How to Start a Water Damage Restoration Company in 2023

Do you want to start a water restoration company? If YES, here is a detailed guide on how to start a water damage restoration business with no money or experience plus a sample water restoration business plan template. Starting a lucrative business in this industry needs taking a few steps to convince people to hire you when their pipes burst or water seeps into unexpected places.

This business can be very profitable if you follow all instructions and complete all required stages. When planning to start this business, you have to first be conversant with OSHA standards and requirements when it comes to providing restoration services for buildings that experience flooding contaminated with chemicals, sewage or other pollutants.

It will be a major duty to establish credibility and gain certification by joining the Institute of Inspection, Cleaning and Restoration Certification, a non-profit organization dedicated to the inspection, cleaning and restoration service industries.

It’s important to state that a lot of businesses in this industry provide an estimate for the work that needs to be done, such as removing drywall, carpeting and flooring as well as cleaning up debris, drying and getting the humidity out of the space to bring the property back to pre-flood status.

Have it in mind that a customer is usually responsible for seeking reimbursement from his insurance company if he has a flood policy.

Steps to Starting  a Water Damage Restoration Company

1. Understand the Industry

Reports have it that the united states restoration industry has grown to an astonishing 0 billion annual market because of factors like aging homes and infrastructure, the worsening severity of storms, the influx of wildfires and frequent flooding. This points towards a skyrocketing market for home and commercial restoration in the coming years.

We all can agree that hazards and disasters can happen at any moment, but one thing is sure, disasters happen often. Reports have it that more than 14,000 people experience water damage every single day, and damage from “water leaks and frozen pipes cost consumers and insurers more than $10 billion every year in the U.S.”

You need to understand that water damage is also extremely expensive, with an average costs to repair water damage ranging from $1,038 – $3,607, and can approach well over $6,000 if the damage is severe. We also know that with water damage, there is always the danger of mold growth. Mold damage can occur no matter when a home or commercial property was built.

Mold can grow without water damage occurring at all, making unsuspecting home and property owners vulnerable, especially if they live in modern, eco-friendly homes. We were able to note from our extensive research that the cost of ridding a home of mold growth is also expensive, with average spending between $1,111 and $3,211, and with high costs approaching $6,000.

Even though water damage and mold growth are both very common, experts in this industry believe that homeowners can expect more property damage as the result of climate change. The Environmental Protection Agency reported $6 billion in property damage from severe storms in 2023, a number that has remained constant since 2008.

Have it in mind that flooding is likewise becoming an issue, especially in the American Southeast, where millions live along the coasts. Water damage is known to cost home and property owners, as well as insurance companies, billions of dollars every year.

2. Conduct Market Research and Feasibility Studies

• Demographics and Psychographics

When you take your time to analyze this industry, you will understand how common and devastating water damage can be. Reports had it that 14,000 people in the US experienced water damage emergency at home or work each day, and 98% of basements in the US will suffer from some type of water damage during their lifetime.

This has created a huge opportunity for you and the market is endless. The costs are just a staggering as the frequency. Water damage and mold cost the insurance industry .5 billion dollars per year, and the average cost of a home water damage insurance claim is $6,965.

Water leaks alone leave incredible amounts of damage and immense waste in their wake. Water leaks from homes in the US can exceed 1 trillion gallons of water in a year. That’s equivalent to the annual water usage of Los Angeles, Chicago, and Miami combined. These individual leaks often seem tiny, but over time they can generate enormous waste and damage to a home.

For example, a continuously running toilet can waste over 200 gallons of water per day, and a 1/8 inch crack in a pipe can spill 250 gallons of water in a day.

Just like we stated earlier, water damage can happen quickly and cause immense damage, there are ways to prevent a lot of it. Your ideal customers will range from businesses to home owners; anyone who can be affected by water is a potential client.

3. Decide Which Niche to Concentrate On

You need to understand that water damage covers a broad range of potential loss. A lot of homeowners understand that wear and tear will occur in any circumstance; however, there are a variety of unforeseen events that may trigger water damage.

Natural disasters are often given the most blame for water damage, and they should, considering that the majority of damages due to water stem from some sort of outside environmental factor. Have it at the back of your mind that water damage may come in a variety of forms.

Understanding the classes of damage is important to not only potentially preventing an incident, but more importantly, to understand where you stand in the eyes of the industry. These classes and many more activities can serve as niches to choose from in this business.

• Class 1 damage – it involves part of a room that has absorbed little moisture. It’s the least level of damage.
• Class 2 damage- this is when it has affected an entire room and has absorbed into carpeting and walls.
• Class 3 damage – when it must have absorbed up into the walls, saturated most of the area, and may have come through the ceiling. Class 3 damage is considered the worst.
• Class 4 damage – this stage requires specialty drying due damage done to materials such as hardwood, stone, and concrete.
• Removing drywall
• Carpeting and flooring as well as cleaning up debris
• Drying and getting the humidity

The Level of Competition in the Industry

You may not believe that every state in the U.S. has experienced at least some type of flooding within the past six years. Recently even homeowners who don’t live next to a body of water can experience costly and dangerous flooding.

Severe thunderstorms, hurricanes, heavy rain, or water melting on mountaintops hundreds of miles away can make flood waters rise. Also things like broken pipes, sewer line backups, damaged appliances, faulty sprinkler systems, and overflowing sinks and tubs are other reasons water damage occur.

This industry is highly competitive as everyone is still vying for market share and brand awareness in the industry. Have it in mind that floods ranked #1 in the United States for natural disasters and just as little as two feet of rushing water can easily carry a car away.

Reports have shown that floods are known to bring walls of water 10 to 15 feet high and there is a risk of 1 in 4 chances of a flood damaging your home with a 30 year period in a high-risk area. For the last decade, total flood insurance claims average more than $3.4 billion per year.

Even with the level of competition and innovation going on in this industry, you still have a very large opportunity to leverage and achieve financial sustenance.

4. Know Your Major Competitors in the Industry

• Puroclean
• Paul Davies
• ServiceMaster Restore
• Belfore
• Rainbow International
• Indoor-Restore Environmental Services
• Advantaclean
• Indoor-Restore Environmental Services
• Servepro

Economic Analysis

This business is always needed because of the various exogenous and indigenous causes of damage. A lot of companies offer reprieve to the victims, but the best water damage restoration business provides several facilities in addition to restoration.

Don’t just jump into the industry and hope to compete with the big players immediately, every big journey begins with a small step. Before you make plans to dominate the water damage restoration industry, you should have a good start.

It is very important to make sure that your decision to start your own company is right. Business idea evaluation is the best way to do so. There are several evaluation tools available online, you can use one or more of them to assess your idea.

We also suggest that you research and identify your competitors. Understand and know all the services that they provide, and their respective charges. If you feel that there is no room for you in your desired area of operation, then you should probably consider targeting another locality.

5. Decide Whether to Buy a Franchise or Start from Scratch

A lot of savvy entrepreneurs are urged on by the vision and dreams of a future big money buyout and an undeniable entrepreneurial impulse to start from the scratch. But it may make more sense to leverage an existing water damage cleaning and restoration business as your vehicle for world domination, especially from the business perspective.

You need to understand that water damage cleaning and restoration businesses are proven operations with dependable revenue streams which will save you headaches and hassles of startup trial-and-error. Have it in mind that there is a greater success possibility if you become a franchisee in lieu of doing everything yourself.

But before you consider starting a water damage cleaning and restoration business, you ought to investigate whether franchising might be the right move for you. Check if it suits your dreams and visions for your business, check if it suits your long term and short time goals.

6. Know the Possible Threats and Challenges You Will Face

Any suitable and successful industry has its challenges and this business is not left out. Experts would always say that it takes more than just funds to build a successful business.

You need to be concentrated, take risks and be committed to be able to achieve or build a breathtaking water damage restoration business. Below are the few challenges and threats faced when starting up a water damage restoration business;

• Dealing with Competition
• Unforeseen Business Challenges and Expenses
• Exiting the Business
• Developing the Vision and Business Idea
• Raising Capital for your Start-up
• Assembling a Business Team
• Finding Good Employees:
• Finding Good Customers

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

Knowing the suitable legal entity for your business will go a long way in helping you achieve your business goals. You should know there are a lot of legal entities in the business world and it takes careful consideration to be able to choose one suitable for a particular spec of business.

As an individual planning to start a water damage restoration business, a Limited Liability Company is the best legal entity to start up with, because a limited liability company (LLC) provides the limited liability protection of a corporation, while avoiding the double taxation.

Also since it is taxed like a partnership, it can be more flexible than a corporation and a sole proprietorship – seems like the best of all worlds.

We understand that a lot of investors do not like to invest in LLCs. First, investing in an LLC can create unintended consequences under Employee Retirement Income Security Act (ERISA) for pension funds who may have invested in the fund making the investment.

This is why a lot of funds are prohibited by their governing documents from investing in an LLC. Second, venture capital and other funds do not want to wait for a portfolio company to finish its own tax return and issue K-1s to its members before the fund can do its tax return and issue its K-1s to its investors.

Finally we believe that there is a significant tax incentive to investors who invest in “qualified small business” stock, which requires that the company receiving the investment be a C Corporation. So to cut the long story short, it is recommended that individuals start a water damage restoration business as a Limited Liability Company and convert to a C corporation immediately before they receive substantial outside funding.

8. Choose a Catchy Business Name

• Clear Guild
• Water Knoll
• Power Mowers
• The Mow Better
• Water Job
• Señor plough
• The Shovels
• The Longest Yard
• Seed-n-Weed

9. Discuss with an Agent to Know the Best Insurance Policies for You

Insurance protection is very necessary in any business that wants to succeed and grow. In this business, you will surely depend on your water damage restoration insurance to provide protection for both your vehicles and business. We believe that the insurance can include a BOP with general liability, workers’ compensation, commercial truck insurance and other coverage that provide protection against costly lawsuits.

In the United States, insurance usually are required by law. If you earn income by providing water damage restoration services to either residential or commercial properties, make sure you’re familiar with the local rules and regulations where you work.

• Workers Compensation Insurance
• General Liability Insurance
• BOP insurance
• Commercial vehicle policy

10. Protect your Intellectual Property With Trademark, Copyrights, Patents

Intellectual property is protected in law for example, patents, copyright and trademarks, which enable people to earn recognition or financial benefit from what they invent or create.

By structuring the right balance between the interests of innovators and the wider public interest, the Intellectual property system aims to foster an environment in which creativity and innovation can flourish. In the water damage restoration industry, intellectual property rights protect Trademarks, industrial designs and geographical indications.

11. Get the Necessary Professional Certification

Water damage comes from many sources; they can be internal to the structure or from external origins such as large-scale flooding or disaster conditions.

You need to know that standards exist which those who are starting a water restoration business will need to be aware of, the most commonly cited mitigation industry standard is the Institute of Inspection Cleaning and Restoration Certification S500 Standard and Reference Guide for Professional Water Damage Restoration.

Note that this standard outlines the process, procedures and recommendations for qualified mitigation efforts including understanding how to properly dry various affected building materials in residential as well as commercial properties. Other certifications may include…

• Certified Mould professional
• IRI Water Restoration Certification
• Microbial Remediation Supervisor
• Building Moisture and Documentation (BMI)

12. Get the Necessary Legal Documents You Need to Operate

It is very important to state that licenses for water damage restoration businesses are typically regulated locally. You need to research your location because they can all vary in different areas. But one document you should have in mind is the service contract or agreement.

In this business, we strongly advise that you ask your clients to sign a service agreement before starting a new project. Have it in mind that this agreement should clarify client expectations and minimize risk of legal disputes by setting out payment terms and conditions.

13. Raise the Needed Startup Capital

Lack of proper and enough funding will kill your business before it even starts. Without funds, your business ideas are just like water poured on a rock. Funds in business is a big ingredient that can move a business to the limelight, and without a detailed business plan, a company won’t be able to land sufficient funds from prospective investors.

This is why you should be very prepared when planning to start this business and also have it mind that getting funds is not an easy task because no one would want to pledge his/her money in a business that can’t guarantee returns and profits. Basic ways of financing a water damage restoration business includes;

• Taking small business loans
• Getting microloans
• Attract an angel investor
• Funds from Personal savings
• Getting loans from families and friends
• Investors

14. Choose a Suitable Location for your Business

Irrespective of the business size, location is one crucial thing which would hit a business hard when made wrongly. You have to note that your location decision has a direct effect on the operation’s costs as well as your business ability to serve customers.

Once you’ve made this decision, it can be very difficult and costly to undo. This is because the cost of moving an operation is often significant and you run the risk of inconveniencing customers and staff. This is why you need to get it right once and for all. Things to consider when choosing a suitable location may include;

• Proximity to other businesses and services
• Ordinances
• Utilities and other costs.
• Demographics
• Foot traffic
• Accessibility and Parking
• Competition

15. Hire Employees for your Technical and Manpower Needs

Knowing the right equipment and having them is half the battle when you are developing a water restoration business. But if you don’t have the right equipment, the right training and marketing can’t help you much. The things you will need in this business may involve…

• Dehumidifiers

Note that you have to invest into a commercial dehumidifier that can run for long periods of time and can effectively extract moisture from the air and surrounding materials. There are several types of commercial dehumidifiers; LGR and conventional dehumidifiers are among the most common for water damage restoration.

• Air Movers

Few things are more important to a water damage restoration professional than powerful air movers that assist with ventilation and air circulation, which will assist your dehumidifiers in quickly and effectively.

• Vehicle

In this business, you will need some way to get to jobs and some way to transport your equipment. If you already have a truck, it must be large enough to handle the job. If not, you will want to look into getting a van or truck that is dependable and that can transport the necessary equipment.

• Extraction Unit

As a professional in this industry, you’ll need a powerful water extractor that can work very fast to remove remaining water from your job sites. You will find many options; you will need to gauge how much power you require for the type of jobs you take on, as well as how much you can invest at the start off your business.

• Moisture Meters

Also have it in mind that you will need both a penetrating moisture meter and a thermohygrometer for psychometric readings. This will help you to gauge moisture content in water-damaged materials and in the damaged environment.

Indeed there are many additional things you can find that will be helpful. But, as you get started, this is a solid collection of tools, equipment and materials to have. The work force you need will depend on the size of your business or you can decide to contract workers only when you get a job.

The Services Delivery Process of the Business

We believe that restoring a water damaged home involves a process starting with a thorough inspection of the damage to the replacement of flooring, walls, and ceilings. These processes are…

• Inspection

We all can agree that anyone who claims to be a professional can best assess the extent of water damage when he or she can observe and note tests damages first hand. Each inspection determines a class and category of water damage. Defining the class and category of water damage helps outline the best means to restore your property.

Categories of Water Damage may include…

• Category 1 involves damage from a clean water source such as toilet tanks, broken pipes supplying clean water. Category 1 water damage can degrade into Category 2 or 3 if it sits too long.
• Category 2 involves damage from “grey water,” such as washing machine or dishwasher water containing detergents. It may also involve water containing urine from toilet overflows.
• Category 3 involves completely unsanitary water that can easily cause illness, disease, or death. Category 3 water comes from sewage, river flooding, and standing water that has begun growing bacteria and other microbes.

Water Removal

At this particular step, pumps and vacuums are used to remove water from your home. The type of equipment needed depends on the extent of the water damage. Water removal begins as soon as possible to prevent mold and bacteria growth.

• Drying

When all water and absorbent surfaces are vacuumed, drying and dehumidification begins. Have it in mind that this step is important to clear up any remaining moisture after water removal. The drying out process can take several weeks to fully complete.

• Cleaning

At this point, all personal belongings need to be cleaned and sanitized to prevent unwanted mold and bacterial growth. Carpeting, clothing, and drapery are given antimicrobial treatments. Air scrubbers may also be used to remove particles and moisture from the air.

• Restoration

This stage involves replacing materials like drywall and insulation. Sometimes this process is as simple as installing a few panels of drywall, while serious cases could require replacing entire walls. Exposure to toxic substances like lead and asbestos is possible during restoration. Older homes are likely to contain these substances.

16. Write a Marketing Plan Packed with ideas & Strategies

Just like we stated earlier, your success in this business will be dictated by a lot of things and marketing is a benchmark. Marketing here is not all about minor background marketing but a concrete plan organized and outlined for achievements. Things to consider may include..

• Email Campaigns

A million and one people around you all have email addresses. The emergence of technology and android phones has made it a necessity to have an email account. This means that the odds are in favour of email campaigns actually connecting with customers.

Have it in mind that the real challenge is compiling a substantive quantity of qualified email addresses. Premium mailing list providers can reduce the cost and hassle of in-house list generation.

• Excellent Business Sign

Even though the processes of water damage cleaning and restoration are very different from each other, signage can be used by any water damage cleaning and restoration business to communicate the company’s value to their customers.

Since the signage for water damage cleaning and restoration businesses has unique characteristics, avoid glossing it over as an afterthought. We strongly suggest that you talk with somebody who knows a lot about business signage advice and get their input before you create new business signs.

• Word of Mouth

Bug players in this industry rely on a certain amount of word of mouth marketing buzz to communicate brand values and product messaging. Report has shown that word -of-mouth is very exponential, but it’s not completely out of your control.

We believe that a skilled marketer can use online and offline marketing tactics to boost consumer discussions about your offerings.

17. Develop Iron-clad Competitive Strategies to Help You Win

We can all agree that competition brings innovation and ideas. You have to understand and accept that you are not alone in the industry and you need to always be on your toes to outsmart your competitors. Ways to win your competitors may include;

• Have a Competitive Advantage
• Establish a customer database
• Excite your customers
• Create good marketing plans
• Define your company

18. Brainstorm Possible Ways to Retain Clients & Customers

Locating a void in the industry, be it service wise or location wise, and striving to fill it will ensure that you gain your own share of the market. As a savvy entrepreneur, you have to work hard to be the first business to offer help and services to your clients. Ways to retain your customers may include;

• Be fast in resolving issues
• Appreciate your customers
• Turn difficult situations into opportunities to earn your client’s trust.
• Give out a reward
• Stop telling customers what’s good for them
• Listen
• Understand what they want
• Employee loyalty
• Soliciting their ideas and suggestions
• Offer a simple way to pay
• Build the customers and not the price

19. Develop Strategies to Boost Brand Awareness and Create a Corporate Identity

Indeed advertising is an important function for all businesses. We’ve stated that this industry is highly competitive, which is why is advisable that you start advertising your services months before you open your doors to business. This way, your company is so familiar in the community that you become the natural choice for new customers. Ways to boost your brand awareness may include;

• Sponsor a local team, such as your child’s little league
• Create a social media presence
• Negotiate with customers to place a sign in front of their homes
• Print flyers and paste around towns
• Place an ad in as many publications as are available
• Participate in fundraisers