A Study Created for Restorers, Powered by C&R and KnowHow. Find all articles, videos, podcasts, and downloads related to this study here.
Data. Facts. Trends. Three things constantly sought after in our ever-changing restoration industry. After all, the more we know, the more educated our decisions for our own businesses can be, right? That constant desire for data was the driving force behind C&R’s 2022 State of the Industry Study.
Restorers from all 50 states, plus every Canadian province, responded to C&R’s first-ever State of the Industry study. Companies ranged in size from two employees and $350,000 in top line revenue to more than 7,000 employees and $2 billion in revenue. Nearly three-quarters of respondents are from independent restoration companies, while 28% are franchisees – representing nearly every franchise group in North America. Pulling all this together, we have a solid set of responses to paint a clear picture of industry trends, wins, and pain points.
This year’s study is designed to serve as a benchmark, or starting point, for years to come. What you read within this article, and within the full results of the study, will be used to take deeper dives into next year’s study, and the year after that, and so on.
As we begin to unpack the information gathered from this inaugural study, I want to start by giving KnowHow a huge thank you for being the engine behind this; we could not have done this research without them. As a software company, they have already conducted several studies in the cleaning and restoration industry and proven their mettle in conducting groundbreaking research. Look for much more from them, and us, in the coming months, as we continue to share what we have learned together.
It goes without much surprise that more that 57% of restoration companies said water damage restoration is the top service offering. Almost 23% of companies listed reconstruction/remodeling at the top. The remaining 20% was broken up between mold remediation, fire damage, contents, and biohazard services.
Less than 14% of the industry is only doing residential work. This is not surprising as many companies have grown and shifted their focus over the last few years toward commercial work, allowing them to handle fewer jobs with higher price points. More than 60% of restoration companies said at least a quarter of their annual revenue comes from commercial work of some kind.
Taking a step away from the reality of residential vs. commercial work, we also asked what restorers want their ratios to be. Almost half desire an even split between commercial and residential work for their businesses.
Despite a year of little CAT work outside Hurricane Ian, almost 80% of contractors expect their revenue to increase over the next 12 months. Just 3% expect any sort of loss.
TPA or No?
It’s no secret third-party administration work (TPA) is a topic of much debate among restorers. Some attest to its profitability if you’re able to follow the rules and guidelines; others accuse TPAs of undercutting restorers and making it more difficult to make a profit on jobs.
Over the last five years or so, there has been a large push in the restoration industry to separate from TPA work. Today, there are more independent companies than ever – and at least one major franchise group – that do not do any program work at all. That truth was echoed in this year’s study with 37% reported doing no TPA work, and almost 20% said program work is 10% or less of their yearly revenue. Of the remaining companies, almost 12% said TPA work makes up 50% of their total revenue, or more.
Things got much more interesting when we asked how much TPA work restorers want to be doing. In truth, nearly half of the industry wishes they weren’t doing TPA work at all. Less than 1% want their workload to be 50% or more TPA work. For those who do want to work with programs, the most-desired range is 21-30% of total revenue coming from TPAs.
Innovations & Technology
Insurtech is a trending, newer term in the restoration industry. Most conferences and events include a panel or educational session on the topic in some fashion. According to Investopedia, Insurtech refers to the use of technology innovations designed to find cost savings and efficiency from the current insurance industry model. With our industry typically lagging on adopting new technology, the State of the Industry study asked a series of questions to gauge where the industry lies.
We will start with what everyone wants to know – who is using what software?
Take a look at the graph below. DASH holds the lion’s share of the industry, but check out the number of options that take up more than 25% of the pie! This is an area where the industry is truly segmented and restorers are asking for more streamlined options. In fact, 30% of restorers said their biggest frustration with software comes from limited functionality. The biggest challenge lies within training and adoption.
Perhaps the most popular or familiar form of Insurtech is 3D imaging, which took the industry by storm over the last five years. Matterport is currently the clear frontrunner, with 70% of restorers using their cameras regularly; 33% use DocuSketch. Other honorable mentions go to estimate-assist platforms like Ask Aime and mpartial. More than 7% use KnowHow to bring their software together, and despite being one of the newest technologies to market, more than 6% of restorers reported using Sureti to assist in getting paid when a mortgage company is in the mix.
Diving a bit deeper, there is a 50-50 divide between companies that use GPS tracking and those that don’t.
Regarding Bluetooth technology, only 16% of contractors are using remote monitoring capabilities like this on their jobsites. That is a little surprising considering the number of innovations and integrations in this space, especially since the start of the COVID-19 pandemic.
More than half of restorers looking to “future-proof” their businesses are primarily relying on employee training; but if you look at the breakdown of the other half of the graph, most of those items are likely some form of technology, or Insurtech.
Products & Equipment
Good news for Aramsco and Jon-Don, as they are the very clear front-runners for where contractors purchase most of their equipment, with 65% market share. Home Depot and Lowe’s account for about 11%, leaving the remaining quarter of the market to other suppliers.
Over the next 12 months, most contractors said they will need to purchase air movers and dehumidifiers. Moisture meters, thermal imaging cameras, and hydroxyl generators also have a good showing for equipment needs.
Hiring and Retention
Zero surprise that hiring is the uncontested #1 pain point for our industry. Just look at that pie graph on the side. Like the stat above about most of the industry expecting their revenues to climb this year, almost 80% also anticipate increasing the size of their workforce. We dove a bit further to see which positions people needed to fill the most – and the answers were across the board from technicians to sales to project managers. Bottom line: everyone just needs more people.
To avoid being redundant, I’m going to point you toward Leighton Healey’s sidebar within this article. He breaks this topic down nicely, thanks to his keen insights from previous research and data on the state of the restoration workforce itself.
We knew going into this study that the topic of getting paid could not be avoided. For one-third of the industry, it takes 46 days or more to get paid in full. For another third, it takes 31+ days. Only 20% of restoration companies are getting paid in full in 30 days or less.
C&R has a plethora of podcasts and articles on this topic from industry experts and restorers who have found ways to get paid in full, faster, and with less hassle. Typically, these posts and videos get high levels of engagement. Because there is such a craving for content and information on getting paid, it’s clear that the majority of the industry is still struggling. If you are one of those, know you are not alone – and there are a lot of resources to help.
With more than 80% of restorers using Xactimate for estimating, we were curious how many contractors are interacting with Xactimate, if at all. This has been at the center of training and conversations around pricing and getting paid for many years. Xactimate, and several well-known industry trainers, are encouraging restorers to give feedback on pricing in their markets to help keep pricing as updated as possible. But according to this data, less than half of the industry is doing so, and of those that are submitting feedback (about 45% of the industry), only half are actually seeing results.
In the first C&R issue of 2022, restoration broker Gokul Padmanabhan broke down the state of M&A (mergers and acquisitions) in a full report. While the middle of the year was relatively quiet in terms of acquisition announcements, brokers and industry experts in the M&A field are expecting an uptick in Q4, and expect consolidation to continue well into 2023.
More than 2/3 of restorers who participated in this year’s study reported being approached by a potential buyer within the last 24 months. Of companies who have been acquired, only 53% report an increase in revenue despite being part of a larger organization. On the flip side, no one has reported business decreasing after a sale.
Perhaps on a more intriguing note, 66% of companies in markets where their competitors have been acquired report either an increase in revenue, or have stayed the same. Just 4.5% said they’ve lost revenue because a competitor was acquired by a bigger player.
Keep reading and learning! In the State of the Industry Roundtable article, you will find many of the industry experts echo much of what the data within this study is showing about the industry.
The information doesn’t stop here. Keep reading and exploring this special section – including the roundtable with industry leaders. Plus, dive into the digital components like podcasts and webinars – which will continue to roll out more of this data, information, and analysis.
Did you find this information helpful? What else do you want to know? We created this for you, and want to know what you think – and what you’d like to know from a future survey! Reach out to me anytime – firstname.lastname@example.org.