Restoration work is a critical service that helps bring homes and businesses affected by water, fire, and other disasters to their pre-loss condition. However, there are different ways to determine the cost of restoration work depending on the nature of the project, the client’s needs, and the contractor’s own goals and priorities.
Careful consideration of these factors and selecting the most appropriate pricing structure can help restoration contractors improve their overhead and profit to build a successful and sustainable business. Here’s a brief overview of the different pricing structures used in restoration work.
Xactimate pricing is a software system used by insurance companies and contractors to estimate the cost of repairing or replacing property that has been damaged. It operates by using a database of pricing information to create an estimate based on the specific details of the damage.
Xactimate takes into account various factors such as the type and extent of damage, the materials required for repair or replacement, and the labor involved in completing the job. It then provides an estimated cost for the work based on average rates for labor and materials.
However, there is often a difference between Xactimate pricing and actual cost for restoration contractors because Xactimate uses averages and those averages are heavily influenced by the amount of pricing data insurance companies regularly upload. That’s why it’s important to review the price of line items and adjust accordingly, or upload custom pricing every time you create an invoice.
“Knowing how you can affect the pricing in your area by uploading your data correctly is one of the first steps you have to take to ensure you’re getting paid a fair price for the work you perform,” said Josh Ehmke, Co-founder and Owner of One Claim Solution.
Since Xactimate is managed and owned by the Insurance Services Office, contractors consistently uploading their data is the only way to influence the pricing to evolve. However, this practice has become a hot topic, especially for contractors who don’t bill Xactimate rates and therefore don’t use the software. While it’s true that contractors who don’t use Xactimate won’t be reflected in the software’s algorithm, it’s still crucial that contractors who are using Xactimate upload their custom pricing whenever creating an invoice.
“The only way to influence pricing to evolve is to get enough custom pricing in there from a volume perspective,” said Jeremy Traasdahl, Co-founder of One Claim Solution. “Although one contractor may not have much impact, if every contractor uploaded custom pricing every time, it would make a difference.”
Speaking of custom pricing, some situations may call for a more customized pricing structure than what is straight out of Xactimate. Custom Xactimate pricing refers to the process of creating a personalized estimate using the Xactimate software as a basis. It involves modifying the standard Xactimate pricing data to reflect the specific costs and pricing for a particular region or situation.
Custom Xactimate pricing is typically used when the standard Xactimate pricing does not accurately reflect the local market conditions or the specific requirements of a job. For instance, suppose a homeowner has a custom-built kitchen with high-end appliances, cabinets, and countertops. In that case, a restoration contractor may need to use custom Xactimate pricing to accurately estimate the cost of repairing or replacing these features. The custom pricing would take into account the specific brand, model, and style of the appliances, cabinets, and countertops to ensure the estimate reflects the actual cost of restoring the kitchen to its pre-loss condition.
Contractors may use different methods to price their services, even without the use of Xactimate or other software pricing tools. Here are some common pricing methods that contractors might use:
Regardless of the pricing method used, it’s important for the contractor to ensure their pricing is fair and reasonable based on the market rates and the specifics of the job. Clear communication with the client about pricing and any potential additional costs or fees is also essential for building trust and avoiding misunderstandings.
Choosing the right pricing strategy for your restoration business can have a significant impact on the operational costs and revenue generation of your restoration company in numerous ways including:
At One Claim Solution, we believe that contractors deserve fair compensation for their work, which is why we focus on helping them achieve the best possible return on their invoices. That’s why we start by looking at a restoration contractor’s invoices and pricing structure and provide coaching on custom pricing and comprehensive scope. If an insurance adjuster pushes back on the invoice, we have the legal expertise to cite case law that supports the pricing structure and commonly disputed line items. We pride ourselves on successfully advocating for restoration contractors on these fronts so they’re paid what they’re owed.
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