CONCLUSION
The Damage Restoration industry grew 6.8% per year on average during 2018 to 2023. In 2023, it was valued at $7.8 billion.
A higher frequency of large catastrophic events and more people moving to areas that are impacted by disasters are just two factors that have impacted industry growth in recent years.
Starting a restoration business will help you tap into this lucrative industry. In this comprehensive guide, we’ll outline the steps and strategies for how to start a restoration business, informed by industry expert Phillip Rosebrook.
👋 Meet the expert
Phillip Rosebrook is the President of Business Mentors and has over 35 years of experience in the restoration industry. He spent the last 25+ coaching restoration professionals to develop a vision and plan for their business, and helping them walk through the process. He’s supported companies from startups to large national players – both independent and franchise companies. Before that, he helped his family run their own successful restoration business, and shares learnings from that time, below.
Why start a restoration company?
While the reasons to start a restoration company will largely depend on your motivation as a business owner, here are a couple of positives.
- It’s an essential business that’s not tied to economic cycles. People will always need restoration companies, no matter what.
- The industry will not be replaced by technology. AI can’t do the essential work of clean-up crews and contractors who rebuild homes. AI can support their work, but will not be able to replace it completely.
- You can positively impact clients’ lives. Restoration is a crisis management business. We restore lives and livelihoods while we mitigate water damage, fight mold, and rebuild homes after fires, floods and other perils. This work supports property owners and allows them to get back to living their lives or running their businesses.
How to start a restoration business
- Learn about the restoration industry
- Decide on an ownership option
- Develop a business plan
- Follow legal requirements and acquire certifications
- Learn risk management and safety protocols
- Set a budget and financial plan
- Purchase essential equipment
- Decide on software
- Set up operations and job management
- Put effective marketing and lead acquisition into place
- Establish client contracts and payment structures
- Hire and build a team
1. Learn about the restoration industry
The first step in your journey is to do some research about the restoration industry. This includes diving into the different service offerings you can provide, doing a market analysis, and determining the best opportunities in your market.
“Assess your personal skill set, align with market opportunities and study the competitive environment to create the best market niche for your new business,” Phillip says.
“When you put those things together, it allows you to create the directional foundation of the nature of your business. The first step before jumping into the work is to think about who you are and what you stand for. Once you’ve done that, you can start laying out a plan to identify where you are going and how you will get there.”
Research types of services
Some of the various restoration services include water, fire, and mold remediation. It’s good to understand the big picture of the industry prior to defining your niche because they all require different equipment and a different skill set. The IICRC offers many different restoration seminars and training classes that will provide tools, techniques and knowledge on various restoration and abatement services.
Conduct market analysis
You’ll also want to analyze the market to determine existing providers and opportunities in your local area, as well as to figure out the most lucrative service offerings.
Determine potential profitability
Generally, small business owners make an average of $83,000 to $126,000 in their initial years, according to the US Chamber of Commerce. In terms of how much your restoration company will make, it depends on many different factors like whether you own a franchise, location, demand, and operational efficiency. Expect to see a modest salary upfront and, according to experts, the potential to grow to $350,000 and above as you find success and gain momentum.
💡Key resources for getting started:
- A Comprehensive Review and Grading of the 2024 Disaster Restoration Industry Trends
- C&R Magazine’s 2025 Restoration Trends
- U.S. Small Business Administration: Market Research and Competitive Analysis
- Jon Don’s Technical Tip Hub
2. Decide on an ownership option
Your options as a new restoration business owner are to: open a franchise, purchase an existing business, or start from scratch. There are pros and cons to each option; we’ll outline the major considerations below.
📌 Note: While this guide is oriented towards starting from scratch, many of the concepts apply when buying a company or going the franchise route.
Open a franchise
Benefits: The nice thing about a franchise is they do a great job of getting your business off the ground. You’ll receive information on what it’s going to take in order to start a restoration company and get training. You’ll pay a lot for these resources, but it’ll ramp you up quickly. If you don’t know the industry, this is a great first step.
The main pros include:
- Upfront training
- Ongoing support
- Ability to drive revenue
- Complimentary services
Challenges: Specializing in certain areas or opportunities might limit the different jobs you can take on. After your initial training, support, and setup, you are committed to ongoing franchise fees, royalties and franchise commitments.
Questions to ask your franchise
- How do you help me get started?
- What type of training school do you offer?
- What type of owner’s school do you offer?
- What resources will you give me to better understand the industry?
- How does your support continue after the initial set up and through the life cycle of my business?
💡Phillip’s advice: Some franchises do a really good job of bringing you continually through to the next level, and they’re always there for you. Some of them keep bringing revenue, others don’t. So, if you’re considering opening a business that’s part of a franchise, call a list of people who have been a franchise for five or ten years and ask questions like, “What ongoing support are you getting? How does this help you? What’s the benefit to you after you get through the startup process?” You will also want to make sure there isn’t too much saturation in your target market location.
Start an independent company from scratch
Benefits: If you start an independent company, you have full ownership over which services you choose to offer. Whatever you decide, you get to look at the marketplace and determine where you get the biggest return on your investment. Some of that’s going to be based on your skill set, some of it’s going to be based on where the market offers you the best opportunities.
If you have some understanding of the industry and you can get through that first step, then it might make sense for you to start an independent company.
Challenges: You’ll have to establish a pipeline for leads and where work is coming from, which is often easier said than done. You’ll also have to identify your own resources for start-up advice and support, as well as training and support for different projects.
Purchase an existing company
Benefits: Purchasing an existing restoration company offers immediate advantages like inheriting an established client base, a proven business model, trained staff, and existing equipment. It can also provide instant cash flow and brand recognition, reducing the risk and time associated with starting a new business from scratch. Additionally, you may benefit from the previous owner’s industry relationships.
Challenges: There is potential for inheriting outdated equipment, unresolved liabilities, or employee issues. You might also face difficulties integrating your management style with the existing team or addressing gaps in operational efficiency. Due diligence is critical to uncover hidden problems, such as declining customer loyalty or misrepresented financial records, which could impact profitability. One often overlooked need when purchasing a company is to assure you have adequate resources for working capital. Many buyers account for cash to make monthly payments but overlook the need to fund ongoing operational cash needs. A good rule of thumb is to have capital resources of at least 30 days revenue to cover needed operational commitments.
Process: The process of purchasing an existing company involves several key steps, including identifying viable companies for sale, conducting thorough due diligence on financials, assets, and liabilities, and negotiating terms of sale. Once satisfied, you’ll draft a purchase agreement, secure necessary financing, and complete any required legal and licensing formalities. Transition planning is essential to ensure a smooth handover and sustained business operations. To get started, contact a business broker who specializes in restoration, or explore your personal professional network.
📚 Resources from Phillip:
3. Develop a business plan
Business plans chart clear steps for how you’ll proceed as you start your business. They’re essential because they provide you with a direction, path, and strategy as you get started. Lack of a business plan could mean you lack the necessary organization to get your business off the ground successfully.
Phillip recommends asking questions like, “Where are we going? What is this year going to look like? And how are we going to get there? What assets and people do we need to accomplish our goals?”
Resources on how to write a business plan are below. And if you have a partnership, you’ll also want to ensure you define roles and responsibilities of each partner, compensation split, and have a partnership agreement.
Not sure about your upfront required costs? Jump to the section on establishing a budget and financial plan.
💡Tip: Business plans can be simple or complicated depending on your goals. If you’re planning to start a restoration business on your own without a loan, you don’t need to do much beyond defining your services, figuring out your basic equipment needs, and getting a sense of pricing. Someone with bigger initial goals will need to get a loan, which will require a much more comprehensive plan.
📚 Resources
- Business Plan: What It Is and How to Write One in 9 Steps
- How to Write a Business Plan
- Free Business Plan Template
- Tool: LivePlan
4. Follow legal requirements and acquire certifications
Phillip’s top advice for following legal requirements is to lean on an attorney and your legal counsel. Your professional team is essential here, and trying to follow all requirements without a solid professional team is going to be a challenge.
So step one is to hire an attorney who understands the restoration business to craft a proper contract you can use with all clients.
📚 Resources from Phillip:
In terms of licenses, industry certifications, and compliance, Phillip strongly recommends in-person classes where applicable.
The industry certifications you need will depend on the trades you specialize in and state requirements. Some examples include:
- Business license, contractor’s license, and insurance certifications
- Institute of Inspection, Cleaning and Restoration Certification (IICRC)
- EPA Lead-Safe Certification (Required for handling lead-based paint, particularly in homes built before 1978)
- Certified Mold Remediation Contractor (CMRC)
- OSHA (Required for handling hazardous materials)
- Certified Restorer (CR) (Advanced certification offered by the Restoration Industry Association (RIA)
- Fire Loss Specialist (FLS)
Generally, when it comes to certifications and requirements, every state is going to be different. Check with your local government and state resources to best understand what is applicable for your business.
5. Learn risk management and safety protocols
There are specific protocols for handling hazardous materials (e.g., mold, asbestos) and maintaining OSHA compliance. Mention regular risk assessments to minimize accidents and legal liabilities.
Safety compliance commonly encountered:
- HazMat
- PPE
- Lock-out Tag-out
- 6’ Fall protection
- Bloodborne pathogens
- OSHA Safety reporting
📚 Resource: Restorers Need a Written Health and Safety Program
6. Set a budget and financial plan
Startup costs, equipment, training, and certifications are likely to be your biggest expenses as a new business. Restoration is cash poor and capital intensive industry, so you’ll need to determine capital requirements and if/where you’ll get funding.
Managing profit margins, projecting cash flow, maintaining an emergency fund, and properly paying taxes are just a few important areas to consider.
In order to effectively track your finances as a new business, we recommend setting up accounting software or hiring an accountant.
📚 Small business finance resources
- How to manage your business finances: 10 tips
- U.S. Small Business Association: How to Manage Your Finances
- IRS: Small business and self-employed tax center
- (Tool) QuickBooks
Gross margin expectations
“I wish I would have known what the margins were and had paid better attention to making and securing our profit margins on jobs,” says Phillip. “We built some absolutely beautiful buildings, but we paid too much to do it.”
Be cautious of overbuilding and managing margins. That will make a big difference in the resources you have to grow your budding business.
These are average gross margins that you can expect for different types of restoration work. There are many issues and factors that may impact them, but Phillip shared these numbers so you can use these as a good rule of thumb.
Keep in mind that regional differences will impact your margins as well. All of these margins exclude indirect costs that are required to support work completed including: equipment, vehicle costs, training and administrative time, job coordination, contents storage and processing space, and more.
- Mitigation – direct cost – labor and material: 70+% margin
- Contents – direct labor and material: 55% margin (Indirect – warehouse storage space, vehicles, cleaning processing equipment)
- Mold remediation: 55% margin
- Construction: 40-45% margin
💡Tip: For most restoration companies, a 5 percentage point increase in your profit margins can double your net profit dollars. “If I went from 35 to 40% margin on my job,” says Phillip, “I would double my net profit dollars. That is the same impact as maintaining margins and doubling revenue.”
📚Resource: How to Manage Margins for Success in the Disaster Restoration Industry
7. Purchase essential equipment
Based on the specialty you choose, you’ll need to purchase some key equipment, like dehumidifiers, air movers, and moisture meters. This also includes service vehicles and obtaining the proper insurance.
Here are a few of Phillip’s must-haves when it comes to water remediation:
- Service vehicles
- Moisture meter kit
- Air movers
- LGR Dehumidifiers
- HEPA Air scrubbers
- Powered extractor
- Thermal and digital camera
- Wall drying system
- Pump sprayers and ULV fogging units
“My recommendation,” Phillip says, “is that you go to Aramsco or Jon-Don or one of the industry suppliers and ask them to tell you about the different products they have.” Here, you can find a list of Jon-Don’s most popular products.
📚 A full list of industry service and product providers: RIA Products and Services
8. Decide on software
While you don’t need to build out your entire tech stack early on, there are a few pieces of software that will be helpful as you start running your business. Our recommendations are below.
General:
- Xactimate: Industry standard estimating software. Check out our resources on how to read an Xactimate estimate and how to write an Xactimate estimate.
- Symbility: Insurance estimating tool.
- DocuSketch: Precise, 360˚ jobsite documentation for restoration businesses.
Accounting:
- QuickBooks: Bookkeeping software.
- Sage Intacct: Accounting and business management software.
Job Management: You’ll need a program that helps you manage your jobs and keep all of the job data in a single place. This is really important as you scale and grow. Phillip recommends companies like Xcelerate, Albiware, DASH or Capabuild.
Learn how DocuSketch helps restoration professionals document the full story of each jobsite in immersive 360˚ with 99% accuracy.
9. Set up operations and job management
Next, you’ll need to establish how you’ll handle job workflows from job intake to final inspection.
This includes job management software for tracking tasks, scheduling, and billing, as mentioned above.
Standardized workflows are key for consistency and efficiency throughout each job.
10. Put effective marketing and lead acquisition into place
“I wish that we would have been more deliberate in our marketing and growth plans,” says Phillip. Like most people, we market deliberately when we are slow. When we were busy, we didn’t market as much. We’d really focus on the work we’re doing and getting the work done. If you want to stay busy, then market when you’re busy and market when you’re slow and that’ll help you remove a lot of the peaks and valleys in your revenue. ”
While crafting an effective marketing strategy for your restoration business will take time, there are a few tactics that will help you get there:
- Identify market verticals
- Develop marketing collateral material
- Develop and optimize your website and Search Engine Optimization (SEO)
- Kick off social media marketing
- Establish your local presence in online sites like Angi and Nextdoor
- Select a Customer Relationship Management platform (CRM) to track clients and activity
- Ask for customer reviews and referrals
In terms of spending, Phillip recommends keeping your marketing spend at 3-9% of your total revenue. The lower budget is a maintenance program and the higher budget should lead to rapid growth.
For an in-depth guide to marketing your restoration business, check out our guide below.
📚 Resources:
- Marketing for Restoration Businesses: How to Choose the Right Marketing Strategy
- Restoration Training Online: Clients for Life
11. Establish client contracts and payment structures
A well-structured contract should clearly outline the scope of work, payment terms, timelines, warranties, and liability limitations. Including a clause for change orders is crucial, as unexpected issues can arise. Contracts also need to clarify responsibilities for obtaining permits or approvals.
Contracts are governed by your state laws. It is highly recommended that a lawyer licensed in your state review and approve your contracts and legal documents. This is not an area to cut corners.
Providing transparent and detailed agreements not only protects your business legally but also builds client trust.
📚 Resources: Check out sites like Rocket Lawyer orLawDepot for customizable contract templates. You can find state customized templates on Ed Cross’s website.
Payment structures: Insurance invoicing and direct billing
To streamline the process, set up clear terms to manage client expectations and ensure timely payments.
- Insurance invoicing: Ensure your invoices are detailed, including line items for labor, materials, and equipment. Using standardized estimating software like Xactimate can help.
- Direct billing: For non-insurance jobs, establish clear payment milestones. This could include an initial deposit, progress payments, and a final payment upon job completion.
To manage cash flow, set payment terms that encourage timely payments. Common terms include net 15 or net 30 days.Quick billing and consistent follow-ups are critical. Aim to bill within 48 hours of job completion.
Set realistic collection expectations based on project types:
- Mitigation: Aim to close outstanding invoices within 30 days or less.
- Reconstruction: Allow for a collection timeline of 45–55 days.
By implementing detailed contracts and clear payment structures, your business can maintain financial stability and build trust with clients and partners.
12. Hire and build a team
If you’re starting your own business from scratch, there will inevitably be a time when you can’t run the behind-the-scenes admin part of the business and do the restoration work at the same time. Or, business might be picking up to the point where you need to hire on staff so that you can handle more than one job at once.
Whatever your situation, bringing on a skilled and dedicated team is a key part of growing your restoration business. When you’re ready, here are the steps you’ll take.
Step one: Conduct a skills assessment for yourself.
Think about what you’re good at and the areas that aren’t strengths for you. As you go through this, remember that hiring diverse candidates who do not think like you is important, as then you’ll end up with a whole bunch of people with the same strengths and weaknesses as you.
Step two: Define goals, roles, responsibilities, and expectations for each potential hire.
“I see a lot of failures in businesses because they have a partner and they haven’t described or defined what the partnership looks like from a structural process. Avoid the common mistake of hiring people with your exact skillset. Look for complimentary skills that help cover your weaknesses.” says Phillip.
Step three: Discuss initial staffing needs and when to expand. This might be a discussion with a partner or investors, or it might be an exercise you do alone.
Step four: Develop a professional team. While this is easier said than done, there are the key roles Phillip recommends hiring for first.
Now, it’s time to get your legal house in order. This includes:
1️⃣ CPA: Your CPA should be a flexible resource who knows the service and construction industry, can help identify bookkeeping solutions, and help with tax planning.
2️⃣ Bank relationship manager: This employee will be tasked with developing banking relationships, establishing capital needs, working capital, and securing assets or leases.
3️⃣ Insurance broker: This should be an independent broker with an understanding of the restoration industry. They should be able to provide insurance services and leads for new work.
💡 Tip: Make sure to get environmental and pollution exclusion coverage, understand Bailee coverage, and know if you need an Inland Marine policy. Your agent should be able to discuss these coverages with you.
📚 Resources from Phillip:
Then, hire for key positions:
1️⃣ Bookkeeper: You’ll need a full cycle bookkeeper able to generate reports and complete data entry. Phillip recommends looking into Baer Bonson for support.
2️⃣ Restoration lead technician: Look for someone with 3+ years of experience who can support restoration projects.
3️⃣ Project manager (if performing construction work): An essential role to guide construction work.
4️⃣ General admin: Hire a person to help with flexible admin support across the entire business.
5️⃣ Reconstruction subcontractors: Tradespeople who specialize in specific tasks.
Once you make these hires, establish a benchmark performance level for each position. “If we know how much a position should be producing,” Phillip says, “we can create some accountability for performance levels. We can have some ownership of expectations, ownership of responsibilities, and then accountability when people do or don’t produce agreed upon results.”
Keys to creating a successful restoration company
There is a lot to handle when it comes to starting and growing a restoration company, but if there is one thing to take away from this guide, it’s to develop a long-term plan and use it to guide your strategy and activities.
“It’s easy in restoration to get caught in crisis management,” Phillip says. “I commonly hear that restoration business owners don’t make a plan because they can’t predict what will happen today. However, creating a strategic plan is going to be really helpful for you long term.”
Generally, one of the best things you can do when starting a restoration business is to craft a solid plan for training, marketing, operations, hiring, and more. The more you can be proactive and do research ahead of time, the better your business will run and grow in the future.
If you’d like to book a consultation with Phillip, learn more about Business Mentors on their website.
Disclaimer: everything stated in this article is for informational purposes only and does not constitute legal advice. If you have questions, contact a licensed legal professional.
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