were used by 20.2% of the population, where in 2013 it will have jumped to 48.9%. In 2016, it’s projected that nearly 60% will have a smartphone.

- 2010: 62.2 million (26.9% of mobile phone users / 20.2% of population)
- 2011: 93.1 million (39.2% / 29.7%)
- 2012: 115.8 million (47.7% / 36.6%)
- 2013: 137.5 million (55.5% / 43.1%)
- 2014: 157.7 million (62.5% / 48.9%)
- 2015: 176.3 million (68.8% / 54.2%)
- 2016:192.4 million (74.1% / 58.5%)

The following numbers reflect those of tablet users. By 2014, it’s predicted that over a quarter of the U.S. population will be using tablets. As tablet adoption increases, older devices will get replaced and eventually, will become more like smartphones, which typically have a single user and less sharing.

U.S. tablet users and penetration, 2010-2014:
- 2010: 13.0 million (4.2% of total population / 5.8% of internet users)
- 2011: 33.7 million (10.8% / 14.5%)
- 2012: 54.8 million (17.3% / 22.9%)
- 2013: 75.6 million (23.7% / 30.9%)
- 2014: 89.5 million (27.7% / 35.6%)

Another advantage of mobile and tablet marketing in a company’s mix is not only the benefits we spoke of above, but the ability to be truly integrated and interactive with other elements of your mix. Marketers can cross-pollinate what can be considered a traditional form of marketing with the newer forms like mobile marketing. By doing so, you can give a “facelift” to what some people might be considered “dead” forms of advertising, like print advertising.

For example, in Quarter 2/2012, the use of mobile action codes In the U.S. top print magazines rose 61% compared to the previous quarter. In comparison to last year, the print-to-mobile marketing strategy rose from 5% overall to 10% and continues to rise. Action codes in magazines right now are actually outpacing action codes in direct mail. Direct mail is typically receiving about 4.4% overall in a response rate while catalogs garner a 4.3% response rate; a direct mail letter receives an approximate 3.4%). But, with the implementation of mobile code actions, that response rate on direct mail rose from 4.5% to 5.9%.

It’s important to note something here…one of the best rules in marketing is this: don’t implement a marketing activity into your mix just because it’s the latest buzz trend. Rather, does a proper analysis of your target market, how they engage with your applicable medium and then see how the rubber will hit the road, if it does at all. The numbers we provided here are some high-level stats. There’s lots of ways to drill down and seek out further information about your target market on a much deeper level, and you should make every effort to do so. But, with some powerful data and the obvious impact both mobile and tablet technology has had and will continue to make on our society, it’s certainly something that can’t be ignored and should be considered!

In the end, what you choose in your marketing mix and what you decide to say and how you say it are all integral, critical parts in acting strategically with your message. Finding the ways to communicate your message is half the battle — figuring out what to say is the other side of it!

What’s your experience with mobile and tablet marketing? Restoration Contractors are you currently utilizing any mobile or tablet strategies? We’d love to hear your thoughts and/or experience!!

For more information about Business Development Associates, Inc., visit www.theBDAway.com.

Is Your Sales Team Productive & Profitable?

Knowing whether or not your sales team is being both productive and profitable is key to driving the growth of your restoration contracting business. In many cases, we find that many owners are sending out reps into the field, and they either don’t have a pulse on what exactly they are doing out there, or, they know that their reps are busy, but not seeing the amount of sales to match the amount of busyness their reps are reporting back.

BDA President Tim Miller discusses the importance of sales people tracking their results for truly optimizing their efforts and your revenue possiblities!

Click Here To Watch the Video!



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