(This article originally appears on C&R Magazine.)
For over 10 years, I have presented my thoughts on expectations for the future in the disaster restoration industry with a primary focus on the next year. In my position as a business advisor to the industry and my nearly four decades of restoration experience, I endeavor to identify the top issues that will impact restoration professionals in the near future.
I feel that grading my predictions is a relevant practice to establish credibility for my thoughts on the coming year. When I think about the critical issues that impacted restoration last year, I believe that I still have some credibility–but you can be the judge of that.
Prior to listing my rating of last year, I would like to say that the good news is that I have an editor to make necessary changes, and the bad news is that I now must operate on deadlines, and publishing schedules. I am writing my review on the current year with nearly a quarter to go and there are several key issues that may impact the accuracy of my thoughts. I will offer you, the reader, the ability to fill in any missing elements.
Trend #1 – Labor and Wage Pressure
There is a dynamic balance between the cost of labor and the commensurate value of the activity. I am not sure where we are on this continuum, but I suspect that there is a point where the cost of labor will exceed the prices that we are able to charge for services rendered. This relationship may also drive the discussion of technology adoption as the cost of technology and capital becomes more affordable and drives the need for increased efficiency. This is not a quick fix, and I expect the desire for higher wages to be driven by higher costs, especially in household spending for everyday items such as groceries or insurance. You have seen this play out in the high-profile labor issues with United Auto Workers, local schools, hospital systems, and medical providers. Restoration wages have increased in many positions, along with a preference for candidates with restoration experience. I expect this trend to continue and have an impact on labor stability in many companies.
Wage pressures have been a real issue in the North American workplace. Inflation levels not seen in nearly 50 years have driven the expectations for higher compensation at most positions to keep pace with the higher cost of nearly everything. Outsourcing staff, utilizing of overseas talent, leveraging technology and setting and managing budgets in all areas of a restoration business are all techniques used to combat higher costs. My recommendations include: updating price lists, focusing on culture and other items that impact employee experience, reducing turnover, adding performance-based compensation, embracing technology, and emphasizing training. These steps will allow your company to survive while affording your team a proper level of remuneration.
Trend #2 – Economic Influences
This was my top recommendation last year, and I predict that this will continue for the foreseeable future. The economic struggles have been impacted by inflation, wage escalation, labor availability, high energy prices, high interest rates, global instability, immigration, supply chain restrictions, and a slow growth environment. These conditions were novel in the past year but now may be more expected, so perhaps this may be the new normal. We are currently in a very hard insurance market – one that has not been seen in over 40 years. This results in higher premiums, lower profits, more restrictive underwriting, more exclusions in coverage, higher deductibles, and more. Impacts on the insurance world have a causal effect on restoration, from capacity to profitability.
Interest rates will continue at an elevated level for longer than most expect. I am torn on this because this is an election year, and rates can be a contributing factor for political success or failure. Inflation may decrease because people stop buying, but costs for most manufacturing inputs, from labor to energy and materials, have not been resolved or lowered. Increases in food, housing, banking, transportation, insurance, and basic living have not been addressed, which will continue to drive inflation above the desired 2% rate. This will affect the cost of capital in your business from vehicles to subcontractors, rent, labor, and more. As a business owner, you need to address your efficiencies and profits at a local and operational level and manage your capital so you can limit your risk as you grow your business.
I, unfortunately, was correct in this assessment. I think that this may have been the most impactful issue in business and restoration in the past year. The industry claims volume was down in most areas, and my guess is that this was not fully impacted by weather. Increasing premiums, deductibles, and more financial uncertainty may be the underlying causes of this diminished claim volume. Interest rates were recently cut, and maybe several other short-term cuts will follow, but I believe current levels of debt and a lack of response to the inflationary causes may keep rates high for some time. This also impacted insurance companies and commercial property owners. My recommendations for a proper response were based on sound business practices, managing budgets, and focusing on cash-generating activities. Keep an eye out for this theme to repeat in my upcoming 2025 predictions.
Trend #3 – Technology
We have entered a time where the convergence of technology within existing infrastructure, along with the complexity of the solutions and the synergy between various hardware and software resources, will provide true and actionable solutions for restoration professionals. Smart devices, ubiquitous cloud solutions, high-speed cellular and data networks are all being tied together and leveraged with machine learning and artificial intelligence. These factors will influence everything from job site data and management to claims distribution. I don’t believe that these factors will remove people from the process, but I do believe that they will leverage human capital.
In some ways, I think that I am unfairly hard on this grade, and in other ways, I’m right on. I passionately believe that technology will transform the way restoration companies operate and scale their growth. The first reason for my lower grade is the omission of CoreLogic from the technology leaders in the industry. I traveled to the CoreLogic event last January and realized that they are truly at the forefront of technological changes. This ranges from pricing, integration, AI, imaging, vertical integration, and more. This showed that I missed a major element in my market research. I also overstated the impact of software integration. I think the foundation is being set, but the reality of open API is very challenging. It is easy to announce integrations with other technology providers but very difficult to achieve.
I believe that technology was very impactful and yet a point of confusion for many companies. One recommendation that was right on is to find a guide for your technology journey. This can either be an in-house chief technology officer or an outsourced strategic restoration technology resource. The technology solutions are so plentiful that the search for the perfect technology package can get in the way of the work being performed by your company.
As you pursue the correct programs for your company, follow my three rules for your technology adoption:
- Technology needs to help scale your business without having to scale the number of employees or overhead in your existing operation.
- Technology needs to remove steps from processes.
- Technology needs to reduce cycle time.
Comment and Review on General Trends:
The following were listed as emerging trends rather than predictions. For that reason, I will not rate these items and just comment on the relevance of the thoughts.
Emerging Trends and potential areas of influence in your business:
- Restoration is the ultimate green solution. Our services keep an amazing amount of material out of landfills, and we are the drivers of the reduce, recycle, and reuse movement. When done right, restoration might just save money for commercial property owners and insurance companies while improving your top and bottom lines.
Comment
Keep an eye out for development in this area. Governments around the world are continuing to drive this issue, all while families struggle to put food on the table. The issue has taken a back seat to more basic needs. Watch out for developments by companies like Eco Claim.
- Currently, there is still a skilled labor crisis in construction. Immigration and a new emphasis on the trades may create some reprieve in this area in the coming years. The backlog and deficit are still relevant and substantial.
Comment
I love the renewed emphasis on skilled labor and trades. More young people are finding this to be a great career direction. Trade schools, high schools, community colleges, and hands-on learning are helping build the next generation of workers. Many areas of the country are also finding a growing skilled immigrant population. While this is an issue, there is hope that some capacity is building.
- I am not sure how it will manifest, but during this election year, political instability will have an impact. This may be like the riots from several years ago, but really, this is an unknown. The current climate is not setting up well and could get very complicated. I recommend meeting with your regional governments or downtown businesses to prepare catastrophe board up and response plans. At a minimum, this will allow you to maintain and improve your marketing contacts.
Comment
This is one of those issues that may change by the time this article is published, as the 2024 election will be complete. There were small pockets of civil disorder, but they were not widespread. Many of the issues were contained to college campus locations. Passions are very strong right now, and my recommendation of proactively working with municipalities and corporations for their contingency plans is still very relevant.
In general, I feel as though my predictions for the past year were relevant and accurate, but I will let you be the judge of that. Restoration companies need to proactively adapt their business and operational strategies to succeed in this changing world. Companies should focus on strategic planning, financial planning, leadership development, and organizational accountability to affect their success. Look for my 2025 trends in next month’s C&R Magazine.
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