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How to Start a Multi-Inspector Firm
by Ian Robertson, Inspector Toolbelt
Let’s face it, starting a multi-inspector firm has at least crossed the mind of most (if not all) home inspectors. Whether we started out looking for something new, a second career, following in the family business, or however else—we likely have thought about it. But the question is—how do you do it?
Many of us may be great home inspectors but simply lack experience in going about something like starting a multi-inspector firm. Well, I have started three of them, and I will tell you I was nervous every time—but all three inspection companies are successful today.
So how did we go about it? Well, be prepared—there is going to be a lot of information below, because there are a lot of facets to starting a multi-inspector firm. But while there is a lot to learn, it is likely not as hard as you may think. So first of all, let’s talk about the roadblocks and how to overcome them. Then we will talk about the nuts and bolts of things:
1. Overcoming the initial obstacles.
2. Having the proper company structure.
3. How/how much to pay your inspectors.
4. How to lead and keep your inspectors from leaving.
5. Transition from “home inspector” to “business owner and manager.”
There are a lot of “obstacles” to overcome to transition from a single inspector to a multi-inspector firm. But obstacles are just roadblocks to keep the unambitious from crowding out your success. If you want it badly enough, you can overcome any obstacle. The biggest roadblocks to a multi-inspector firm mostly come down to the following.
Fear & Money: Fear is probably the biggest factor. Having enough work—making sure you have enough inspections for another inspector or two. Having enough capital is another. First, let’s talk about fear. Fear is one of the biggest reasons people don’t do things in life. People are anxious about money, failure, people judging them, and what could happen. You know what though, if you are not at least slightly uncomfortable with something, you probably are not pushing hard enough. The best opportunities in life are the ones where fear stops many other people.
Being anxious is basically worrying about things that could happen—but that may never happen. But what if you failed? So what… Thomas Edison didn’t invent the light bulb the first time. Walt Disney tanked on several ventures at first. The first American colonies all failed at first. Imagine if they had all given up. Don’t give in to fear—face it, look for it, and beat the tar out of it. Fear has no place in a multi-inspector firm.
Is It Time?
Now that I am done with my soapbox speech about fear, let’s talk about having enough work. Recently, a home inspector called me and said: “I am really busy and want to hire another inspector, how do I do that?” Whoa Nelly, hang on a second, I said. Just going out and hiring another inspector without planning is no way to go about it. So, I started asking questions: how many inspections did you do this year so far? Have you been turning down inspections? If so, how many did you turn down this month? How about how many you turned down this year?
Those questions are important because it turns out he wasn’t ready. He had only turned down a couple of inspections recently and was really busy—because it was the busy season. He hadn’t done as many inspections as he had thought; in fact, he didn’t even know how many he had done. Don’t let the “busy season fever” get to you. Step back and look at the numbers. In that vein, keep track of growth, how many inspections you do, how many you turn down, etc.
From my experience, once you get to at least 400–500 inspections a year is when you can take on another inspector. Some may disagree but it has always worked for me. The only exception to that is if you are doing high dollar inspections. We hired a second inspector once because our average inspection fee was almost $1,000 (that company does a lot of specialty inspections), so that was an exception. If you price your services too low, then you will need to do more.
You should really step back and look at your pricing before you ever hire a new inspector. Why do we say that? Well, imagine that you are charging $300 per inspection (way too low by the way). But if you do 500 inspections a year, your gross revenue is $150,000. So instead of hiring another home inspector at that point, why not raise your prices? Let’s say you raised your prices slowly up to $400 per inspection. Even if you lost 100 inspections a year because of your price increase, you would make $10,000 more a year and work less. That would also set you up to make more when you hire a new inspector. However you cut it, be sure that you have enough inspections AND revenue to make it profitable to hire another inspector.
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Now let’s talk about having enough capital (i.e. money). This is important because once you have other inspectors relying on you for a living, you have an obligation. So if you are living each week by the seat of your pants, then you are probably not in a position to start a multi-inspector firm. So what do you do? Take out of every inspection you perform about 20 percent and put it in a high yield online savings account. There are several like Marcus, HSBC, Alliant, or whomever you prefer. Then save up AT LEAST six months’ worth of living expenses. This way you are covered if anything ever happens and work runs dry for a little bit. It’s hard to do, and it takes time, but having that cash there is a very important safety net. Think of not having it and then having to let an inspector go after spending so much time and money on training them—that is much more expensive than not having that money there.
So, once you have enough work, your prices are right, you aren’t afraid of the mountain ahead of you, and you have the capital for it—what next? Let’s get into the nuts and bolts of starting a multi-inspector firm.
How to Start a Multi-Inspector Firm
Here are some of the things you need to start a successful multi-inspector firm. You will find a lot of different opinions on this, and a lot of different methods, but this has always worked for us. We will talk about the following points:
I am a “go big or go home” kind of guy, but there is a time and place for that—especially when it comes to business. The first person I hired was not an inspector, and it was the smartest thing I ever did. In my area, almost everyone gets a radon test. The problem is that driving around and picking up those tests were taking hours a week—gas, phone calls, coordinating with agents and homeowners—a huge time eater and was costing me inspection time slots. So I hired someone to pick up my radon tests—and it was awesome! So, I did the same thing for water test. Then I realized I could train a guy to inspect septic systems, and another guy for the pest inspection, and so on.
There is an inspector in my area who does three inspections a day and writes the reports in the evening. He hired a guy to drive him around during the busy season. He gets his ladders out, sets things up, and more. Now he writes his reports in the passenger seat and does four inspections a day. He pays the person a couple of hundred bucks a day, but he gets a full fourth home inspection in at $550 and is home earlier with his reports done—so a win-win.
Just because you want to have a full-time home inspector right away does not mean that it will make you the most money. Do you do septic inspections? Hire a guy to dig the hole for you while you do the home inspection. Hire an assistant to check every outlet, window and door while you focus on the bigger stuff. There are a few specific benefits to this method.
1. You get to try guys out and train them before they get put on as full inspectors.
2. You compartmentalize what they do—so you don’t have one guy who knows every aspect of what you do. This makes them less likely to leave to start an inspection company of their own after you’ve trained them.
3. It’s quite a bit less pressure. Going back to the whole “fear” thing, if you are nervous about hiring another inspector, this is a great way to get your feet wet.
Paying Your Inspectors
This is probably the most asked question, and everyone does it differently. There are basically two ways to go about it—1099 (as a subcontractor) or an “employee.” Which one you choose is up to you, but consider a few things.
Subcontractors: We went to a consultant for advice and she said there are certain criteria for hiring inspectors as subcontractors. First, you cannot provide their tools or uniforms—they need to buy those themselves. Also, you cannot be their sole source of income—they need to have income from somewhere else to show that they are a contractor and not an employee. Also, while not “required,” having disability insurance for them is important, as well as making sure they are covered under your E&O insurance. It is also good to make sure your client knows you use subcontractors in your agreement somewhere. You would pay a subcontractor by the inspection and not hourly according to the consultant.
Employee: While this will be shorter than the subcontractor section, it is actually more complicated in a lot of ways. Having an employee requires you to file your taxes differently, withhold taxes for your employees, and have additional insurances—though there are services that make this easy for you. This would be the right path for you if you want to pay hourly though, as the subcontractor really shouldn’t be paid hourly.
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Payment to your employee-inspector depends a lot on their skill level and what they do. Are they first-year employees (not subcontractors)? Then $15 per hour should suffice depending on where you live. Are they your team leader? Then triple that would be more like it, along with a small profit share. For instance, if your lead inspector helps you get over $500,000 that year, he gets a cut of everything above that. If you have employees, the pay is pretty straightforward.
Paying your inspectors as contractors is relatively easy as well. A starting guy in his first year will usually get 25 percent of the inspection fee. So, at $400 per inspection, that’s $100. The average home inspector with 5–10 years under his belt will typically get a 50/50 split. After that, pay them more the better they do. For instance, I give a $50 bonus if they get a glowing review, or if they are requested specifically by an agent. Make it worth their time to make you look good.
You also need to increase their percentage. I have an inspector who I pay 75% percent to—I almost break even on him. But I don’t care because he brings way more value by running things, taking care of problems, and making us look great. Also, I don’t want to lose him and have to compete with him, so I keep him happy where he is. Keep your inspectors happy by treating them right, paying them well, and making them feel valued. Splurge for lunch, take a company trip, and hang out with them on the weekends. In this way, you become their leader and not just a boss, and you will keep better inspectors this way.
Back Office Stuff
I knew an inspector who tried to start a multi-inspector firm with him serving as the lead inspector, answering his own phones, writing the reports on old software, and storing his documents in Dropbox. Needless to say, that didn’t last long. The bigger you grow, the more you need your stuff in order. You need two things—administrative software (like Inspector Toolbelt) and office people.
You need a way to easily manage your contacts, store and send documents, schedule inspections and keep track of your calendar. If you don’t have software that does that for you, mistakes happen and things get pretty crazy pretty quickly. I know this part of the story seems self-serving but it’s true.
As for “staff,” you don’t really need to hire a full-time office person, as there are many ways around that. At first, you can have your significant other or a relative answer phones and schedule for you. Or a better option is a remote office/call center. Whatever you choose, answering your own phones is not the way to go. Some inspectors say that it costs too much to use one. But let’s be honest, if you can’t afford to pay someone to answer your phones, do you really have the capital and work volume to have a multi-inspector firm? You can disagree with that comment, but you need to spend money to make money.
Do a Test: Spend the money to hire a call center or person to book your inspections and use Inspector Toolbelt’s online scheduling and administrative software for three months and then compare your sales from those three months to the same three-month time period the year before. You will likely be pleasantly surprised.
Hiring the Right People
Not everyone is cut out to be a home inspector, so be careful who you hitch your horse to. I have always found that contractors in their 40s–60s usually work out well. That is young enough to still get around and old enough to command a room and get instant respect. But know that you will need to “kiss a few frogs before you find a prince,” so to speak.
I have never looked for the most knowledgeable person to hire as a home inspector, but instead, looked for ones who had awesome people skills and were honest. I have always said that I can teach anyone about a house if given enough time, but I can’t teach someone to have people skills or to be honest. We home inspectors are a bridge between people and the technical parts of their home, so people skills are very important.
The last point I will make about hiring the right people is that I don’t think about it as a financial decision. I know that sounds weird, but I don’t. When you say to yourself that you need to hire this guy because you are busy, step back and ask—is he a good fit? Hiring a bad egg because you are busy will cost you more than you will ever know. It’s better to lose opportunities and inspections than to hire the wrong guy.
You are building a team, so you need to be close to that team. Everyone I have ever hired is someone I would/do hang out with. We do things together, grab lunch if we are inspecting in the same area, and we watch each other’s backs. Many big companies force their employees to do “team building exercises” to make them like and trust each other—so why not hire people who you can learn to trust and know would have your back in the first place. On that note—be careful about hiring existing friends and family, as the dynamics can be a bit awkward if things go south.
Once you have capital, enough work, the right people and your “office” and E&O insurance are in place, you are good to go. In reality, owning a multi-inspector firm doesn’t change much else in your life as a home inspector. You still need to market your services, build relationships, and provide a great home inspection. But you will need to transition from a home inspector to leader. You need to take the bull by the horns and lead your company. If you look after your inspectors, they will be loyal to you. Don’t be afraid of stepping into the new realm of being a multi-inspector firm owner. Embrace the challenge and enjoy it.
About the Author
Ian Robertson is a veteran home inspector, owner of three inspection companies, owner of Full View Home Inspector Marketing, and one of the founders of Inspector Toolbelt. Inspector Toolbelt is simple administrative and scheduling software for home inspectors that makes running your inspection business easy and automated.
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by Paul Taylor
I enjoyed your article and thought it was every informative. Helped me to understand where I am with my business and ways to better use my time. Picking up radon in my state, Maine, is a drain on my time. It is nothing to travel an hour to do a home inspection. My question is can I use inspector Tool Belt with another credit card processor? Does it have to be Square? Thanks again for all the information.-