When Disaster Strikes

Fire, floods, storms and other misfortunes are inevitable regardless of the economy or current fashion, so at first glance the disaster/insurance restoration niche of the remodeling industry looks like a sure thing. But by now, those who have been in the remodeling and construction industry for any length of time know from experience there is no such thing as a sure thing.

Disaster/insurance work, nevertheless, has been called a stable business. “It’s recession-resistant but not recession-proof,” says Chris Silliman, owner of First Restoration Services of Asheville, headquartered in Fletcher, N.C. “Our business is growing because we’re good at what we do in our market.” In addition, he says: “We hired a consulting firm that knows the [disaster/insurance restoration] business inside and out, and they’ve directed us in a lot of good directions. That’s one of the reasons we’ve grown substantially in the past year.” It’s a story that might apply as easily to a successful kitchen-and-bath remodeler or a roofing contractor: Be good at what you do and seek professional advice to capitalize on your local market.

Although disasters and accidents regularly occur, one challenge is they don’t always occur with the same frequency or consistently in the same place. “I think the eternal issue with the restoration industry is how driven it is by uncontrollable factors,” says Nikki Domanus, marketing communications specialist for JC Restoration Inc., Rolling Meadows, Ill.

She relates that the summer of 2010 in the Chicago area did not have a lot of severe storms or flooding, noting that through alliances with other companies JC Restoration was called in to assist companies outside of its customary area of operation.

Who Is the Restoration Contractor?

Like any specialty in remodeling, disaster/insurance restoration is more complex than it first appears. For example, a variety of business models and organizational structures, ranging from international corporations to sole proprietorships, compete in the field.

BELFOR is a well-known example of a global company with offices in Asia, Europe and the United Kingdom, in addition to the BELFOR USA Group Inc., headquartered in Birmingham, Mich. The company, listed as No. 1 in Qualified Remodeler’s 2010 Top 500 list, has a mix of clients—about 75 percent residential and 25 percent commercial—though the revenue split is about even, owing to the fact that commercial jobs are generally more costly because of their size and complexity, according to Kirk Lively, BELFOR’s director of technical services.

"Do you want to get into cleaning sewage out of basements or do you want to get into rebuilding houses after someone else has cleaned out the sewage?”

The sole proprietorship is more familiar to the remodeling contractor. Jose Cruz, founder of JC Restoration, began his business as part of a husband-and-wife team doing cleaning and board-up work. Cruz built strong relationships with insurance adjusters and others in the industry; today his son Warner owns the company, which does more than $10 million in business in the Chicago area and was listed No. 71 on Qualified Remodeler’s 2010 Top 500 list.

“Our business is a little like the grocery store or drugstore business was 50 years ago; it’s mostly small mom-and-pops, privately held businesses,” says Dale Sailer, president and chief executive officer, Disaster Kleenup International (DKI), Wood Dale, Ill. “There is a reasonable amount of private equity out there that is figuring out a way to do rollups, buy up 20 of these guys and turn them into one large company.”

There are also the “folks in the middle,” as Sailer calls them, who are neither a national company nor a mom-and-pop but part of a traditional franchise company in which the franchisor takes a relatively high percentage of top-line revenue from every job.