Friendly competitors

By Timothy E. Hull, CR

November 25, 2011

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The thought of a natural disaster, such as a hurricane, tornado or severe flooding, raises concern for most of the general public.

People in the restoration business, however, get excited because a natural disaster means one thing: WORK, and generally lots of it. Call it a CAT. Call it a surge. Call it whatever you like. It’s time to make hay and all hands are on deck.

Unfortunately, most restoration contractors are ill prepared to handle such a large volume of work in such a concentrated time frame.

Throughout my 11 years in the restoration industry, I have been fortunate to be surrounded by some very successful restorers, most of whom had specific plans for how to handle catastrophic events. The key to their success was their ability to capitalize on the strategic partnerships they established well in advance. These partnerships provided the opportunities to share resources that are necessary when facilitating large projects and volumes of work.

There are many advantages to establishing strategic partnerships with fellow restorers. They allow contractors to broaden their service territories, increase production capacities and penetrate hard-to-reach markets.

Perhaps the biggest advantage is enabling average contractors to compete with larger national companies to secure more desirable projects.

When evaluating partnerships, I advise clients to consider three basic needs under a multitude of scenarios. These are labor, equipment and location.

Labor

Labor is perhaps the most difficult of all resource needs to meet in a CAT or large loss scenario, as it yields the lowest profit margin and is the hardest to manage. Not to mention other contractors willing to lend assistance are usually staffed similarly to those in need. My observation is that most restorers can benefit from looking to labor brokers, large environmental contractors and commercial janitorial companies to fill this need.

Equipment

There is no shortage of supply when it comes to rental equipment, even during a catastrophic event. Most reputable suppliers prepare themselves well in advance of a pending opportunity and stage equipment in locations that allow for rapid response times. I advise clients to establish relationships with at least three suppliers with the resources to handle most any size loss. Some even offer setup, monitoring, and supervisory services, if needed. This can be particularly useful in large loss situations that would otherwise drain most, if not all, of a small company’s resources.

Location

My experience has proven that location is the most important need to consider when establishing strategic partnerships. Regional and national agreements with clients mandate an acceptable response time to losses, despite the fact that they may be outside of the contractor’s immediate service area. It is important to consider the risk of those clients and make sure that their response times can be met. To service the local market in the event of a surge, I encourage contractors to look just outside of their market, but within a 2-6 hour drive time. This insures a proper response while minimizing the chance of those partners being affected by the same surge or weather event.

When considering strategic partnerships to meet the needs identified, it is important to consider the compatibility of the working relationships.

Contractors will want to seek out companies that share similar business philosophies and values. The needs and expectations of the partners have a better chance of being met if these are in alignment.

Additionally, I have found that it is advantageous to look for partners with complementary service offerings and technical performance. This broadens the scale of projects that can be sold and minimizes the risk of mistakes and under performance.

Once partners have been identified and operating parameters agreed to, the relationship must be solidified in writing. The use of subcontracts, service agreements and fixed price schedules are imperative.

Most, if not all, disagreements between partners in these situations could have been avoided by having written contracts prior to starting any work. At a minimum, I advise contractors to define price, performance expectations and payment terms in their agreements. This protects all parties, including the client.

Establishing a network of strategic partnerships can be time consuming. The due diligence can be long and involved. However, the payoff can be substantial for any company regardless of its size.

Additionally, the process provides networking opportunities that yield a healthy exchange of ideas and information that help elevate the restoration industry, making it stronger and more professional.

I would encourage restorers to make strategic partnerships a part of their production models. After all, a little “friendly” competition only raises the level of performance in the industry and that benefits everyone.

Timothy Hull brings firsthand insight and mastery of large-scale restoration operations to those who face operational challenges in this industry. He is currently a Business Development Advisor for Violand Management Associates (VMA) where he works closely with business owners and their key management staff as both a business consultant and an executive coach. To learn more about VMA’s services and programs, visit www.violand.com or call (330)966-0700.