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Writing an estimate should be a blend of art and science. As an estimator you will utilize equal parts scientific and artistic approach if you want to set yourself apart from the status quo. The Science of EstimatingThe science of estimating includes growing your knowledge base so that you understand what you are bidding, how you will approach the project, and why you use certain items to construct your estimate. In the world of insurance claims mitigation and repairs, this often means learning to utilize estimating software such as Xactimate or Symbility. The science of estimating is all about growing your mindset for success. We have created a series on our podcast called The Xactimate Sessions which reviews some of the resources and approaches to estimating that can help you expand your knowledge base and elevate your skills as an insurance claims estimator. On The DYOJO Podcast we talk about learning to estimate from scratch, resources available from your Xactware license, and habits for improving your estimating game. The Art of EstimatingThe art of estimating includes those habits that will help you stand out from your competition. There is some science in the art form, whereby the habits both help you to be a more consistent estimator as well as methods for composing your estimate in a manner that is understood by insurance carriers, property damage customers, and your production teams that will carry out the restoration work. Many of these mindsets and habits for success are addressed in the book Be Intentional: Estimating by Jon Isaacson, The Intentional Restorer. Some of these elements include:
An Example From An Xactimate EstimateWhat's missing from this picture (Exhibit 1) of an insurance claim repairs estimate written in Xactimate?  Exhibit 1 - An Xactimate Estimate with No Structure or Headings I will start out by saying that this example above is not the worst estimate that I have seen. It is probably better than the status quo. Yet, it lacks a few simple things that can help it be better for clarifying the scope, negotiating the claim, expediting the contract, and delivering an executed product. The Importance of Estimating StructureThis estimate is not top-down or in sequence with the way the claim will be addressed. Without changing any of the line items, take a look at a picture of the claim (Exhibit 2) and see how an estimator might approach this scope with a bit more art and science.  Exhibit 2 - A Picture Of A Typical Property Insurance Claim Repair Where would you start? Most intentional restorers would start with jobsite prep, right? So PREP ITEMS will be our first estimate header and those line items would be in that first category. PREP ITEMS include:
As you compose your line items, you will either write your estimate in a sequence from the top down or the bottom up. You will create headers that give your estimates an aesthetic that leads the reviewer through a guided tour of the damages in each room. Your F9 notes and photos will supplement any line items that create questions for the carrier. - Be Intentional: Estimating, Chapter 17  Exhibit 3 - The Same Xactimate Estimate with Simple Headers The Advantage of Estimating ConsistencyAs you can see in Exhibit 3, I have made no line item changes to the prior Xactimate estimate other than to format the structure of the scope with headers. I believe that headers make the scope easier to read for all parties involved in the claim. Having a structure like this helps those who are responsible for thorough data capture at the loss site to consistently gather their documentation in a manner that will be in sync with how the scope will be composed. Estimating structure increases estimating consistency which decreases scope creep on the initial job walk. When you write in a consistent manner, you help yourself to reduce the chance of missed scope details. When you compose in a clear structure you are attempting to minimize the questions that a reviewer might ask. It can be frustrating when you put so much effort into an estimate and silly questions still get asked, but if you continue to work with those entities they will come to appreciate the level of detail that you provide. It is possible to stand out when composing estimates in Xactimate. It may not happen often, but it is always nice to hear someone say, “I really like how your estimate is structured. That’s the first estimate in a long time that had a flow to it that I could follow. You really are the best and there is no one like you. I hope your boss is paying you well because you are worth every cent and more. I want to be like you when I grow up.” - Be Intentional: Estimating by Jon Isaacson If there is enough interest and readers give feedback to the publisher, we may have a follow up discussing legitimate line items from Xactimate that should be included in this estimate. I think the missing items should be clear to most estimators, whether restorers, adjusters, or project managers, who consistently see projects through from start to completion or restoring a structure to resemble it's pre-loss conditions with materials of like kind and quality (aka The Standard). A few of those missing line items would include (but not limited to):
 Exhibit 4 - Helping You Rise Above The Status Quo In Estimating Better Insurance Claim Outcomes Through Better Estimating HabitsPoorly structured estimates show a lack of care and/or expertise. How often have you reviewed an estimate from an adjuster or a competitor that has little structure and is hard to follow? There are so many estimates that look like a grenade full of line items was thrown into the program and exploded. It’s like mystery night when someone extracts all the leftovers from the refrigerator and attempts to make something edible.
How many of you are reading this and know that those same poorly structured estimates are being composed by your hands or those of your team members? Most Xactimate professionals can see the telltale signs of an estimator who is either inexperienced or is lazy in their estimating habits:
If you are lost or this is the first time you are hearing of such things, please refer to another article I wrote titled The Three R’s of Mastering Xactimate for more guidance.
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Overhead and Profit (O&P) in Xactimate Line Items?Is it true, there is no O&P in the Xactimate repair line items? Xactiamte trainer and estimating guru, Ben Justesen, joined The DYOJO Podcast to discuss this topic and more. On Xactimate Sessions File 005, Ben responded, "This is a good question. Whether you realize it or not, it's a little bit loaded. When I when I think of overhead and profit (O&P). as a markup, that markup is not included in the Xactimate line items." The Difference Between Markup & Profit for Insurance Claims EstimatingWhat is markup? You have your line items coming together to form the cost of your scope. You add a markup, which in the insurance industry is often considered this arbitrary 10% overhead plus 10% profit (aka 10 and 10). This add-on to the end of your Xactimate estimate is your markup. Markup doesn't actually give you a guaranteed profit margin, which is what you actually take away from the project once you've paid for the work and the cost of goods sold. In simplified terms:
"However," remarks Mr. Justesen, "That markup is only a portion of the margin that you would need. So there is some margin in the line items themselves. But it's on a certain component. That's the labor component. There's are no margin on materials, there is no margin considered on equipment. So the margin that you have to consider is on the labor." in addition to running a multi-site restoration company out of Moses Lake, Washington, Ben also has created the Enlightened Restoration Solutions (ERS) course to help insurance claims estimators elevate their skill sets. He is the leading proponent for encouraging restorers to make their own pricelist within Xactimate and teaches them how to effectively do so. He reminds contractors that if all they rely upon is the 20% markup added to their estimate, they will struggle to cover their true overhead costs or meet their actual profit margin goals. If a restorer sticks to a strict 20% markup, they need to understand they are only netting a 16.67% margin. 20% Markup is only 16,67% Margin for Restoration EstimatesI will try to do this justice. This is something Ben justesen demonstrated when I attended his ERS course. If you watch the video you will notice that I am using the legal pad from the Law Offices of Edward H Cross, aka The Restoration Lawyer. Another resource like to shout out is The Book on Restoration Collections by Ed Cross. This book is available through their website and is designed to take the mystery out of collections for insurance claims.
Restoration professionals hear all the time that 20% overhead and profit (O&P) is more than enough. But, you and I know that this is actually only 16.67% margin. I will demonstrate how:
Why is this? That is because if we had an invoice from a subcontractor for $1,000.00 and the gracious insurance company allowed us to mark that invoice up by 20%, we would then be charging $1,200.00. From our $1,200.00 we pay our sub $1,000.00 and we are left with $200.00. Our $200.00 is only 16.67% of the $1,200.00 that we charged. So, not only did we NOT get at least 20% (which is far lower than ANY insurance company makes as an overhead and profit margin), we also likely had to wait on the money so the insurance and the client allowed us to finance the payment interest free while they waited to pay the $1,200.00 so that we could recoup what is left of our $200.00. Most restoration companies, most contractors, and most insurance companies have a higher profit margin goal than 20%. This markup can really drag those margins down on your individual projects and your overall goals for the year. If you're only getting a 20% markup on the front end, it can really skew your margin on the back end. I was invited to contribute to the September 2021 issue of Construction Business Owner Magazine which was dedicated to estimating in the skilled trades. My topic was about how setting clear objectives for estimators will lead to more consistent outcomes — not only in estimating, but also the production process. Consistently top-performing organizations take a holistic approach and view estimating as one process, among many, that leads to a successful outcome. So, whether you are a business owner, training manager, estimator or trades professional looking to develop this skill set, the following will provide three key ways to elevate the estimating process.
 NEW BOOK ANNOUNCEMENT: As this series develops, Gabriel J. Jones and I are transforming content from The Xactimate Sessions into a book that will release shortly after the podcast episodes are all released. This will be a great compliment to our first book, Be Intentional: Estimating. Please RSVP your copy today. This book is intended for:
The Xactimate Sessions from The DYOJO Podcast File 003 - Fake it until you Xactimate it The DYOJO Podcast Season 3, Episode 68 Guest: Nick Sharp, Consulting Specialist at Reets Drying Academy If you can't estimate, you become a trainer. Right? Nick Sharp joins us on The DYOJO Podcast to share his experiences from cleaning carpets to learning to fake it until he made it as a reconstruction estimator. Nick shares how his positive mindset and consistent work ethic helped him to progress in his property restoration career. As Nick says, "I never went into anything thinking that I can't do this." This week, on The Xactimate Sessions from The DYOJO Podcast, we sit down to discuss Xactimate with a restorer-turned estimator who transformed into a restoration industry trainer. Nick shares a few tips for aspiring professionals and growth-minded estimators, including:
PODCAST SPONSOR: The DYOJO Podcast is sponsored by Advocate Claim Service (ACS), "Where you can find solutions to claims that are causing you anxiety." David Princeton and his team are ready to help you navigate doubtful and disputed insurance claims. If you are a business owner, manager, or intentional restorer, you will appreciate Nick's insights as well as this key question, "Why are we teaching estimators the program (IE Xactimate) instead of what is going to be profitable?" We supplement our discussion with Nick with clips and comments from many sources including
NEW BOOK ANNOUNCEMENT: As this series develops, Gabriel J. Jones and I are transforming content from The Xactimate Sessions into a book that will release shortly after the podcast episodes are all released. This will be a great compliment to our first book, Be Intentional: Estimating. Please RSVP your copy today. This book is intended for:
DEALS FROM THE DYOJO: The DYOJO collaboration with DocuSketch offering a $200 discount on the initial hardware package to members of The DYOJO Nation who use the custom code "DS-DYOJO1". The DYOJO Podcast, the official home of the DYOJO Nation as so declared by The Global Watchdog, Pete Consigli, exists to help intentional restorers to shorten their DANG learning curve for personal and professional development. How to go toe-to-toe with a contractor and win every time during insurance claims negotiations8/2/2021 Jon Isaacson, The Intentional Restorer, was invited to present a breakout session for the 2021 IA Path Virtual Job Fair. What is the IA Path Adjuster Job Fair? The IA Path Adjuster Job Fair is an online platform for adjusters and companies looking for adjusters to find each other. This is adjuster-specific networking designed for insurance adjusters and those looking to recruit and hire insurance adjusters. https://virtual.adjusterjobfair.com This is a twice-annual event. Dates for the two upcoming events are,
 This event was created by Chris Stanley and his team. Chris was a guest on The DYOJO Podcast Episode 38 where, among other topics, we discussed how to work with an insurance adjuster's "box". Chris explained his process for working insurance claims in the automobile wing and how those principles can apply to property insurance as well. For this presentation, How To Go Toe-To-Toe With A Contractor And Win Every Time During Insurance Claim Negotiations, we played off of the title of a presentation that Bill Wilson, author of When Words Collide, used to use to share his process for doubtful and disputed claims. We had the pleasure of diving into this topic with Bill and David Princeton (Advocate Claim Service), on The DYOJO Podcast Episode 48. Sample dialogue from this presentation: In insurance work, where Xactimate is the common estimating platform, the first step is to establish the agreed-upon scope (based on data capture) and then build an estimate that reflects this approach (data input). Thorough data capture leads to accurate data input. These are also fundamental elements of a contract. Insurance is a bit unique in this aspect, where the scope is negotiated between the contractor and the insurance carrier which establishes the agreed-upon scope whereby the contract between the customer and the contractor will be created. The primary goal (aka the standard) for insurance claims repairs is: To restore the property to resemble pre-loss conditions, no more and no less. This is the standard by which all efforts should be judged. This standard is critical to remember during all phases and starts with the estimating process. The property restoration estimator, insurance adjuster, and homeowner/insured should have a “meeting of the minds” to confirm the scope of work relevant to that standard. The DYOJO Way of the Intentional Adjuster: Use this standard as your opening statement to the client as well as your introduction to the contractor, take the lead on the conversation and establish the process for your discussions. (Read more on The Standard) In insurance work, the agreed scope of work is a foundational element. While many people focus on the price, in insurance the standard estimating tool is called Xactimate which helps create a common language between contractors and carriers. Xactimate estimates are constructed based upon quantities and are composed line by line and room by room. While Xactimate is often over-utilized as a guide for the insurance claims repair process, it is also blamed when either party doesn’t agree with the output. Thorough data capture leads to accurate data input. The software’s role should be understood as communicating a fair and reasonable price in relationship to the scope of work necessary: To restore the property to resemble pre-loss conditions, no more and no less. The DYOJO Podcast airs Thursdays at 9am PST, you can WATCH on YouTube or LISTEN on Spotify. The podcast for the intentional restorer, helping you shorten your DANG learning curve for personal and professional development. thedyojo.com/listen |
AuthorJon Isaacson, The Intentional Restorer, is a 19 year veteran of the property restoration industry and a business coach through his organization The DYOJO. Archives
November 2021
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