The restoration industry is tough to break into: it’s competitive, and there’s little room for error. The biggest mistake business owners make is underestimating the cost of starting a restoration business.
If you’re considering opening your own commercial restoration company, it pays to do your research beforehand. When looking at what it takes to start a restoration business, most people don’t consider all the costs involved in running one; they only think about startup fees and equipment costs.
To start a restoration business, expect an average of $55,000. A restoration business can be established for $12,000 up to $160,000, depending on the clients you plan to serve and the equipment you purchase.
But if you do your homework and create a plan ahead of time, you can succeed in this niche market. You should outline what it will take to start a restoration business and the average cost of starting one so you’ll know what you’re up against as you pursue this goal.
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Restoration Business Costs
What are the costs of starting a restoration business? You’ll need to be able to answer this question before you get started so you don’t start taking on more than you can afford.
Here are some examples of typical restoration business costs:
Office or Storage Space
The cost of renting or leasing office space or a storage facility will be your most significant annual expense, so you’ll want to choose a location where the rent is affordable.
The amount of space needed for an office and a place to store equipment depends on how much you have. This, along with where you live, will affect your rental rates.
You should budget about $15 per square foot for an office and about $5 per square foot for a warehouse. On average, you can expect to spend $1400 per month for an office and $3,500 per month for a warehouse.
You may receive a discount on your monthly rent if you sign a 1-year lease. Don’t forget to include the cost of utilities, insurance, and taxes in addition to your monthly rent.
Operating Expenses
You’ll also need to consider operating expenses like utilities, gas, maintenance, and other miscellaneous tools you may need.
These expenses will vary depending on where you live.
You should budget about $200 per month for office utilities. Most restoration owners use their cellphone for business purposes, so you can consider that expense separate.
An average cell phone bill will be about $130 per month.
Gas can add up fast if you have to drive around or out of town for a project.
You should budget about $100 a week for gas if you have a pick-up truck and about $75 a week for a sedan or small SUV.
Maintenance costs
These costs will depend on how much equipment you have, the type of equipment, and where you’re located.
You should budget about $100 per month for maintenance and repairs on a vehicle.
All of your equipment will need to be maintained as well.
You should budget about $150 per month for repairs and upkeep of equipment.
Office Furniture & Equipment
You will need to outfit your office with essential furniture and equipment before you get started.
For example, if you have an office, you’ll want a desk for doing paperwork plus chairs for your clients. Expect to pay $500 for a desk and $100 per office chair.
Don’t forget to include the cost of computer equipment if you don’t already have what you need. You’ll want at least one desktop or laptop computer, so expect to spend about $700 – $2000 depending on what type you decide to get.
You’ll also need a copier, fax machine, printer, filing cabinets, and other essential equipment. These will cost about $1100.
Your cost will depend on what is available in your area, but about $3,500 should cover the bare essentials.
Vehicles
You may need one or more vehicles to get started.
Your restoration service will likely require a truck for transporting equipment and materials. An average-sized used pick-up will cost about $32,000.
Don’t forget to include insurance costs for your vehicles in addition to the purchase price, which will average $150 per month.
General Business Insurance
You’ll likely need general business insurance to rent workspace and buy and use equipment like power saws.
This type of insurance will cover liability claims that may arise from accidents, equipment damage, and other issues. You should budget between $2,000 and $3,000 annually for general business insurance.
Equipment & Tools
You won’t be able to work without the equipment and tools you need.
Make a list of all the tools and equipment you’ll use most often. This may include:
- Power saws
- Ladders
- Generators
- Lights
- Commercial air movers
- Dehumidifiers
- Boots, gloves, and safety gear (like eye protection and dust masks)
- Chemicals for cleaning up water damage or mold
- and other basic supplies
We’ll outline some of these costs so you can get a sense of how much each piece of equipment will cost you.
- Basic Power Saw: A circular or table saw will cost about $200.
- Jackhammer: You can rent this for around $30 per day, but the average one to buy is about $1500.
- Drywall Saws: $650 each.
- Floor Sanders: $950 each.
- Generators: $700 – $1700 each.
- Safety Equipment: An essential selection of safety equipment for protection from heat and chemicals will cost about $100 to $350.
- Chemicals & Cleaning Supplies: You’ll need chemicals for water damage or mold, so you should budget about $4500 per year on top of the cost of the equipment you use to apply the chemicals.
- Chemical Respirator: $100-150
- Goggles for Chemical Use: $20 – $30
- Chemical Resistant Gloves: $20 – $30
- Chemical Resistant Boot Tops: $50 – $55
- Commercial Air Movers: You’ll need at least two air movers, which will cost about $250 each.
- Dehumidifiers: Expect this to cost about $1000 for a small dehumidifier and around $2500 for a larger size.
- Boots & Gloves: You can expect to spend between $30 and $95 per pair on boots and gloves you use for protection from heat and chemicals.
- Ladders: $400 each.
- Fire Extinguishers: $50-100 for a small one and around $400 for a large one.
- Chemical Applicator: $200 – $550 depending on the size.
- Digital Camera and Photography Equipment: If you need to take photos of the damage and building interiors, you should budget about $500 for a digital camera and around $200 for photography equipment like tripods and lighting.
- Other Equipment: You should budget about $300 for miscellaneous items like buckets and measuring tapes.
Building Permits & Licenses
Your restoration business will usually need building permits and licenses to do work on homes or commercial buildings.
Start at your local city’s website to find out what you’ll need to get started and the cost of each permit. You should budget about $400 for permits depending on the jobs you will be working on.
Employees
You may need to hire employees depending on the size and scope of your restoration business. Employees can be paid hourly or monthly, though you’ll want to set up a payment system that works best for you and your needs.
Employee benefits like private insurance and taxes should be considered, and employ someone full-time versus part-time.
A typical employee will cost around $3500 per month, and you’ll need to match social security, unemployment insurance, and payroll taxes on top of the hourly wage.
It will vary depending on where you live, but on average, additional expenses will cost $700 per month for each of your employees.
You should consider hiring employees when your work goes beyond what you can do by yourself or when the size of your restoration business outgrows the capabilities of one person.
It is crucial to carry workers comp insurance and unemployment insurance for your employees. This will cost around $180-$300 per month, depending on the state you live in.
There are so many other expenses you should consider when starting a restoration business. You’ll need a detailed budget to see the potential costs involved with creating your own restoration business.
Marketing
Your marketing plan will be one of your most vital assets in starting a restoration business, so you should invest time and money into it.
Start with simple strategies like creating a website and making social media accounts.
Facebook has an advertising program to help small businesses get started for as little as $10 per month.
You can also make flyers and business cards to advertise your restoration services.
The materials you’ll need for flyers, printing, graphic design, or logos will cost around $1000.
A basic website will cost about $300-$500, while a more advanced website starting at about $3500.
If you need to hire a graphic designer or web developer, that will cost an extra $35 per hour.
Make sure to budget between $1000 and $2000 per month for marketing.
Marketing strategies like attending trade shows, seminars, and networking events will cost you money as well.
Trade shows can be anywhere from $50-$120 per day, while seminars and networking events usually average around $100 for a ticket to attend.
Not only do these expenses vary greatly depending on the event, but it’s hard to predict how many people you’ll get in contact with or if it will be worth the cost of attending.
Once your budget is set, stick to it and make sure you aren’t spending more than you can afford.
You should also consider advertising online through company websites like Angie’s List for around $400 per month on average.
Set Your Prices
How you price your restoration services will depend on what the market will bear and how much it will cost you to get a return.
If you want to make a profit in your restoration business, you’ll need to charge enough for each job to meet or exceed the amount of money spent.
This means your goal should be to spend less than you charge. For example, if it costs $1500 for materials to complete a job and it takes 20 hours of labor (at $15 per hour), your goal should be to charge more than $3000 to be profitable.
You may need to lower the price to attract customers, but this will ultimately depend on how competitive the market is and how much money you have to spend upfront.
The costs associated with restoration work vary greatly depending on the size of the project, so it’s best to get a general idea from other professionals in your area before finalizing your prices.
It is important to have a good idea of the market in your area before setting restoration business prices.
Restoration Business 101
Many people are interested in having a restoration business, but only a few know what it entails.
This type of business is meant for people who need help immediately after a disaster or emergency.
The goal is to minimize damage and prevent further damage from occurring, such as mold growth.
A restoration business is different from a contractor or general cleaning service.
It requires people specifically trained to prevent damage from affecting your home or business further.
The good news is that many restoration businesses are expected to grow in the near future due to increasing natural disasters.
It will take some preparation for you to get started. This is why it’s essential to do your research before you make any decisions.
Restoration Process
The steps involved in the restoration process are:
- Removing damaged materials, including cleaning or removing furniture, sheetrock, insulation, and other debris. This is to prevent further damage to undamaged items while also letting damaged items dry thoroughly.
- Repairing building materials that have been water damaged, such as sheetrock, insulation, and others.
- Water-proofing materials to prevent further damage from occurring.
- Cleaning furniture and belongings that have been exposed to flood or moisture damage. This may include removing odors or smoke from a fire.
- Deodorizing the structure and belongings using disinfectants, ozone machines, or ionizers to make it safe for occupancy.
Is This Business Right For You?
It’s important to consider whether or not starting a restoration business is the right choice for you.
There are so many factors that go into getting your restoration business up and running that it can be overwhelming at first glance.
You now have a great idea of what it will take to start your new business and what costs you should consider.
If you’re sure that starting a restoration business is the right choice for you, go for it!
