By this point in the year, many are feeling their resolve to follow through with plans they had for the new year start to fade. The pressures of daily life, both work and personal, get in the way of the big management ideas we have in early January.

That doesn’t mean the ever-present goal of being a better leader is out of reach. Everyone knows the best way to achieve big goals is to break them into smaller ones. While every issue of Cleanfax offers business management tips, to help industry leaders keep growing and improving as the year begins to speed by, we’ve heavily focused this issue on ways to create, grow, and maintain success in your business.

Buying a business

On page 20, David Grossman is back with part four of his series exploring how to make the best choices when acquiring a business—ways to save money, lessen the emotional toll, and know how to spot a bad deal. In this last article, he provides a list of 15 things to look out for and do to make sure you make smart decisions when buying, whether you are a new owner or looking to add locations or enter another industry.

Growing a business

Online marketing can be overwhelming for the owner or company that performs it in house, so on page 28, Sonny Ahuja provides a detailed look at how to use a company’s free and simple Google My Business profile. He offers up five easy ways to use your profile to increase traffic and convert website visitors with light effort.

Mark Cornelius discusses the importance of also investing in knowledge when investing in new restoration equipment on page 24. He points to what he sees as a growing problem of companies buying new equipment but not ensuring staff understand the specifics of that new device—ultimately leaving money on the table and hurting the customer.

Staying on top

The struggle to get paid is a reality for all service industries, but we all know restoration companies face especially high hurdles in dealing with insurance companies and TPAs. On page 8, Kris Rzesnoski breaks down smart recordkeeping practices that create an air-tight case for your company’s choices to help you get paid faster and easier.

It’s easy to get in the rhythm and assume you’re following the best path for you. That’s especially easy to do with relationships, and your relationship with your supplier is no different. Learn from Michael Wilson (page 26) how conducting a supplier audit can save a company money and make managing product spending simpler.

Lastly, on page 16, Chuck Violand explores ways to create financial stability within a company and how a leader’s management behavior affects financial performance. It’s a discussion of lessons from the pandemic, the need to diversify clients, and how to adjust your mindset for financial success that no business owner or leader should miss.

So, I hope you find ways to stay successful in these pages. Keep trying every day to be a better leader than the day before, even in the smallest ways, and you will see the small victories start to build up and equal the bigger goals you aim for.

Amanda Hosey is the managing editor of Cleanfax. She has worked as an editor and writer for more than six years, including four years with Cleanfax.��Reach her at amandah@issa.com.

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Any discussion about profitability or the financial performance of a small business must start with an understanding of the business owner’s personal beliefs about profits and the financial performance of their company, as the two are inextricably linked. Any attempt to change the company’s financial performance without also addressing the owner’s beliefs usually results in frustration and disappointment.

In his book Working Without a Net, change management consultant Morris R. Shechtman states: “There are no business problems—only business manifestations of personal problems.” In my three decades of working with small business owners, I have found Shechtman’s philosophy to hold true. It holds true in an owner’s beliefs about their relationships with their customers, suppliers, and workers; with the quality of the products or services they produce; with how well organized their company is; and with just about every other area of their business. Even when it comes to their company’s financial performance, I have found that business owners work out their personal beliefs about money through their business.

To illustrate this point, I could pull from my experiences with clients over the years. But instead, let’s use a recent example we’re all familiar with—one that has affected all of us to some degree: the COVID-19 pandemic. While COVID is a tragedy of global proportions and my intention is not to treat it casually, the pandemic has taught us some valuable business lessons if we are open to learning them.

Pandemic lessons

When COVID set in, we at Violand Management were frequently asked to offer our insights on how businesses could best deal with the very uncertain economic and business conditions experienced at the time. With the assistance of all the advisors at Violand, we quickly assembled our Business Continuity Guide—a set of recommendations for business owners and managers to follow to ensure the stability of their businesses.

While some of our suggestions in the Guide addressed issues specific to the economic disruption experienced at the time, many of them were reminders of things business owners should have been doing all along. With respect to business finance, these included the need to track and collect accounts receivable, increase the frequency of invoicing, collect cash, monitor the profitability of jobs, and have contingency plans in place for significant drops in revenue.

Establish a savings safety net

In a short time, one of the things many business owners realized was the pandemic revealed existing weaknesses in their business as much as it created new ones. Obviously, if you’re in a cleaning, disaster restoration, or building service contractor business, you had to adjust to lack of access to your customers’ homes or businesses. This was catastrophic for some companies as they experienced immediate and sharp drops in revenue. And it took quite a while before some customers were comfortable having workers back in their surroundings. Regrettably, some businesses never recovered, although most have rebounded well. Many other business owners found themselves exhausting what little savings they had prior to COVID in an attempt to survive.

Having insufficient savings to withstand a downturn in business is a mindset more than it is a factor of outside conditions. We convince ourselves we’ll never need much of a cushion, or we never establish the discipline to build that cushion, and decide it’s better to just enjoy the money while we are making it.

Diversify your customers

In some cases, the pandemic also revealed what can happen when we have an unhealthy dependence on one customer. During flush times (and keep in mind that for most businesses, times were pretty flush pre-COVID), it was easy to dismiss the risk of an overdependence because the money came so effortlessly or maybe because we had gotten too comfortable or too casual about marketing to find additional customers. In the cleaning industry, we saw this with companies that had become reliant on one or two large contracts. In the restoration industry, we saw it with companies that had an excessive reliance on program work—especially if it was from any one program. Things seemed to be fine, right up until that one customer experienced financial difficulties of their own or decided to “go another direction” or until the contractor got cut off by the program. Or until COVID hit and some business owners found themselves without enough revenue to support their company or lifestyle.

Anyone who has heard me talk about business numbers has heard me state that when one customer represents more than 20% of a company’s overall revenue, they are a threat to that company. This doesn’t mean they’re a bad customer or that you should stop doing business with them. Quite the contrary! You should pamper them… and then get busy finding more of the same type of customer so that not one of them represents more than 20% of your sales.

Prioritize profitability

Some owners had gotten soft with tracking the profitability of their jobs or even the profitability of their company. Others had rationalized their unprofitability, thinking they had other customers who could offset the poor performance. They would write it off as a “marketing expense” or convince themselves that they would make up for the loss in volume. When the economic seas got rough, these business owners quickly felt the bite of customers they relied on too heavily and many discovered the impact that doing so was having on their business.

During the height of the pandemic, our advice to clients remained the same as what we have always given—run your business with discipline all the time, in good times and in bad. This way, when tough times arrive (and they will always arrive at some point), you’re prepared. But this requires developing the business discipline and the mental toughness to avoid financial distractions; the type of discipline that will lead to the right decisions, that lead to the right actions, that produce the desired financial performance.

Discipline your financial mindset

Here’s the good news: Growing the mental toughness, developing the business acumen, or establishing the discipline necessary to run a highly profitable company is a learned skill. Most of us aren’t born with it, and anyone can learn it. It has little to do with your IQ, education, gender, or genes. It has everything to do with the thinking you bring to your business. We sometimes must reprogram our beliefs about money and profits. The starting point is for business owners to recognize the direct link that exists between their company’s financial performance and the thinking they bring to the decisions and actions that lead to that performance.

Another lesson a lot of business owners learned in recent years was just how gritty and resilient they are. Many of them returned to the fundamentals that first led to their success. They rediscovered the value of customer service, how to produce jobs more profitably, and the importance of tracking their company’s financial performance.

Even if we feel that business numbers aren’t our strength, that doesn’t mean they’re not important. They are important and being soft on them comes at a cost. Circumstances will remind us of this when times get tough. We need to continually remind ourselves of it when times are flush.

My advice as we enter this next era of abundance, where we have more work than we have people to produce it, is to never lose your grit—ever. Resist the urge to get soft on hard decisions just because you can. Enjoy the easy times but be prepared for the unexpected. Stay vigilant against the siren song of complacency.

Chuck Violand is the founder and principal of Violand Management Associates (VMA), a highly-respected consulting company in the restoration and cleaning industries. Through VMA, he works with business owners and companies to develop their people and their profits. For more information, visit .

The post Financial Performance Follows Behavior appeared first on Cleanfax.

Because carpet cleaning companies depend on various cleaning products, it’s important to know which are the best performing and most cost effective. This is typically accomplished by conducting a product audit. Without an audit, products are often repeatedly purchased out of habit rather than based on an analysis of performance and cost. Along with product audits, carpet cleaners should also evaluate their suppliers, the distributors that market those products to them. Because we usually have a personal relationship with distributors, a supplier audit is rarely conducted. We like someone, so we keep working with that person over the years. However, as with products, without investigating possible alternatives, carpet cleaners may not be getting the time, attention, and quality service they deserve from distributors. A supplier audit is designed to determine this.

Benefits and caveats

Here are a few reasons why conducting a supplier audit is so important:

• A top-notch supplier will soon learn which types of cleaning solutions and equipment work best for you and the types of services you offer. Essentially, they become your partner when it comes to supplies.
• The supplier will track and update you on what new products may prove more performance effective or cost effective than those you are currently using.
• Because supply chain issues are such a big concern right now, an astute supplier may be able to let you know ahead of time if a specific product may be in short supply soon.
• A high-quality supplier can help you improve your customer relations, satisfy your clients, and maintain your quality standards.

It’s clear there are benefits to conducting a supplier audit, but before we discuss how to conduct one, we need to acknowledge a couple of things.

First, virtually every audit will point out the strong and not-so-strong points of a supplier.��Expect this. It is then your job to determine if the strong points outweigh the weak points based on your business needs and preferences.

Second, if the decision is made to continue with a current supplier, be sure to share your findings with them—acknowledge their strengths and weaknesses. Further, if another supplier provides a service that you would like your current supplier to offer, be sure to ask about it. Suppliers committed to providing you with quality service will typically be more than willing to make changes to accommodate you.

Designing your supplier audit

There are several key components to a supplier audit, but the first one starts with you. Begin by asking yourself the following questions:

• Do I need someone to help me select products/cleaning solutions for my business?
• Do I need someone for product advice?
• Do I need someone that specifically knows the carpet cleaning industry?
• Do I prefer selecting products from distributors or brick-and-mortar/online mega-retailers?
• How important are product delivery issues to me?

Answering these questions will not only help you design your supplier audit, but also help you determine if you need to conduct one in the first place. If you are new to the industry, some handholding is often necessary. And if you’ve been around for a while, you’ll likely find that a supplier evaluation turns out to be more revealing than expected.

Answering these questions also helps you stay focused on what you are looking for in a supplier. As you conduct your supplier audit, here are some things that should be examined:

• The supplier’s website: Virtually all distributors have e-commerce sites. The big difference is whether they are essentially product brochures or provide product information along with content that can help you run your business. Some distributors, for instance, provide excellent articles and videos on how to use a product or perform a task. This material can prove invaluable.
• Customer reviews: Distributors market products, but for carpet cleaning technicians, they can also provide invaluable services. See if there are any customer reviews on this supplier and always take customer reviews seriously.
• Employee turnover: Some companies have revolving doors, with employees coming in one door as others are leaving through another. This can indicate business operation problems that could impact your company. On the other hand, a distributor with low staff turnover offers the opportunity to work with the same people over time, developing business relationships that can benefit your company.
• Product availability: For a variety of reasons, our country may experience product shortages for a couple more years. Supply chain issues can have a more severe impact on small, mom-and-pop operations than on larger organizations. Finding a supplier who is part of a nationwide network can alleviate some of these issues. If the local distributor is out of a product, another distributor within the network probably has the product and can deliver it to you.
• One-on-one interviews: While continuing to work with the same supplier for years because you like them can have its pitfalls, it also can have its benefits. It is important to determine if you are comfortable with the supplier, and the best way to do this is with one-on-one interviews. Remember, these are typically long-term relationships. It’s essential to work with someone that you like, trust, and feel comfortable with. Include this as a critical part of your supplier audit as well.

While it might seem like a chore to evaluate your supplier relationship when you are content with your current situation, you’ll likely find an audit to be an eye-opening and fruitful experience.

Michael Wilson is AFFLINK’s vice president of marketing and packaging. He has been with the organization since 2005 and provides strategic leadership for the entire supply chain team. In his free time Wilson enjoys working with the Wounded Warrior Project, fishing, and improving his cooking skills. Reach him at .��

The post Conducting a Supplier Audit appeared first on Cleanfax.

The customer had an oil furnace that created a puff back into their home, which filled with smoke and soot throughout.��We were called in to mitigate and found the duct work had taken a heavy hit, with the dust in the duct work collecting the soot and ash. By taking a portable duct cleaning system, creating negative air, and sealing all registers, we were able to run a flex bristle brush through, cleaning all sections of the HVAC unit.��This alone let the homeowner breathe better and allowed the cleaning process to run smoother.

For an opportunity to win a gift card worth $250, send your images and a brief 100-word description on how you obtained your results to Amanda Hosey, managing editor, at amandah@issa.com, or submit via Facebook Messenger at . Contest rules available by request.

[infobox title=’DID YOU KNOW’][/infobox]

The “push/pull” or “negative air” duct cleaning method is important in settings like commercial locations with bigger ducts or areas with heavy debris. Meanwhile, using contact cleaning in which you disturb the debris and collect it at the same point can be effective in settings with light debris.

Read more at cleanfax.com/duct-cleaning-methods.

The post Negative Air Duct Cleaning to Breathe Better [Photo Contest] appeared first on Cleanfax.

Google is the lifeblood of any successful business, with more than half of all shoppers stating that they use Google as a primary method of finding and researching products before they buy them. Search engine optimization (SEO) has been proven to drive sales, and one contributing factor of this is Google My Business.

Google My Business, or GMB, is a free tool that companies use to customize how their brand is seen by potential customers online. A GMB profile includes photos, videos, map listings, and unique content. Simply put, GMB allows you to craft an online presence that’s separate from your website and social media.

Depending on your industry, Google My Business may play a more important role than your website when it comes to grabbing a customer’s attention. Knowing how to optimize your GMB to drive traffic, increase sales, and generate revenue is a cost-effective way of getting your products and services in front of the right audience.��Let’s look at five ways you can optimize your Google My Business account.

1 | Complete every field with honest, factual information

After you’ve created a GMB profile, you need to ensure it’s filled out as much as possible. Not only will additional information help you rank higher in Google search results, but it also will give your customers better insight into your company, which could be a deciding factor if they’re torn between you and your competitor.

Each GMB profile allows you to enter the following information:

• Business name—ensure this exactly matches the name on your website and social media channels
• Address
• Website
• Phone numbers
• Hours
• Categories that best describe your company
• Attributes that apply to your company
• Types of products and services you sell/offer
• Business description

Attributes could include everything from number of employees to if your company is veteran owned or female led. In light of the coronavirus pandemic, you can even indicate if all employees are vaccinated or if your staff implements a mask policy.

The more information you share, the better. Just remember to be honest and factual about what you offer. While it may be tempting to say you’re open 24 hours to offset customers from your competitor, if no one can reach you after midnight, it’s best to stick to your normal operating hours. This is because competitors can easily target GMBs that they believe are claiming false information.

2 | Add photos and geotag them

Photos give customers a glimpse into your business. Plus, GMB profiles that have photos tend to receive 35% more website clicks than those that don’t. A lot of this comes down to human nature and how we’re innately visual creatures. Your photos should be crisp and clear and positively represent your company.

Google allows you to add photos of your team, as well as the interior and exterior of your office space. This is incredibly helpful for anyone interested in visiting, so they can feel confident they’ve arrived at the correct place. Before you upload your photos, you should take the time to geotag them. Geotagging is the process of storing location data on your photos by adding your company location’s latitude and longitude. This additional data is pulled to help increase your organic search ranking.

3 | Engage with your customers

You should think of your GMB profile as another social media channel where you can connect and engage with others. Customers can leave a review for your business in the form of a testimony, star rating, or both. Responding to these reviews, even if they are negative, can have a big impact on your company’s reputation.

First, responding to feedback shows that you’re engaged with your customer and builds trust.��Second, responding to reviews helps improve your local search ranking. In fact, Google recently confirmed this and found that 34% of customers deleted their negative reviews after engaging directly with the owner through GMB.

4 | Post regular content

Just as you should think of your GMB profile as a social media channel, in a way, you can treat it like one, as well. Google My Business allows you to post static photos and videos, as well as publicize upcoming events, sales, and services. As mentioned previously, people are visual creatures, so this is one way to help your business stand out from the competition. You can also include a link to any landing page you want to drive traffic to or provide a phone number for customers to contact you.

Many of these content posts are live for seven days; however, product posts always remain active. Regular GMB posting can strengthen your local SEO ranking, especially if you optimize each post with a keyword you want to rank for.

5 | Regularly check your insights

After a month or so, you should take the time to check your GMB’s insights. By logging into Google Analytics, you can easily find out which keywords your customers are engaging with and how they found your services and/or website. You can also see how many people visited your company’s map listing and how well your photos performed.

By regularly checking your insights, you’ll be better equipped to optimize your Google My Business profile because you won’t be playing a guessing game about what people want. Rather, you’ll be creating and pushing out content that is directly tied to your target audience and their browsing habits. This means you can easily develop or tailor your existing search engine optimization strategy to generate more leads, increase revenue, and improve your company’s brand awareness.

Sonny Ahuja is an online lead-generation expert who specializes in high-conversion responsive websites, optimized mobile sites, Google AdWords, and SEO. He mainly helps remodeling, disaster restoration, and cleaning companies get more leads by developing their online lead-generation systems. Visit for more from Ahuja.

The post 5 Ways to Optimize Google My Business appeared first on Cleanfax.

As a long-time restoration industry member and instructor, I have observed an alarming trend of restorers looking at industry tools and restoration equipment as printing machines for cash. The power-on button has become “the money button.”

Increasingly, owners are purchasing tools and equipment based on how much they can charge per day for the item and how many of the machines they can stack in the back of the van. I have heard several students recently say they do not actually care about the function of the item; they just wanted to know how much money they can make off it. The same comments apply to every tool and piece of equipment from the dehumidifier to the thermal imaging camera all the way down to the hammer.

But it is essential for owners—and their technicians—to understand the capabilities of their resources, including how to use each piece of restoration equipment to its maximum efficiency. Those who do ultimately will make more money through proper utilization than competitors who load up the job and hit the money button. Not only will the informed owner observe higher profit margins, but also clients will be better served, with their property quickly and efficiently restored.

How much do you know?

Let’s focus on a specific tool for a moment. First, some classroom-style questions: What is an LGR dehumidifier? Now, what makes an LGR “low grain?” In what conditions do refrigerant dehumidifiers work optimally?

Recently, in a class I taught, we had access to multiple models and manufacturers of LGR dehumidifiers. I asked the students if they knew the differences between the three manufacturers and the five different models. Then we talked about what they knew about how to make the LGR work optimally. The first thing the students remembered was the optimal temperature range of 70-90 degrees Fahrenheit.

The next question regarded what needed to be done to make different models of one manufacturer’s LGR work more efficiently if the ambient air was warmer than 90 degrees Fahrenheit. A couple of students said to turn the air conditioning unit on to reduce the temperature, which is the best answer, but no one could explain the specific steps needed for the units to work more efficiently if the ambient temperature could not be brought within the
optimal range.

Why does this matter? If the number one way to prevent microbial activity in a wet environment is to get it dry quickly, then it makes sense to understand the playbook and give your team the best possible conditions to produce a win.

Why should you learn?

Let’s look at a scenario: The phone rings, and a new water damage claim is taken. The project is sent to the first available technician. All the technician knows is, if he pushes a particular button, air comes out of the airmover. He gives little thought to which style of airmover might work best for this job. He also knows he needs a dehumidifier to put on the truck, so he grabs the dehumidifier from the closest shelf in the warehouse. He does not realize the dehumidifier needs to have a magnetic strip moved to make it work optimally. He only knows it is the first one in the line.

This discussion can be repeated with every piece of restoration equipment and tool we buy. A salesperson tells us all the pretty things about the item we are interested in purchasing, we ask how much we can charge per day for the unit, and that is the end of the discussion.

No matter how good an item is, nothing is perfect, and few things are as simple as we expect. Even the best thermal hygrometer requires acclimation time to give an accurate reading. If a technician does not understand the device might require two to four minutes or more to give an accurate reading and, therefore, only allows 30 seconds to obtain data, they will misdiagnose the situation.

How can you keep up?

The last 15 to 20 years has seen a massive entry into the industry from people who chose to exit past careers. The last five to ten years have been dominated by investment capital acquisitions. For the most part, the driving force to be the best in the industry has changed to who can make the most money. There must be a deeply rooted desire from a company’s ownership that spreads to even entry-level technicians to become proficient with the tools and equipment necessary to successfully perform industry work. There also must be someone in the company who is the expert in technical proficiency with each item.

In a start-up company, the owner does not always have a lot of resources or time to be the expert on all tools and equipment. Designate someone in the company to be the expert on the dehumidifiers, someone to be the expert on the thermal imaging camera, and someone to be the expert on the moisture meter and thermo-hygrometer. They should then train others in the company to become competent, proficient, and eventually experts.

It is called the “power button” for a reason. When you push that button, it unleashes the potential power of that piece of equipment to not only do the job with the best quality and accuracy, but also yield the maximum profits. The key here is, for the power button to truly be the best money button you have, you must take the time to become proficient and use the tool efficiently. Once you have mastered the function and use of a device, your equipment will blow more dead presidents into your business than you ever thought was possible.

A smartphone is only as smart as the trained or untrained hands that wield it. The same is true for airmovers, moisture meters, and all of our tools. They are just plastic, metal, and wires that depend on expertise to work.

I challenge you to first learn the restoration equipment. Then use the power button to sit back and watch the results stack up in your bank account.

Mark Cornelius has been in the restoration industry for more than 38 years. He is president of Disaster Recovery Industries Inc. and owns . As an IICRC triple master, Cornelius travels the world teaching IICRC approved classes. He is a member of the 2021 IICRC Board of Directors, a co-chair of the OCT committee, and on the committees for the IICRC S540, AMRT, MRS, and FSRT standards.

The post Restoration’s ‘Money Button’ Problem appeared first on Cleanfax.

It’s getting harder and harder for restorers to grow a profitable business, and it’s no secret that the last two years have not been an easy environment to operate in. Many restorers feel like their businesses are under increased scrutiny that is taking a toll on staff. It’s especially frustrating when you feel like insurance carriers aren’t working with you as you try to help people in their time of need. Restoration is an essential part of the insurance ecosystem, and you perform a service that is needed for the insurance industry to be successful. Theirs is a data-driven industry, and the data they require to make decisions comes from the documentation you capture in the field. The level of detail and accuracy you capture can make or break you.

I have witnessed firsthand that the best restorers in Australia, Canada, the United Kingdom, and the United States all have one thing in common: The ability to deliver major wins to the bottom line depends on field documentation systems and consistently sticking to the same process.

To build a foundation that will lead to consistent profitability, restoration companies must create a simple, repeatable process for the team to use while in the field. If you want premiere-level documentation, it’s essential to validate the work you did to justify and defend your actions; limit the exposure of pre-existing conditions/damages so you don’t pay for things you didn’t damage; and create repeatable processes, so your business runs more efficiently and routinely.

If you don’t focus on these things right from the get-go, you’re selling yourself short and setting yourself up for constant back-and-forth battles with reviewers, adjusters, and TPAs. You’ll be fighting for every dollar, and it’ll likely take forever to get paid.

At the very minimum, there are six types of field documentation categories you should check off for every job to protect your business—and your customer—from unnecessary scrutiny and delays:

1. Overview
2. Pre-existing conditions/damages
3. Source/Cause of loss
4. Resulting damage to structure
5. Resulting damage to contents
6. Pre-existing conditions/Damage to contents.

Taking the time to document the job properly instantly solidifies a process that will help your business succeed.

Overview

When to take them: During the first walkthrough (before beginning any work)

Benefit: You document exactly how the property was upon arrival.

This is the only opportunity for you to document the original condition of the building and contents before you start working unless you take these photos and videos immediately upon arrival at the site.

Start at the door of the affected room and take your photos left to right, slightly overlapping them. You want the images you capture to tell a story so that anyone reviewing your documents will understand exactly what you were looking at when you arrived.

These photos are critical. They will be used by your company’s internal resources, the homeowner, and the adjuster, and if taken poorly, they can be weaponized against you. Gaps in your documentation leave room for doubt, allowing people to further scrutinize your work and documentation capabilities.

Pre-existing conditions/damage

When to take them: During the initial walkthrough (before beginning any work)

Benefit: You clearly identify previous, current, or future issues.

The problem is people walk by their home finishings every day without noticing dents, dings, scratches, and other imperfections—until you and your team arrive. I can’t express how many times we have had to pay for walls to get painted or to repair damaged finishes or contents that we didn’t even touch. Unfortunately, that’s the nature of this business. Every restorer has this type of liability exposure, so it’s important to understand how to limit it.

Again, start at the door of the room and work your way around from left to right. This time, you need to focus in greater detail right down to the dents and dings, moving from top to bottom, but still maintaining a left to right flow. If a question arises in the future you can demonstrate, isolate, and identify any marks.

If the mark is on a flat wall surface, it’s a good idea to take a photo from further away from the location to provide some context. Look to frame a light switch, outlet, trim piece, or some other item in your photo capture as a point of reference to help identify the mark’s location.

In this step you are looking for everything:

• Dents
• Scratches
• Stains
• Tears
• Discolorations
• Pre-existing mold/water damage (Don’t miss this one especially!)
• Odors (Use video to explain.)
• Sounds (Use video to demonstrate.)

We saved so much money on jobs when we slowed our response and actually took the time to protect our company. The bottom line increased, and the potential for any problems with the customer decreased. Overall, it cost us less time and money to close our jobs out by taking a little more time to do it right from the start.

Source of loss/Cause of loss

When to take them: As soon as possible

Benefit: This documentation helps your customer make their claim and determines your handling based on the IICRC S500.

There is a difference between the “source of loss,” a contractor term, and the “cause of loss,” an insurance term. Before we discuss how to document them, let’s clarify how these two terms differ:

The source of loss (SOL) identifies the place of origin for the loss and should be identified by the restorer. An SOL could be a ruptured water line, a punctured waterbed, seepage from the foundation, an overflowing sump pit, etc. For restorers, we are less concerned with how a loss happened and more concerned with where the loss originated from. A broken pipe is a source of loss, and we need to know what type of pipe ruptured. A supply line (drinking water) provides us with an initial categorization of water as a Category 1. A broken sewer line would provide us with an initial categorization of water as a Category 3.

The adjuster is more concerned with the cause of loss because the insurance policy revolves around what caused the loss in order to determine the level of coverage. The same supply line may or may not have coverage, depending on what caused the rupture. If the rupture was a sudden and accidental break in the line, the insurance policy might cover the break. If the rupture was a slow leak due to poor maintenance, the policy might not cover the loss.

But the restorer drying the building has to determine the source of the water and the current condition of the water, regardless of whether there is coverage.

Despite these differences, how you document the SOL and the cause of loss is very similar. When documenting the room, you should take a distant photo to provide fuller context, then move in toward the source or cause of loss until you can capture a closer photo.

The property owner and adjuster need clear pictures and accurate context. It doesn’t matter whether you are working with the adjuster or only for the property owner, the information you collect is still required by both parties to determine coverage, insurance dollars, and how the submission of the claim goes.

Resulting damage to structure

When to take them: You should take these on the first day. You may take more photos within 48 hours due to further water damage. You also should take these photographs when you open the wall structure or find damage that was concealed, as well, typically within the first few days.

Benefit: This documentation supports your actions in the field, assists the property owner in making their claim, and reduces conflict in a file review.

This category of documentation should be done with great diligence because it often expands the loss size and scope as time goes on and as materials are removed and additional impact is found. While it is common for more damages to appear after the initial assessment, it is uncommon for restorers to document the resulting damages after the first day, but these findings can have a huge impact on the restoration process.

For many novice restorers the resulting damage is taken upon the initial walkthrough and then never updated. This is where a good operator should pay particular attention to the resulting damages and document because an initial scope or rough order of magnitude of $10,000 could easily be increased to $25,000 upon removing some materials or waiting for the water to finish penetrating the building structure.

Using a digital or written change order is critical to documenting the reason for increasing or decreasing your costs based on what you find during your work.

Resulting damage to contents

When to take them: Before you move the content, while you are listing content, and during the cleaning process when damage is identified.

Benefit: This documentation supports your actions in the field, assists the property owner in making their claim, and reduces conflict in a file review.

We often think of contents as the stuff in our way when we are trying to do “real” restoration. The reality is, if you ever want to connect with someone, you must take very good care of their belongings.

Most restorers underestimate the importance of documenting the damage to contents. This is especially true if the contents are deemed non-restorable or economically non-restorable. These items are going to be documented, identified, and then thrown out forever, so you’ve only got one chance to properly document them so that the property owner can make their insurance claim and get the full value of those items.

While removing contents might seem like a chore, when you do it incorrectly, it can cost the customer thousands of dollars. Every item should be documented by capturing the following:

• An overview photo of the item
• The brand name of the item
• The model or serial number if applicable
  or the tag (for size and style)
• The quantity of items.

For items that are not retail brand name items—a 100-year-old oak desk, for example—you’ll need to get more information from the customer. What is the value of the item? Where did it come from? What’s the value to the customer? Is there anything else that should be noted?

Why did I choose the desk example? I once threw away a 100-year-old oak desk that was an heirloom from when the customer’s grandfather started his business. I misidentified the desk as walnut, to which the customer said, “The walnut desk has no value to me.”

I failed to walk the customer through the items being tossed, and I still look back with regret on that moment. I know a simple administration mistake resulted in a bad experience for the customer and for me.

After you’re done identifying all the items, share the list of pictures with the customer for a final review before permanently discarding those items. That way you won’t accidentally discard a family heirloom and cringe thinking about it for years.

Pre-existing conditions/Damage to contents

When to take them: Before you move any item; on all items over $100 (set your value)

Benefit: These limit your risk of paying for damage not done by your team, limit potential conflicts, and create a bond between you and your customer.

People are emotionally attached to the things they acquire throughout their lives. Of course, almost everything has a monetary value, but you cannot discount a customer’s
potential emotional attachment to any item. Focusing on this can change your relationship with your customer. When you document their possessions, you are doing two things:

1. Reducing your liability: People don’t notice the wear their items pick up over time until you touch or move equipment around those items.
2. Establishing a bond with the customer: They witness the care and attention to detail you take with their belongings, and you showcase your professionalism.

The beautiful thing about documenting the job to this level is, if you do make a mistake, most of the time the customer is willing to forgive you because they have witnessed your sincere and careful approach with their things. Once you have documented everything on the job, the only thing left to argue about is the things you actually damage, which most restorers will be more than happy to remedy.

Better documentation leads to higher profits

Your business thrives when you have repeatable processes that allow you to hire and retain new employees who can fit into your system and succeed in this complex industry. I repeatedly have found that, by spending a little more time at the beginning of a job to document the entire situation in greater detail, I am saved immense frustration and protect my employees from feeling doubted on every job.
It’s ok to slow down and document the job properly to do right by yourself, your team, and your customer. Your inevitable success will pay dividends and major time savings down the road.

Kris Rzesnoski is vice president of business development for Encircle where he is committed to driving delivery of intuitive, easy-to-use solutions that allow contractors to improve productivity and profitability. He is an RIA technical instructor, an IICRC approved instructor, a third-party evaluator, and owner of Reztime Training and Consulting. Rzesnoski sits on RIA’s Restoration Council and Canadian Education Committee and is the chairman of the Estimating Committee.

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We’ve finally come to the end of this series on business acquisitions after previously exploring an overview of the buying process, drafting a letter of intent, and questions to ask during the due diligence process. You can find the previous articles online at cleanfax.com/acquisition. While there is no magic-bullet approach to completely smooth out the overall process, I’ve attempted to provide guidance to make buying a business easier based on my own experiences.

I wish I had been given a list of tips before I made my first investment because it would have saved me a significant amount of time, energy, and money. What follows is by no means an exhaustive list, nor is each item pertinent to every situation; it is merely an attempt to shed light on a few issues—and maybe help you in at least a small way as you look to buy a business, whether it is your first company or your fifth.

1

Ask the key question, “Why are you selling?” Then ask it again and again until you feel certain the explanation is consistent and the motivations are clear and real. The two most cited reasons are retirement and inability of management to scale with the business. Make sure the owner’s story checks out and she isn’t hiding another reason that could negatively affect your ability to succeed with the company.

For example, while a 60-year-old owner looking to retire may feel credible, that reason might warrant further explanation if she has working-age children who traditionally might take over the company. I cannot tell you how many times I have been told by a seller, “I lack the energy and knowhow to roll up my sleeves and do what needs to be done, but a young guy like you with piss and vinegar can really take this business to the next level.”

There may be truth to that statement, but it also might be masking something troubling like an adverse change in the marketplace. The point is not that any single rationale for wanting to sell is better than another, per se, but some might require further probing.

��2

The seller is almost always less financially sophisticated than the buyer. Having spent most of her time focused on sales, marketing, and operations, there was likely little focus on financial issues. Compiling financial statements and understanding the intricacies of structuring a sale of a business may involve treading into unchartered water. After all, a common reason for an exit is that the company has outgrown the managerial capabilities of the current owner.

It is helpful to speak on the same level as the seller to effectively communicate and not come off as intimidating. The sale process may progress slower than desired because of a seller’s lack of sophistication, and she might have less information available on her business than desired since the need for detailed financial statements as a management tool may be a low priority.

3

Emotion frequently is a major factor in the seller’s behavior, so honesty and objectivity are critical. As the cliché goes, often the best deal is the non-deal, and you should be just as prepared to walk away from a sale as to close the transaction. It is important not to fall in love with the business until after the deal is consummated.

Putting emotion aside will lead to clearer decisionmaking. Objectivity is important for both deciding whether to continue going forward—as you learn more about the business throughout the due diligence process—and negotiating purchase terms. Don’t be too accommodating in an effort to close the deal at any cost.

4

Play the political angle with any intermediary, also known as a “business broker,” representing the owner of the target company. While this individual is compensated almost entirely only if the deal closes, he is often more aligned with the seller since she is the one who both hired him and pays him.

The broker will have known the seller for a longer period than you and likely had several conversations with her regarding the value of her business. He also typically serves as an adviser to the seller. By gaining the respect and attention of the broker, you may be able to obtain an understanding of the seller’s expectations and concerns.

5

Don’t take the seller’s financial statements at face value. Very infrequently will you encounter a target company that has undergone annual audits by a top-tier CPA firm. More commonly, the numbers are compiled by a small, local accountant or possibly only reviewed by one. Thus, you may want to consider performing your own forensic audit in which you track random invoices and bills and reconcile revenues to monthly bank statements.

It may be helpful to hire a financial consultant or an accountant. (Note that you may be able to cut a low rate for this work in exchange for hiring the firm as your company’s CPA should the deal go forward.) If you discover that the business is less attractive than the seller boasted, then a renegotiation of price is warranted.

6

Do not assume costs can be cut. Unless you are a strategic buyer and will combine the business with a pre-existing, similar one, there is typically little room for expense reduction. In fact, more frequently than not, I find that expenses will need to be increased, especially for marketing.

Conversely, the apple may be tastier than it appears. Be sure to back out from cash flow the owner “benefits.” Without claiming any unacceptable activity, it is likely a portion of the seller’s business expenses would more accurately be classified as personal items. Areas to examine include auto expenses, travel and entertainment, professional fees, rent, and salary. Changes should be made to:

• Adjust the salary to a market-based compensation package for an active owner/president—$100,000 to $150,000 for a small business.
• Include a realistic rent. If the seller also owns the real estate, the rent paid may not be the fair market value.
• Take out personal expenditures such as non-business auto and travel costs.

7

Strongly consider spending money to hire a lawyer to review documents such as supplier and customer agreements, a financial expert to perform an audit on the company’s financials, an industry veteran to recommend certain questions to ask, and an experienced buyer to help guide you through the process. A significant amount of the investigation into the company and its industry, employees, customers, and competitors can be done firsthand. Also, depending on how knowledgeable you are of the industry, attending an industry conference can provide a wealth of information in a short period of time. These expenses should be considered as the first part of your investment in the business regardless of whether the deal transpires.

8

Be creative in your due diligence. A lot can be learned about a business through some unorthodox investigative methods. I have two favorites:

1. The first involves asking a friend to approach the company, posing as a customer. Pay for her to receive their services, and you can see every step of the customer interaction process. Then ask her to do the same with key competitors and compare the experiences.
2. The other is to make phone calls to the large trade magazines covering the company’s industry. You would be surprised how much the typical ad salesperson and editor can disclose about the industry and the key players.

9

Frequently remind the seller she is selling the business. By this, I mean talk about what will happen after the sale. This will serve two purposes:

1. By observing the seller’s reactions, you will gain a sense of her comfort and desire to sell. It is helpful to know early on if the seller could, at some point, decide not to go forward.
2. By reinforcing the vision in her mind that she will soon have a great life lying on a faraway beach, you may be able to gain leverage in the final negotiation process.

10

It is never too early to plan for the transition. While you may be pre-occupied with—or overwhelmed by—closing, the due diligence process can be used to help plan for when you are in the driver’s seat. If done correctly, prior to the purchase you should have strong ideas on such topics as how to effectively grow the business, which employees are underperformers, the size of the investment needed in the following twelve months, and what areas you personally need to focus on. Furthermore, thinking hard about these issues will enable you to see yourself running the company and allow you to know if taking the plunge is right for you.

11

Remember the deal is not done until the final paperwork is signed and the check has cleared. Know second-guessing your thinking every step of the process is expected and even healthy. While you may end up having nothing to show from months of hard work except large legal and due diligence bills, there is no shame in walking away even at the very end. You should use every last moment to research and every interaction with the seller to learn more about her business. As the great Kenny Rogers says, “Know when to walk away, and know when to run.”

12

From my experience, whenever momentum is lost, even for legitimate reasons, the deal falls apart. While it is important to perform a thorough due diligence process, milestones need to be set and the process should move along. If a deadline will not be met, frequent and frank communication between the buyer and the seller will help mitigate the risk of the transaction tanking.

13

Push for the seller to have skin in the game. Tying part of the seller’s proceeds to actively working with you as you learn the business—and helping you succeed—post-close is critical. Including a large percentage of the sales price in the form of a multi-year note (as opposed to a 100% upfront cash payment) helps accomplish this.

While there is no set-in-stone formula, a buyer should strive for paying no more than 50-75% of the total purchase price in cash upon closing. The balance, referred to as a “seller’s note,” should be paid over the next two or more years. This note typically calls for a fixed, quarterly payment and a reasonable interest rate.

However, the post-closing payment can be variable and tied to several different metrics such as the future revenue of the business. If for some reason the seller is unable to remain with you, then the price should be lowered. For example, an individual purchases a company and is counting on the seller to stay around for several months to introduce him to the customers. Two weeks after the sale closes, the seller suffers a fatal heart attack—a tragic event, indeed, but one that leaves the business arguably less valuable. Unfortunately, the buyer has no recourse against the seller’s estate if this issue is not addressed in the contract.

14

Consider letting the seller pocket more money. While this may sound counterintuitive, you may want to incorporate a provision wherein the seller can reap additional money if the business grows over the next several years by a pre-determined amount. This is known as an “earn-out” and is intended to further align your interests with the seller’s. It is worth considering if the seller’s involvement could be particularly helpful in generating additional sales or profits.

In the past, I have proposed that the seller could make more money than she was looking to if the business had higher revenue than either of us anticipated. Of course, the trade-off is she would make less if it underperformed. In one situation, I was willing to pay to the seller 10% of all revenue above a set benchmark for the year following the sale. Given that gross margins were well in excess of 10%, both the seller and I benefited from the growth.

If the seller does not agree to this type of arrangement, then either she does not have faith in the business or she does not have faith in you. Either way, that is a serious red flag.

15

There are a few issues that, if addressed upfront, can save a significant amount in taxes. For example, in most circumstances the purchase agreement will require allocating the price to various components of the business, namely the assets. The asset base consists of fixed assets, a contract prohibiting the seller from going into competition with you over the next several years, and the seller’s agreement to work as a consultant with you during the transition, among others. The balance will go toward an accounting item known as “goodwill.”

As the buyer, you naturally strive to value the assets as high as possible and the goodwill as low as possible since the assets can be depreciated over a significantly shorter timeframe than goodwill. Greater upfront depreciation will lead to lower taxable profits. Lower income taxes
will be due, and, therefore, higher after-tax cash flow is generated. This cash can then be used for other purposes, such as investment in the business or bonuses/dividends to employees and the owner.

Granted, when it comes to taxes, generally what is good for the buyer is bad for the seller, but some creativity potentially can enlarge the after-tax pie for both parties. Given the importance of this and other accounting issues often not properly tended to, I recommend further investigation into the relevant topics for your transaction. Spending some money to on guidance from an accountant may be prudent.

Buying a business requires a mix of patience, persistence, a sense of humor, a little bit of luck, intellectual honesty, an understanding that outside help is available if needed, and upfront commitment to not fall in love with any business until you own it. Pay attention to the details, trust your instincts, and the process will go much more smoothly. Good luck with your future buying.

David Grossman is president of Renue Systems Inc., a global franchisor and operator of specialized deep-cleaning services businesses to the hospitality industry. He can be reached at david.grossman@renuesystems.com with more information available at .

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