“How to RECAPTURE a Few Billion Dollars” - By Larry Burtis

Bradley Jacobs

Chairman and CEO at QXO, Inc.

Congratulations on your acquisition of Beacon Building Products    

Until you institute the storm damage restoration contractor training program as I have outlined it below however, QXO will never be able to recapture the hundreds of millions to billions of dollars in missed building product sales revenue that would otherwise make it possible for QXO to truly achieve maximum TSR for the investors who have placed their trust in and their money with your new company - period.  I barely made it through high school and even I understand why, as did the owner of a London trained, Boston based investment firm leader I recently spoke with who clearly understood that the solution to the problem was clearly...

"Hiding in plain sight"...

A number of years ago, Allstate Insurance Company President Tom Wilson made the following comment at a company shareholder meeting; “Our obligation is to earn a return for our shareholders”.  At the time, Allstate still owed a $12,000 balance to one of my insured property owner customers to cover the remaining cost of roofing and siding repair work that his Allstate claims reps had been refusing to pay.  $3,780 of that remaining balance was needed to cover the cost of the additional building materials.  

After reading Wilson’s shareholder comment, I sent him a personal letter that reminded him that, along with having an obligation to Allstate shareholders, Allstate also had an obligation to their insured property owner customers to make sure that their claims were fairly and fully paid.  Soon after receiving my letter, Wilson made sure that my customer’s remaining $12,000 insurance claim balance was paid in full.

In regards to Wilson’s shareholder comment, what Allstate shareholders did not know, was that, while those shareholders believed their TSR’s were sufficient, they really were not.  Due to a misunderstanding of the market and lack of proper associate and third party agency training, Allstate shareholder value was, in fact, substantially below what it should have been.  

The 3RSystems, LLC Trained Contractor Advantage

What I do know based on my forty plus years of experience in the construction industry, is that the same problem exists with both privately and publicly held distribution companies that sell roofing, siding, and related building products to construction contractors.  The crux of the problem is as follows. 

Building product distribution company directors and C-Suite execs typically, and mistakenly, continue to view the sales process of the companies they represent as linear.  Simply put, a property owner needs a new roof, they sign with a retail contractor to replace the roof, the contractor orders then pays a building products distributor for the needed roofing materials, and the new roof gets installed – done.  What I’ve just described is the typical retail re-roof sales process.     

What the directors and C-Suite execs of those companies don’t seem to consider or understand however, to the great detriment of both themselves and their trusting shareholders, is the fact that the business of selling roofing and related building products is actually made up of two distinctly different components.  The first is as I’ve described it above – the retail side.  That’s the easy part. 

The second part is the insurance paid property damage restoration contracting side which is conservatively estimated at, on an annual basis, $110,000,000,000 (at free market pricing) of which approximately $34,600,000,000 + (avg. 31.5%) of that amount would have been, if contracted the same as retail free market pricing, spent by contractors on needed roofing, siding, and other related building products. 

Note that property and casualty insurance companies generally price their premiums based on the free market retail cost to replace whatever is damaged but generally calculate claim repair settlement costs at wholesale pricing. 

Now, that $110,000,000,000 figure may be the estimated true free market retail cost to complete all of the insurance covered repairs, but, once property and casualty insurance companies perform their “magic” on their insured customers legitimate property damage claims, that $110,000,000,000 figure is reduced, on average, by 50%, down to $55,000,000,000.  The dollar amount of roofing, siding, and related material orders is then reduced down from $34,600,000,000 to roughly $17,300,000,000. In many cases, that $55,000,000,000 total insurance settlement offer figure may be increased, as insurance company adjuster oversights and/or omissions are revealed and corrected, to $65,000,000,000.  If that $65,000,000,000 figure were achieved, the roofing, siding, and related building products orders total would then come in at roughly $20,500,000,000.  At that point, the resulting total roofing, siding, and related building products orders sales revenue recapture would amount to $3,200,000,000. 

Also at that point however, the total insurance settlement underpayment as a result of insurance company adjusters underpricing the cost of the repairs that were acknowledged and insurance company adjusters as well as engineers denying the existence of additional legitimate insurance covered damage comes to $45,000,000,000 ($110,000,000,000 minus $65,000,000,000) of which roughly $14,200,000,000 would otherwise have gone to pay for the needed roofing, siding, and related building products.     

With the above in mind, the logical goal of roofing, siding, and related building product distribution companies should be to recapture as much of that annually missed $14,200,000,000 building product sales revenue as possible. The question is however, how does a roofing, siding, and related building products distributor go about achieving that goal which will, once achieved, substantially increase shareholder value – far beyond the leader’s initial post acquisition expectations.  The answer?  Advanced storm damage restoration contractor insurance claims process training. 

“Since its founding by Ken and Diane Hendricks in 1982, ABC Supply’s sole focus has been serving professional contractors and “making it easy” for them to do their jobs by offering the products, support and services they need.” (Source: Forbes)  That, of course, could be said of any of the other roofing, siding, and related building products distribution companies as well.  It is in doing just that that building product distribution companies are enabled to grow, prosper, and thereby, increase shareholder value – except for... 

When, however, distribution company directors and C-Suite leadership who are either not aware of, or disregard (which generally has been the case over the past fifteen years) the reality of what has been taking place in the insurance restoration segment of the construction industry, shareholder value cannot and will never increase to the levels they otherwise could have.  While retail sales may (or may not) continue to increase, as a result of actions taken by the P&C insurance industry since 2010, until determined and aggressive action is taken to change the current environment, sales of roofing and related building products to storm damage insurance restoration contractors will continue to lag behind and even possibly decrease. 

Presently, building product distribution companies are focused on improving technology that is meant to help their contractor customers to increase efficiency.  Such improvements are, without question as helpful as they are needed.  Several companies have begun offering access to advanced CRM programs and AI driven tools that help contractors to achieve that goal and more.  Having reviewed several of the most highly promoted contractor CRM programs out there today that promise to help contractors achieve that goal, I see them as useful and helpful – although more so for contractors whose primary focus is on retail contracting work. 

When it comes to storm damage restoration contracting work however, those advanced CRM and AI driven programs will be just as helpful as they will be to retail contractors in increasing efficiencies.  They will not and cannot however, help storm damage restoration contractors to overcome the hurdles and obstacles placed in their way by the P&C insurance industry that are the cause of the estimated $14,200,000,000 worth of annually missed roofing, siding, and related building product materials orders across the USA.  How so?           

After a storm tears through an area, all at once, hundreds to even thousands of insured property owners who likely were not even thinking of having a new roof or siding installed are now in need of a contractor to repair the damage.  Soon after the storm has passed, the damage areas become inundated with contractors offering their repair contracting services.  They are not simply talking with retail property owners who may or may not decide to get the work done, those property owners must get the damage repaired as soon as possible.

Pre-2010, the storm damage restoration contracting process was still a relatively uncomplicated process.  The contractor would conduct a free inspection and if the contractor found damage, the contractor would offer their services to the insured property owner.  If the insured agreed to hire the contractor, the contractor would then attend an “official” inspection with a licensed insurance company employed or third party employed independent adjuster to inspect the damage.  If damage was proven, the next step would be for the contractor to negotiate the price of the repairs with the insurance adjuster and come to an agreement.  Once an agreement was reached, the contractor would then schedule and complete the work and on completion of the work, the insured customer would pay the contractor any contract balance due. 

In 2010 however, a new law entitled the Unauthorized Practice of Public Adjusting (UPPA) that was being falsely promoted by the P&C insurance industry as consumer protection was introduced that prohibited storm damage restoration contractors from negotiating with their property owner customers’ insurance companies on the damage repair price.  The new law also prohibited storm damage restoration contractors from interpreting policy language or advocating on behalf of their insured customers.  It took a number of years for UPPA to gain a foothold but when it did, storm damage contractors who were caught violating the law were/are faced with potential jail time and fines.   

Over the years, while contracting both retail and storm damage work, I had been unofficially training storm damage restoration contractors on the insurance claims recovery process.  In 2010 however, with the introduction of the great UPPA “push” as I refer to it, I decided to make the move from retail and storm damage contracting to training storm damage restoration contractors across the country on how to successfully beat P&C insurance at their own game.   Referring to my decades of retail and storm damage contracting experience, nearly twenty years of insurance and investment advisory experience, and proven and winning Pro Se legal experience in either serving or going up against corrupt actors from some of the most well-known companies in the country, I wrote the program then began offering the training to storm damage restoration contractors from across the county.

From its unofficial “official” introduction in 2010, as I saw it, UPPA was nothing more than, and has since proven to be, essentially, license for P&C insurance companies to be able to steal from their insured policy holders by delaying, denying, and defending fair and full payment of insured policyholders legitimate property damage claims indefinitely. 

Since, per UPPA, the contractors were, and still are, no longer allowed to freely negotiate the price of their customers’ property damage claims with the customers P&C insurance companies, their hands were/remain tied.  Now, the insured customers only options after the fact are to either hire and pay a public insurance adjuster whose license allows them to negotiate insured’s claims and interpret policy language, demand claim appraisal, or hire an attorney to sue their insurance company.  Interesting to note that it was the nephew of the guy that started the largest public adjusting company in America decades ago who participated in the creation and writing of the UPPA law.  

The reality of the above...only about five percent of insured's whose claims have faltered as a result of P&C insurance claims departments hi-jinx ever hire a public adjuster. About the same amount demand claims appraisal.  Only two percent of insured's ever hire an attorney to sue their insurance companies.  From that other approximate ninety-five percent of unassisted insured policyholders, many of them who do have problematic claims, simply give up the fight and are left underpaid and underserved.  That is where that estimated $14,200,000,000 worth of annually unordered roofing, siding, and related building product sales total comes from. 

As one of the country’s leading experts on UPPA, in 2019 at the Win the Storm Conference in Phoenix, AZ, I presented on UPPA to a group of attending storm damage restoration contractors.  At the same event, famed plaintiff’s attorney John Houghtaling debated the UPPA issue with insurance industry attorney Steve (The “Badger”) Badger.  You can and should watch the video short through the highlighted UPPA link below. 

Unauthorized Practice of Public Adjusting (UPPA) law - Is NOT insurance consumer protection!

Because contractors can no longer (for the time being) negotiate their insured customer’s claims as they had been able to do pre-2010, I developed a work around that puts the power into the hands of their insured customers who are free to negotiate their own claims – at what I call real, true, and accurate (RTA) free market pricing.  I also developed a contractor friendly property damage repair estimating program that takes the pricing power and control away from Verisk Analytics, Inc.’s owned and controlled Xactimate estimating platform and gives it back to the contractors and their millions of insured property owner customers.   

Although Verisk was, to say the least, displeased with the competition that my alternative contractor and contractor/consumer friendly repair estimating program presented, several quick conversations between myself and their attorney made it clear that there was nothing they could do about it. 

Although UPPA and Xactimate are the two biggest hurdles to be overcome by storm damage restoration contractors, there are others.  One of the hurdles that restoration contractors also need training on is how to rebut the numerous objections of wayward insurance adjusters and engineers who will, now more than ever, as shown previously in the “magic” APA video, without hesitation, freely “misrepresent” the conditions found at storm damaged properties.   

Again, as I talked about during my UPPA presentation at WTS in Phoenix and as Houghtaling talked about during the UPPA debate at the same event, only about five percent of insured property owners ever take any action intended to cause/force P&C insurance companies to fairly and fully pay their customers legitimate storm damage claims.  It is the customers who don’t take action and their contractors who can’t – due both to the restrictions placed on them by UPPA and Xactimate, and their lack of the kind of advanced storm damage restoration contractor training that only my company can provide to them, that roofing, siding, and related building product distributors annually miss out on those hundreds of millions to billions of dollars of building product sales each and every year. 

By getting my advanced and one of a kind top down approach based storm damage restoration contractor training program into the hands of your storm damage restoration contractor customers, pre-new M&A’s, QXO will immediately be in a position to take a number one position in the building products distribution industry.  As the only building products distributor licensed to offer the training program, QXO will be in a powerful position to further accelerate the recapture of those hundreds of millions to billions of dollars-worth of annually missed building product sales revenues.  Also to consider is the fact that once your competitors' storm damage restoration contractor customers learn about the program, they will most certainly be motivated to bring their business over to QXO so they can take full advantage of the training - unless one of your competitors licenses the program first.