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What’s the Real Cost of hiring a Home Inspector in your Home Inspection Business?  XML
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Joined: 06/17/2014 09:32 PM EDT
Messages: 5244
Location: Carmel, IN

Check out this video discussion on hiring Inspectors from P. Nathan Thornberry and Wally Conway - https://youtu.be/aDalywjHjd4

What’s the Real Cost of hiring a Home Inspector in your Home Inspection Business?

If you’re thinking about hiring an inspector and it’s your first time or even your fifth time, this analysis of the cost of hiring a home inspector is for you! If you’re past your fifth or never intend to hire anyone at all you’ll find hundreds of articles I’ve written just for you but this isn’t one of them.

Reality Check!

Consider this analysis in terms of a Home Inspection business owner that is also an inspector that is ready to hire due to volume and the desire to expand. Furthermore this analysis is made with the assumption that the cash flow from the business, in large part driven by the inspections performed by the business owner himself, is the primary driver of investment in growth.

Direct Cost of Employment

Let’s assume a typical employee inspector makes around $50,000 per year over their first 24 months in your employ. We’ll use my favorite model - “Base + Bonus” - for this analysis. We consult on best pay models regularly and they vary but let’s assume a $25,000.00 base plus bonuses for the inspector that they would qualify for once they’re inspecting. Depending on their background and your ability to train you’re looking at 2-6 months before that’s the case. Until that point the inspector isn’t going to be a revenue generator. 6 months of pay with all of the associated overhead of employment will run you around $18,000 in most States.

Other Direct Costs

I’m going to always suggest a professional training course - budget around $1500 for such. Between licensing and testing fees if you’re in a licensed State let’s assume another $1000.

When they’re ready to go into the field, you’re going to need software, a truck, insurance, and basic inspection tools. You can do this incredibly well for $20,000 or on a budget for $10,000. I’m including $7,000-$16,000 for the vehicle itself which can be easily financed of course.

So far we are up to around $30,000.00 on the low end for Direct Costs.

Indirect Costs

Most inspectors decide to hire an inspector because they’re busy and figure they could expand if they just had more slots on the schedule. Here’s the problem with that: Most inspectors are still inspecting when they hire their 1st through 5th inspector. At 40-90 inspections per month on the owner’s schedule (this is the range at which most decide to hire for the first time), the owner is paying themselves as an inspector whether they realize it or not. Keeping an inspector busy and paid means keeping them booked and initially that is likely 20-30 inspections per month once they are trained and released into the field. You may get lucky and backfill your entire schedule immediately, but it’s unlikely and not a scenario that should be assumed in your budgeting for expansion. You will likely instead turn your focus to sales and marketing while still trying to do inspections to maintain something that resembles your current cash flow. The most likely scenario is that this gradually builds, leaving you personally scheduled for 10-20 less inspections for a few months on average. There’s a very direct cash flow loss on that during that rebuilding period that probably adds up to around $30,000 for most whether they realize it or not.

Now we’re at around $60,000 in direct and indirect costs in hiring that first inspector. Depending on time to getting your new inspector up and running in the field you may see a lower out of pocket number. In the best case scenario under normal market conditions and an efficient training regiment the actual total in direct and indirect cost invested in a single inspector is around $30,000.

The Fork in the Road

Once that first inspector is in the field, many inspectors face a dilemma. They can build their own schedules back up to full and start experiencing the ROI of having that inspector out in the field in combination with the revenue from their own full schedule OR they can keep pushing for growth and keep their expenses lean in their lives while they hire their 2nd through 5th inspectors. While that determination should be made based on projections and the ultimate goal of having a team of 5+ inspectors with full schedules giving the Home Inspection business owner a six figure profitability without personally inspecting, the reality of required cash flow early on can be the deciding factor.

Beyond the purely financial decision to hinder growth in trade for short term cash flow, there are a couple of pitfalls that are common in the industry;

1. Loss of an Inspector. Employee retention is important and for reasons within and outside of the Home Inspection business owner’s control an inspector employee might not work out. The solution to this is to accept it, move on, and if financially capable of hiring multiple inspectors at one time do so.
2. Inability to fill schedules. Many Home Inspection business owners have marketed themselves as the product they sell, often being personally involved to that point in each and every phone call and building “about us” web pages featuring themselves. The solution to this issue is to ensure the marketing focuses on features and team members.

In Summary

While it’s generally a determination based on volume, planning for a new inspector hire should be based on free cash flow of $3000-$6000 per month, with the expectation to recover that investment beginning 2-6 months from the start date and ideally a plan to immediately implement the next hiring sequence when free cash flow is again established.

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This message was edited 2 times. Last update was at 06/30/2020 01:22 AM EDT

P. Nathan Thornberry
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