How can I compete with the dreaded preferred vendor?

The question: How can I compete with the big national franchise preferred vendors?

Steve’s answer: Use your small business dexterity to your advantage!

restoration preferred vendor competition

Hi Steve,

Claims from insurance companies are not working so well for us anymore. They refer customers to their #800 for claims and then tell them they need to go with one of the preferred vendor big national franchises. So the local companies (like us) are getting “frozen out” of the process. Do you have any ideas? Thanks

Frozen in Fargo

Yes, Frozen, I feel your pain with the Preferred Vendor Networks and the third party administrators for claims. The water damage mitigation world has changed enormously and not for the better! That said, there are still opportunities out there for a flexible and locally quick responding restoration company. So a few thoughts…

1) Head ’em off at the pass- Yes, many insurance companies now want to deal with the preferred vendor big national franchises. To see it from their point of view they want consistency and at least a minimum amount of knowledge. (And yes, I’m sure your company is highly skilled. But insurance companies are dealing on an anonymous national basis and they have been burned… a lot!)

So reach out to and build a relationship with your LOCAL insurance agents. Yes, your agents MAY just tell their insureds to “Just call the 800# number…” and go back to sleep! But if over time you can convince the agent that your company will help retain their clients due to fast response and superb service some will go out on a limb and refer you! And don’t forget about…

2) Other water loss prospects. Contact local governments (sewer departments are sweet!) and institutional accounts like colleges, hospitals, large companies and military bases. All of these places must have a disaster plan in place on who to call and what to do. Even better, most of them are “self-insured” and won’t be immediately calling their insurance company. Why not become their “go-to-consultant”? You can also contact…

3) Property and Facility Managers. These folks usually have very large deductibles on the properties they manage and just want very fast emergency service. That sounds like… YOU! This leads to the fact you must be quick, quick, quick and then be willing to…

4) Gracefully yield. So just get in fast, do your emergency mitigation and blow the socks off of the insured with your Value Added Service. Then IF the preferred vendor national company moves in and wants to take over… OK. You’ll still get paid for your emergency work and equipment rental till you pull it. (This is where most of the net profits are any way!) Even better, the Insured will notice the difference between your company and the preferred vendor big franchise and hopefully will mention it to their local agent! And finally, think seriously about developing …

5) The “3-Legged Stool” Business Model. Many of our SFS member companies who previously were 100% restoration have now morphed into providing 1) restoration, 2) commercial and 3) residential. (3 “legs”- get it?) Now while 2) and 3) do not have the potentially high profit margins of restoration they do feed and support each other! And as you have been finding out SOME cash flow is better than NO cash flow!

Plus remember my suggestions (#1, 2 and 3 above) to make regular sales calls on local agents, institutional accounts and property managers? If you can also provide commercial and residential cleaning this gives you a wedge into building an ongoing relationship with these people. Then sooner or later disaster WILL strike and you will be there for them!

NOTE: Be sure to download this free Special Report on building a successful restoration company. And HERE is our entire website section on restoration!

Best wishes!


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