So you’ve decided to become a home inspector, have picked out a great name for your company, and are ready to open your own business. Congratulations!
Are you ready for this?
At the risk of raining on your parade, you should know that, according to March 2020 data from the Bureau of Labor Statistics, about 20% of businesses failed within their first year, and only 50% made it to their fifth anniversary.
And there’s some evidence that the odds could be even slightly worse for home inspection businesses. One trainer found that, one year after students completed their coursework, about 60% were not in business. They either closed up shop or never got started in the first place.
Why is it so difficult to succeed as a home inspector? Part of the problem may be that home inspectors are very good at their work but not that great at running a business. You can know absolutely everything there is to know about electrical panels and floor joists, but without a basic grasp of certain business fundamentals, you could find yourself underwater quickly.
So let’s fix that. Here’s what you need to know about making smart business decisions right out of the gate to get your home inspection company on solid footing.
Have an income backup plan
It takes time to grow a business. At first, a good deal of your time and energy will be spent on everything but inspecting houses: choosing equipment, making connections, building a website, and making real estate office presentations. Very, very few inspectors are able to fill up their schedules the day they open up shop.
In the meantime, you’ll still need to pay your rent and eat. So what’s your plan for income while your business ramps up?
There are a few ways to make sure you have enough cash to live on at first. First, you can use your savings as a cushion, dipping into this cash to make up for lack of profits in the early months and years of your business. Ideally, this means pulling from mad money you have stashed somewhere and not your retirement savings, which you’ll need for the future. In general, you should have at least a year’s worth of living expenses available to be safe and give yourself time to make a real go of your new venture.
If you don’t have adequate savings to see you through, you could build your home inspection business as a side venture while staying in your regular job to guarantee income. This will require flexibility with your schedule and a willingness to work long hours at first, but it’s also a smart way to test the waters before diving into your new business head first. If you have a supportive spouse or partner, you may have more leeway to cut back on your old job while relying on their income to see you through as well.
There’s no “right” answer here, but there is a wrong one: not planning how you’ll make ends meet for the first year or two of your new business venture.
Know how to fund startup costs
Starting a home inspection business is appealing to many contractors and tradespeople because they already know so much about the process of building homes. While your knowledge base is deep, it takes more than a clipboard and a flashlight to be competitive in today’s home inspection market.
Modern home inspectors rely on some serious equipment to get the job done right. Some of these tools are expensive and require a hefty investment: think telescoping ladders, infrared cameras, drones, and radon detectors.
In addition to equipment, you’ll also need a vehicle (and all the expenses that go along with it), a business phone, website, marketing materials, and office basics like a computer and printer. If you plan to work outside of your home, you’ll also need to rent office space and furniture.
All of this costs money, and your biggest outlay will be upfront. How will you cover it?
Again, you may have savings to dip into, which is great. If not, you’ll need to plan your financing carefully. You could use your credit card, but you’ll usually get a better deal from the bank or from government-sponsored small business loans. Shop around for low interest rates and plan carefully so you only borrow what you need.
Cover yourself for liability
One of the biggest mistakes a new home inspector can make is to ignore the need for business insurance. Even the most thorough inspectors in the world are human, and mistakes can happen. When they do, you could be on the hook for damages, especially if you missed something big. Unhappy homeowners could sue you to try to recover their losses.
The best way to protect yourself is to purchase liability insurance for your business. You’ll want to make sure that your policy covers errors and omissions, or E&O. If you shop around, you can find an affordable policy. You may never need to use it, but having it could protect you from losing thousands of dollars — the kind of money that could tank your whole business.
For extra protection, you’ll also want to develop clear contracts with your clients. This will help spell out exactly what your responsibilities are and help set your clients’ expectations. Your contract may also include specific language about liability as well.
Pro Tip: The way you structure your business can also help you avoid losing your shirt over a liability issue. Forming an LLC instead of operating as a sole proprietor can protect your personal assets in the event of a lawsuit.
Commit to a marketing plan
The Achilles’ heel of many home inspection businesses? Marketing. Most home inspectors know a lot about houses but not much at all about getting their business in the public’s eye — and keeping it there. But marketing is absolutely critical to bring clients into your business so you can remain profitable.
Many home inspection businesses fail simply because inspectors don’t know how to drum up business — and don’t realize that a good deal of their time and effort will be spent on this task. The Golden Rule of Marketing? It’s a process, and it’s never done.
This means that you will have to keep up your marketing efforts regularly. Plan to set aside a certain amount of time each week to devote to getting your name out there. There are so many ways to do this. For home inspectors, some of the most popular are:
- A search-optimized website
- Internet advertising, particular through search engines like Google
- Social media accounts and regular posts on Facebook, Twitter, and Instagram
- Direct mailers
- Networking with real estate agents, including office visits with presentations, handouts, and branded swag
- Cold calls
- Email marketing
Once you choose which methods of promoting your business you’ll employ, you’ll need to keep up with them regularly. That could mean posting to Facebook and Twitter every Tuesday and Friday, calling real estate agents on Wednesdays, and updating your website and emails with special offers once each month.
To keep it all organized, it helps to add your marketing activities to your schedule at set times. Treat this as just as important a part of your day as inspections themselves, and you’ll set yourself up for success.
Keep careful records
Running a business requires getting a handle on lots and lots of paperwork. In addition to writing thorough inspection reports, you’ll need a way to file these reports to track your customers — and your contact with the real estate agents who sent them your way.
You’ll also need a way to easily schedule appointments and track payments and invoicing. Even if you hire an accountant to take care of your bookkeeping and tax filing, you’ll still need a system for gathering receipts and other records to make his or her job easier at the end of the year.
Fortunately, there’s great business software out there that helps home inspectors do it all. HomeGauge has you covered with the best inspection software in the business, so you can manage and track all of your appointments, build easy-to-read reports, and accept payments all in one handy interface.
Once you tame the paperwork, you’ll have all the information you need to keep things running smoothly. And with the time you save, you’ll be able to invest more of your efforts into expanding your business, including all that marketing and networking to help you grow.
Want to learn more about how HomeGauge helps home inspectors make it through the early years to develop a thriving business? Get 90% off a HomeGauge subscription for 90 days to help you envision what your new business can look like in action. We’re also here to help with plenty of free resources to help grow your home inspection business.