The 8 Story Catastrophe

Before I founded Albiware, I used to help run a successful restoration company in the Chicagoland suburbs. The company grew out of my father’s garage, and now it’s worth over eight million. I’ve had many moments during my career that have helped shape the leader and entrepreneur I am today. These are the lessons I carry with me that have made me stronger, and through my mistakes, I’ve been to pick up on the tools that work and don’t work. I’ve been in your shoes before, so I’ve made it my mission to help restorers like you grow and scale your businesses faster.

“This was a trash fire!”

As restorers, we get a rush of adrenaline depending on how big the job is. That’s why commercial mitigation projects are enticing to restoration contractors; however, they often come with many risks. One of my mutual friends knew the building engineer for the Chicago Housing Authority, who called me to ask for help after a sprinkler on the 8th floor of this high-rise broke, causing water damage to the lobby.

A tenant had accidentally lit his trash bag on fire with a cigarette and ran down the hall with the garbage bag to throw it down the trash chute. The sprinkler system tripped and caused 50,000 square feet of water damage. The building wasn’t climate controlled and had limited power.

The building staff’s main priority was ensuring that none of the tenants were displaced. The building was an elderly government housing facility. During the drying process, we decided to use desiccants because the building had no climate control and no electricity, and tenants needed to remain in the building. We pitched the outcome to the board of materially interested parties, and they approved. We brought in 2 large desiccants, generators, and a 40-ton AC unit to cool the air so the environment would be habitable during drying.

We mobilized a crew of 70 people and worked around the clock for 90 hours to stabilize the water loss. All crew members had to walk up eight flights of stairs as the elevators were water damaged and inoperable. We communicated hourly with all materially interested parties, explaining to them what we were doing, progressively billing the project T&M-wise, and thoroughly documenting. 

The building staff’s main priority was ensuring that none of the tenants were displaced. The building was an elderly government housing facility. During the drying process, we decided to use desiccants because the building had no climate control and no electricity, and tenants needed to remain in the building. We pitched the outcome to the board of materially interested parties, and they approved. We brought in 2 large desiccants, generators, and a 40-ton AC unit to cool the air so the environment would be habitable during drying.

Watch the full Video on YouTube!

The Aftermath

Everything went smoothly, and we got the place dry in under five days, saving about 30 units from being displaced. While removing equipment from the loss, we were informed that the customer’s insurance carrier had hired a consultant. We eventually discovered that the consultant had hired one of our competitors to provide a competitive bid.

I knew the competitor and called him up immediately after finding out he was a consultant. Trying to build a working relationship with him, I told him to let me know if he disagreed with anything, and we’d figure it out together. I felt assured when he said, “Alex, no worries. We’ll get it taken care of!”

45 Days later, we get the competitor’s bid of “what they would’ve done.” They handed us an itemized Xactimate bid which came in at $60K. Restorers know that a massive 8-story loss does not equate to the number this “competitor” offered. It was evident that there was a clear discrepancy. I immediately decide to call up this competitor to ask for an explanation. After a short conversation, he blew me off, telling me not to contact him anymore and that if I was unhappy, I should sue the Chicago Housing Authority. I felt betrayed because I had developed a friendship with this competitor only to feel stabbed in the back.

We ended up going to court and suing; the whole process was long and tedious, and it took about 3 years to settle. When we settled, we got close to the amount we should have gotten initially.

Lessons Learned

I wanted to share this cautionary tale about commercial mitigation jobs to show that although they look lucrative and could create a significant spike in your revenue, they have some downsides. It could come with a whole bunch of complications. When you’re out with your crew, you’ll find that you’re spending a lot of money on the overtime you’re paying your team and the equipment providers.

Before you take on your next large loss, just think about the risks you could face. My situation isn’t uncommon; I’ve heard very similar situations happen to others. The one thing that worked out in our favor is that we had a line of credit, we had a relationship with a local bank and we had about a 2 million dollar line of credit that we could borrow money from. We used some of that money to pay off the equipment suppliers and held onto that line of credit until we got paid. It also helped that we had good legal support to help our case.

The biggest lesson learned is don’t trust your competitors. It’s ok to be friendly with them, but at the end of the day, no matter if there’s a friendship or not, it boils down to the fact that they are your competitor no matter what. In business, you put all business matters first. Anything else, like friendship, comes second. Your competitor ONLY cares about their bottom line.

I’ve employed a couple of people who worked for that competitor, and they told me this competitor had a deal with the Chicago Housing Authority all along. They also happened to have a good relationship with the insurance carrier. So the competitor wrote this lowballed bid to get in the good graces of the CHA to make themselves look better in front of them and the insurance company.

One of the things I recommend for restorers who choose to take on commercial loss mitigation jobs is to make sure to put their foot in the door, so they can guarantee they’re receiving a deposit. This will help you find out if a payment schedule is insured or not insured. So always make sure you look at the payment terms and have a clear understanding before moving forward.

As a result, we learned firsthand the risk associated with taking on large losses. 6 to 7-figure losses can be a restorer’s best dream but can turn into their worse nightmare. In fact, a large loss can put your entire company out of business. The purpose of this post isn’t to discourage you from taking on large losses but to always proceed with caution whenever you do.