|> E&O/GL Insurance for Home Inspectors
Competitive Rates, Broad Coverage, Free Risk Management, online inspection
support for tough questions, discounts on education and more…
Professional Coverage, Competitive Pricing
Shop OREP today!
The Rise of Multi-Million Dollar Inspection Firms
By Kendra Budd, Editor
The home inspection profession is still relatively young. Beginning as a cottage industry in the late 1960s, it wasn’t until 1985 that Texas became the first state to license home inspectors (See History of Home Inspection).
During these early decades of the profession, the vast majority of home inspectors were one-person operations (solopreneurs). Very few multi-inspector firms existed.
Even rarer was a home inspection firm earning over one million dollars in revenue. In the 1990s, there were less than a dozen home inspection firms that were breaking this revenue band.
In the last ten to 15 years, however, the competitive landscape has changed rapidly. The number of “million-dollar revenue” home inspection firms has exploded. Today, industry insiders now estimate there are over 200 firms earning over one million dollars in revenue annually and that number is increasing every year.
Not only are we seeing an exponential increase in million-dollar inspection firms, but we’re also seeing an increase in private equity groups who aspire to buy up dozens of the larger inspection firms and build a “mega-firm.”
This shift signals a certain maturation of the profession. The development of many service and trade professions have all followed a particular arc—Introduction, Growth, Maturity, Consolidation, and on it goes (this is classic Industry Life Cycle).
This trajectory is not new. People often draw comparisons between the home inspection profession and pest control operators. Although it has a much longer, storied history, the pest control profession began much like home inspection—with local, small business owner-operators.
Over time, entrepreneurial-minded operators built larger and larger pest control firms. Then private equity began buying up these firms and building “mega-firms.” Today, the five largest pest control companies bill over $7.2 billion in revenue and manage the lion’s share of all pest control business in the United States. Smaller, owner-operated pest control businesses still exist and some do well, but the space is dominated by the Rollins and Terminix’s of the industry. (Note: An obvious difference between these professions is the recurring revenue model of pest control services.)
Will the inspection profession follow a similar trajectory?
Mike Crow, founder of Coach Blueprint and the “Father of Home Inspector Marketing,” has built, not one, but two different million-dollar-revenue home inspection firms and has a unique insight into how the competitive landscape is changing and why.
For starters, the type of people driven to run their own business, even as a solopreneur, are rare. Crow says that 95 percent of our industry doesn’t want to be in business for themselves at all. They’d rather just be inspectors. And of the five percent who actually do want to own their own business, it takes an even more unique individual to want to build a larger business, according to Crow.
“Some people are company builders like myself. I wanted to build a business that not only could take care of my family and myself, but where I wouldn’t have to be out there every single day doing the home inspections myself. There are so many home inspectors in business today whose business would be incredibly hurt if they took 30 days off—whether they wanted to take a vacation or for health reasons. But the reality is that the majority of home inspector business owners just want to be a solopreneur, or maybe have one or two inspectors,” Crow says.
In Crow’s coaching groups, Crow’s goal is to coach the solopreneur inspector to reach $300,000 in revenue. Crow calls inspectors who reach this level an “Ironman” (or woman). “There’s nothing wrong with being a solopreneur. We coach many single-person operators or firms with just one or two inspectors. But you still need to maximize your business as much as possible. Lots of people want to say they made $150,000 as a solopreneur, but that’s revenue. Even with no employees, you have to factor in expenses, gas, tools, insurance, and so much more. These are the kinds of things that we focus on in our coaching,” Crow reports.
In terms of how the profession is changing, Crow says that very business-minded entrepreneurs have been building their businesses in the inspection space over the last two decades. “These are folks that have been very focused on building the business instead of just being a technician. Working on their business, not in their business (as Michael Gerber wrote in The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It.) The shift from running a home inspection business as a home inspector technician versus running a home inspection business as a business owner who wants to expand, hire more people, and grow the business into something bigger. That’s what’s changing the game over the last decade,” suggests Crow.
Inspection training schools have also shifted their focus. “Schools used to teach new home inspectors from the standpoint of going into business for yourself.” Here’s how you need to grow your business. Fewer schools are taking that approach today. Home inspectors are getting less business and marketing education and are being trained to be just inspectors,” Crow observes.
As the founder of the Millionaire Inspection Community, later renamed Mastermind Inspection Community (MIC), Crow was one of the first business coaches and visionaries who helped home inspectors focus on putting the processes in place to really scale their businesses they wanted to be a solopreneur or a multi-inspector firm. Crow says he has personally coached over 100 inspector-business-owners to reach over one million dollars in revenue. (Visit www.coachblueprint.com to learn about Mike Crow’s coaching programs.)
(story continues below)
Of course, now that several hundred “million-dollar-revenue” inspection firms exist, more private equity-backed groups are emerging to buy up the larger firms and build a mega-firm. Crow has direct experience with being acquired by such a group. Before founding TexInspec, Crow’s current home inspection firm, which earns over a million in revenue, Crow built Affordable Inspections, Inc., which grossed nearly two million in revenue, which he sold to US Inspect in the year 2000.
US Inspect was one of the first mega-firms that ambitiously moved to acquire home inspection firms. While US Inspect likely has not grown quite as big as they’d originally hoped, public information reveals they currently employ over 250 people and their website boasts over three million inspections in the last 30 years. That’s $1.2 billion in revenue at $400 per inspection; or an average of $40 million in revenue a year.
“In every industry, as it matures, somebody always tries to roll up (buy) the industry. When I first started, if you go back to real estate, there were not any really big real estate offices. Then came Century 21, Coldwell Banker, Better Homes, and eventually Keller Williams—each building up a huge organization. In the home inspection industry, it has been tried three or four times. Most of the companies that are rolling up are after the data. They’re not actually after the home inspections themselves,” says Crow.
Today, there’s a new kid (private equity group) on the block. LaunchPad Home Group has begun buying up some of the largest home inspection firms across the United States. They are rumored to currently have over 50 million dollars in revenue and are shooting to raise that number to 100 million dollars shortly.
Working RE Home Inspector magazine sat down with LaunchPad’s Chief Executive Officer (CEO) Scott Swayze to discuss their business model and learn more about their vision in the home inspection space.
LaunchPad has been in the home inspection space for less than a year. It was created with the first acquisition by their equity partner RFE Investments and Max Home Inspections—which Swayze used to be the CEO of before LaunchPad.
In terms of the growth of the inspection profession, Swayze echoes some of Crow’s comments with his own twist. For Swayze, it all comes down to growth of the workforce available to inspection firms.
Specifically, younger home inspectors aren’t as inclined to open up “one-man” shops anymore. “As companies have gotten bigger and the workforce has gotten a bit younger, some have found that it’s a little more attractive to work for a multi-inspector firm where they can get access to things like benefits, paid time off, health insurance, etc. That’s only possible with companies that are a little bit larger in size. So, as more home inspectors complete training, they’re drawn to those larger companies. This growth in the workforce is why we’re seeing more multi-inspection firms pop up that are doing revenue numbers in excess of one million dollars,” Swayze theorizes.
Time has helped as well, as these inspector entrepreneurs have been working diligently over the last two decades to develop systems and processes that allow them to scale. “The profession has reached its current level of sophistication because the business owners have been working through their growing pains. Going from a successful solopreneur to a multimillion-dollar inspection business comes with a whole new set of challenges; then you go to five million in revenue, then to ten million in revenue. Each milestone requires solving a different set of problems,” says Swayze.
Regarding what makes LaunchPad unique, Swayze says its business model is different from other private equity firms in that it is led by a home inspector (Swayze himself) and is built around supporting each LaunchPad location. “Our model is predicated around LaunchPad—the support group for our brand partners. We handle everything from finance, human resources, client success, IT and systems integration. We are fully dedicated to our partner’s success,” Swayze reports.
Swayze believes LaunchPad will bridge the relationship between home inspectors and homeowners by creating lifelong connections. LaunchPad’s vision is one-part concierge service and one-part a network of useful tools and resources for homeowners throughout the home life cycle. For example, LaunchPad pairs homeowners with contractors for repairs. It provides a lifetime support network that a homeowner can call anytime and connect with a licensed inspector to walk them through issues.
“From the onset of the inspection throughout the entire journey of ownership, we want to create lifelong relationships by simplifying the process,” Swayze elaborates.
To-date, LaunchPad has acquired some of the largest firms in the U.S., including The Inspectagator, Residential Inspector of America (RIA), and All-Pro Home Inspections (API). They continue to grow rapidly through acquisitions. Swayze explains that their acquisition strategy is built around what Swayze calls “anchors”—which are just larger home inspection companies that make three million plus dollars in annualized revenue. “Then as we do our acquisitions, or “tuck-ins” as we call them, we begin to fold them into the ecosystem of these anchors which have a lot of systems, resources, and talent, so they’re able to start leveraging out those processes across a broader scale of inspection companies that we’re able to bring in—all the while being supported by LaunchPad,” says Swayze.
(story continues below)
Taking Back “Our” Business
The growth of large, dominant inspection firms and new venture-backed mega-firms is obviously a concern for some home inspectors. Many inspectors see the deep-pocketed mega-firms as a threat to the home inspection industry. One of these inspectors is Ian Robertson, co-owner of Inspector Toolbelt Home Inspection software, owner of Full View Home Inspector Marketing, and Host of Inspector Toolbelt Talk—all the while owning three home inspection companies.
Robertson has concerns over the way that mega-firms may affect the customer experience and the quality of services provided. “The market is basically trying to be turned into Walmart or McDonald’s by large companies. These mega-firms are going to try to turn out what people think they want. It is going to be just like Walmart, where you go in and get a lower quality product because it is cheaper, and without thinking about the actual quality. You only choose it for the sake of convenience and price,” Robertson says.
In fact, Robertson goes as far as to say that, if successful, these mega-firms will turn home inspectors into a commodity—comparing it to what appraisers are like today. “Take appraisers as an example. Homeowners used to think about who they hired, who was the best appraiser, and who had a clear report. Now, most people don’t even know who their appraiser is. The appraiser shows up, does his thing, and then moves on. It’s a commoditized aspect of the real estate industry. That’s what these larger companies are trying to do with the home inspection industry too,” Robertson explains.
According to Robertson, the result will be fee pressure for home inspectors and lower standards. “What we’re going to see is lower standards so that the homeowners get a lower fee; this is going to push good home inspectors out of the industry and leave the ones willing to do more work for a lot less pay. Inspectors who have been working since the 80s and know the area like the back of their hands, for example, are suddenly going to be faced with these large companies, which come in and put a bunch of new inspectors with little experience in their path. The only one who benefits is the large corporation, not the actual inspectors. It is ultimately going to hurt consumers, which will hurt the industry,” warns Robertson.
To those home inspectors worried about the growth of LaunchPad, Swayze says there’s room for everyone. “We’re not out here to take out anybody, and we aren’t engaging in conversations unless someone is actively looking. There’s plenty of room in the market, and independent inspectors will always have a place in this industry. We’re here to provide opportunities and elevate the entire industry. Our people are our priority and at the core of everything we do. We have not lost sight of what is truly important: ensuring we provide an exceptional experience on every inspection without exception,” Swayze argues.
For those inspectors worried about larger inspection firms, especially mega-firms such as LaunchPad, Roberts reminds us that there is still a place for the independent inspector and believes inspectors should take pride in being independently owned during this time. “We are not a large corporation. We’re your neighbors. Will these companies get a big share of the market? Sure. But that doesn’t mean they have all of it. Most people will pay more for the independent guy in my experience; that’s a great selling point,” Roberts argues.
Crow’s advice to home inspector business owners, whether you want to succeed as a solopreneur or build a larger firm, is to learn from your peers and those who have gone before you. “Be successful and be around those that are successful” is a motto of Crow’s, which has proved to be true for both him and the inspectors he’s coached. “The best defense a home inspector can have is to build their business on a strong foundation, that means strong marketing, processes, systems, and if you make the decision to take that step, hiring the right people and training them so you can scale your business,” says Crow.
As for LaunchPad, will they succeed in building a $100 million, $200 million, or $500 million revenue inspection firm? We’ll just have to wait and see.
One thing seems certain: the home inspection profession will continue to grow and we will likely see more large-scale inspection firms level up every year. The upside to that is that our profession is growing—and growing up. Stay safe out there!
About the Author
Kendra Budd is the Editor of Working RE Magazine and Marketing Coordinator for OREP Insurance. She graduated with a BA in Theatre and English from Western Washington University, and with an MFA in Creative Writing from Full Sail University. She is currently based in Seattle, WA.
OREP Insurance Services, LLC. Calif. License #0K99465