Insider Secrets for Starting a Successful Business

Starting a Home Inspection Business

Ken Compton, president of Home Inspector Start-up and Growth, shares his tips about how to become a home inspector and start a home inspection business. He gives expert advice about the training and equipment you’ll need, marketing techniques, income potential, and much more. [25 min.]

Ken, give us an overview of how the home inspection business works.

Home inspectors have a lot of services they can provide today. When I started my home inspection business, Southern Home Inspection Services, we basically just provided home inspections to people who were buying a home. They were going to buy a home, they want to have it inspected to make sure the mechanical systems and structure and all the things about the home were in good condition, so we still do a lot of that, but there’s lots of specialty inspections that we do today. For instance, when a builder builds a new house, we actually go out and do code compliance exams, which means is the home meeting the current state and local building codes, and we look at foundation stage, framing stage, final stage. We also look at new construction from the standpoint of when you buy a new home, a builder gives the buyer a twelve-month warranty, and we go out and do builder’s warranty inspections for the consumer so before that builder’s warranty expires we can actually determine any defects or deficiencies and the builder can fix it before the warranty expires. We have things today Matt, like energy audits, where we can go out and do an inspection on your property and show you if can change out your windows or add additional insulation and those types of things that you can actually save “x” amount of dollars over the long term. One of the new inspections that we do a lot of today because of the mortgage crisis and the pricing bubble and that type of thing has effected many of the metropolitan areas, and one of the things that we do now is we go out and do what we call pre-listing inspections, and that is before the seller puts their house on the market for sale, the home inspector comes out and inspects it and tells the seller of the home what’s actually wrong with it and what’s going to be kind of an impediment to their sale, and then the seller has an opportunity to get all those items fixed before they get the house on the market and get a buyer out there, because buyers buy homes on emotion and they justify their decisions with logic, and when the buyer’s inspector comes out and lists fifty or sixty things wrong with the home, guess what happens: the buyer is out of love with the property. So, we’ve moved just from doing buyers inspections now to lots and lots of specialty inspections as well.

Walk me through the steps involved in a typical home inspection.

What happens is, the real estate agent will call into the home inspection company on behalf of the client or the client will call directly, and once they decide on using our firm, then what we do is we’ll send out one of our inspectors and an average inspection will last about 3 ½ hours, we’ll meet the buyer out at the location, and we generally try to always have the buyer come out there and join us for the inspection. It’s really important, not only are we going to tell you what’s right and wrong about the house, we’re going to share maintenance information with you, we’re going to show you where all the shut-offs are for the utilities, and that type of thing. So it really is important, especially if you’re a first-time home buyer. So what we do is they meet us on the property and we inspect the exterior of the property first, and we usually input our findings into a computer, and then we go in and start looking on the interior and we get the first floor, and the second floor and the attic, and the whole time that we’re looking for a variety of issues, we’re talking with the consumer, the buyer if you will, about the property, so they’re very familiar with the problems. Because there’s no perfect home, all homes have issues, and we want to be able to make sure the buyer has some perspective. These are small things, they can be fixed here, or these are maintenance issues, or whatever. But then if they’re major issues that are discovered during the course of the inspection, we can explain those to them, and some possible ways for repair, who would be the type of person who would repair it contractor-wise and that type of thing. So we walk them through the whole thing, and then the last thing we do on a home inspection, we do the basement or foundation, because we function the plumbing on the floors above, and if there are leaks we’ll be able to catch those downstairs in the basement or crawl space is we actually put all that information together in a computer with digital photographs, we print all that out at the end of the inspection, and then we go over our summary pages, our list of findings if you will, with the buyer and whoever else is there. And then we produce, of course, the written report, they take that with them, and then the negotiation process begins between the buyer and the seller.

How much money can you make as a home inspector?

Well, I will tell you this. I have home inspectors, one man shops, in other words they work solo, in my coaching company that will make between $125,000 and $150,000 a year. Now I will say that’s not their first year. It takes them about three years to really get to that level. If you join a coaching program like mine early on you could beat the learning curve and do that quicker. But, the average new home inspector without any coaching will do less than 100 inspections in their first year, and that’s pretty hard to live off. I mean, our average inspection fee is $350 so you do the math, you can’t really make it off that, so you have to have some cash put aside, but if you join a coaching program before you get into the home inspection business or as soon as you do, you can beat that learning curve and do a lot more inspections. I have one guy, and this is totally atypical, he’s in the Seattle, Washington area, and he graduated from one of the home inspection schools, and he said “Ken, I’m not in your marketing area, I want you to help me grow my business.” And I said okay, here’s what I think you should do, I think you should go back and say here’s my fee, and then you ought to give everybody who would refer you a one-time use 50% discount coupon, so let’s say your inspections were $300 for easy math, you give them a coupon and their inspection is $150. Okay, and the only reason why you’re doing this is because you want to get on their approved list or you want to show them that you’re a quality inspector, and once you work for them, then they’ll know what good work you do and they’ll call you back again and again. Lenders or real estate agents or whoever. And this guy, Matt, did 500 home inspections in his first year. I actually produced a CD audio interview which is still on my membership site, called From Zero to 500, where Bill revealed exactly how he took the material that I shared with him and put it together and did 500 home inspections, and now Bill is a small multi-inspector firm. That’s totally atypical.

So, you can run a home inspection business by yourself without employees?

And a lot of our members choose to do that. Running a big multi-inspector firm is a lot of headaches, because what happens is this. Consumers have a certain perception about what’s inside the scope of a home inspection and what isn’t, so you have to be really good at saying “Listen, cosmetic dings, a tear in the carpet, those types of things are things that you can see as the consumer, and really aren’t inside the scope of the home inspection.” And so you have to manage all these expectations, there’s a lot of that management of the client that goes on, and a lot of home inspectors are terrible at that, so if you’re a one-man shop and you have great interpersonal skills, which by the way, to me is the number one most important thing in how successful you’ll be in the home inspection business is if you have good interpersonal skills. You get to be my age, an old guy, the fact of the matter is I can teach you the home inspection business and the skill set that you need, but I can’t teach you a personality. So that’s a real critical factor, and I think everybody listening to your interview really ought to look at themselves, and say hey, if I’m an old gruff or I’m a young gruff person, or I don’t really like people, the home inspection business really isn’t for you. You’ve got to have good interpersonal skills, but yeah, a lot of my clients prefer not to have employees, not to have to manage them, not to have to deal with all that. So there’s pros and cons of being a multi-inspector firm or a one-man shop.

What’s the best way to get the technical skills you need for home inspection? Are there any reputable courses or training programs?

Oh yeah, there’s really good ones. The two that I push all the time for our guys, if you’re going to be a home inspector in our firm you have to go to one of these two: American Home Inspectors Training Institute, and that’s actually where I graduated, and then ITA (Inspection Training Associates), that’s the other one, so AHIT or ITA, those two are really, really good. And they’re generally a week or ten days. You start about eight o’clock in the morning and about eight o’clock at night you drag out of the classroom. So you get a lot of hours, generally the instructors are excellent, you take an exam when you go in for proficiency, and you take an exam when you come out. They provide ongoing support and training for you, oftentimes they’ll have reporting software and other things to support you to make it in the home inspection business. So AHIT or ITA, and you can get good training there. Now, there are other good training schools that are in the individual states. I’ve got a buddy, Frank Libero (Advanced Training Institute), up in New York that owns a big, nice training school, it’s very good, it’s really geared more to people in the New York state and New England area for his school, where the AHIT and ITA are national. And they have campuses in almost all the major metropolitan areas now. They also teach code compliance if you want to be a building code inspector. They generally have courses on that. A lot of times if you want to be a commercial inspector, inspect commercial building, they’ll both have that. But it’s essential today to get a quality education background like that, you just can’t be in the trades and then come into the home inspection business and be successful. It’s two different sets of skills, and when you go to real estate agents or mortgage brokers, or other people for referrals, and you can say that you graduated from one of the top schools or a school that’s recognized, that helps your cause.

What kind of tools and equipment do you need? Do you just need a tape measure and a clipboard?

Home inspectors a lot times will just go overboard on what they need. I think home inspectors, sometimes I call them inspector gadget, every newest latest gadget out there they have to have, but you really don’t need that. You need to have a good ladder, one that will reach seventeen feet and they make a variety of them today that fold up, will go in back of an SUV. You need some specialty equipment, like you need a moisture meter. Oftentimes we’ll come upon stains on the roof sheathing or other places, and it’s nice to be able to run a moisture meter in there and prove whether it’s wet today or not so that you can provide the client that type of information. We’ve also come up with some great tools, like in the old days when we had to measure the air conditioning temperature coming out of the vents, we used to have to stick a little old baby thermometer up there. Well you can imagine that’s pretty tall so you got to get a ladder out, now we have laser thermometers, you can just point, a laser beam comes out, tells you the temperature, so you need a laser thermometer. You need a few other little tools, an electric screwdriver to remove electrical panels and that type of thing, so I imagine about $600-700 worth of tools, $1,000 at tops, would get you started. Now, you can go on from there and add on all the little gadgets that you need or you’d like, for instance they have infrared cameras today that you can actually see a thermal image behind a wall, and those can start at $12,000 and go up. So you can get as fancy as you want, but a basic good toolkit, $600-700, including your ladder, is about all you need.

Are there too many home inspectors in the market today? When the real estate market slows down, is there really enough business to go around?

That is an excellent question, and that is one that we’re facing right now, Matt, so that is very timely. When I started my business in 1997, I didn’t start as a one-man shop, I started as a multi-inspector firm. It’s interesting, I wasn’t even a home inspector. That’s a whole other story. I started our business, in the first year we did over a half a million in sales, and I was just the marketing guy. And life was very different. Everything was off-line, there wasn’t any online marketing, there weren’t really any home inspection schools per say that were large and pumping out home inspectors like they are today, so it was much easier to start up then, than it is now, but the answer is a good home inspector can still get started today and be successful. Here’s one of the things about the home inspection schools where I think that they are a little bit lacking, and this is why my coaching program has been so successful. They’re still teaching you old school techniques on marketing. Get some tri-fold brochures and some business cards, and go out to these real estate offices or these mortgage broker’s offices and drop those things off, and you know what happens is after 9/11 everybody has gotten much more security conscious, especially in the major metropolitan areas, and they will not let home inspectors past the gatekeeper, which is generally the receptionist, so if you’re going to rely on marketing techniques, just that marketing technique, then the answer is you can’t be successful. So there’s lots and lots of home inspections that were out there in 2007 that are absolutely out of business, and one of the things I’m teaching my coaching clients is how to go out and grab that market that’s been evacuated by them. If you came into the home inspection business and you got a coach and you actually learned effective marketing, and you implemented that plan, you could actually come in and really grow your business today, not a problem. But it’s the guys that don’t really look at their home inspection business as a business, they really get focused on getting all these technical skills, but when they get out they just expect the phone to ring when they hang out their shingle, well, you know what, that isn’t going to happen. So the answer is yes, the market has never been more competitive, the real answer is if you use the right marketing skills and techniques, combine that with good interpersonal skills, you can absolutely get in the business today, be very successful, and make a fantastic living. And it really is a rewarding job. It’s one of the few jobs I’ve ever been engaged in where you really help somebody and they were really grateful. I mean, if you go to our website at our home inspection company and you look at the testimonials on the front of the website, you feel genuine excitement for what we’ve done for them.

Ken, are there other services that can complement home inspection, like radon and mold testing? Can you offer both inspection and remediation services?

I would not, I always think there’s a conflict of interest in there. Our firm wouldn’t do it. The conflict of interest that’s built in is this: If you go out there and do the inspection, and you tell the clients they need this, this and this, and then you actually do the remediation work, the appearance could be that you’re selling them a bill of goods, so what I do in our firm, is we do the inspections, and then we have a list of what we call preferred vendors, folks that we know that do good work, we followed them up and reinspected their work, and we know they do a high quality work. We don’t take any fee or money for the referral, we just do it as a service to our customers, in other words they can get a one-stop shop, they can come in and get a quality inspection from us, whether it’s radon, mold or lead paint or whatever it happens to be, and then they can select from a list of vendors, and generally in each category we try to provide three vendors, and then they call the vendor and select the one they like, but we get asked every day, do you have somebody that you know that I can trust who does this work? So I would refer it off and not to do it myself. I think that you open yourself up for some liability by doing it yourself, and the national associations that you’ll need to be a member of prohibit it.

What are some effective ways to market and advertise your home inspection service? Do you just advertise in the yellow pages and sit around and wait for the phone to ring?

I advertised in the yellow pages in 1997, and I will tell you, Matt, I made money from my ads, I’m not opposed to the yellow pages, but it didn’t bring me the types of clients that I wanted, and so that’s why I don’t do it. And I’ll tell you the most exciting revolution for small business owners bar none since I’ve been in business, and I’ve been in business 25 years on my own, and that is the Internet and pay-per-click advertising. For the first time I think that we can advertise our product and the only people that are interested raise their hand. In other words, if you’re not interested in a home inspection, you’re not clicking on my ads. And if you’re not clicking on my ads, I’m not paying for that advertising, so I don’t have to put up a yellow page ad and hope millions of eyeballs are going to come see me, some are interested, some aren’t. With the Internet and pay-per-click, only the people that are interested in my ads come and visit my site, and then we convert them over, so to me I think that’s very exciting. And we use pay-per-click and search engine optimization strategies to get the right eyeballs on our websites every day of the week, so if I was a new home inspector in the market, I would be after that like crazy. The other thing that we do is we teach our members how to stay in touch with their prior clients. You know, when people do business with you, they know you, like you, and trust you, and when you stay in touch with them on a monthly basis and provide them helpful information, and then they need to make another purchase, they’ll call you back, but the other thing they’ll do is they’ll refer you to their friends and family, and we really work that strategy hard and heavy so if you’re new getting into the business, make sure you collect all that data, keep that email address, their physical address, all those types of things, so that you can stay in touch with them. In 2006 over 36% of my business, and we did close to 4,000 home inspections that year, 36% of my business came from prior client referrals. So you can do a variety of things to get your marketing, but the Internet is very, very exciting.

Tell us about some creative ways to get customers and generate inspection business.

I like to build a list. I’m still a huge direct mailer. I think today that about 1/3 of the emails I send out never land in the right mailbox or they’re filtered out by spam filters, so we really use a lot of direct mail. We grew our business in 1997 to over half a million dollars in sales, and 99% of all the marketing activities I did then was direct mail. And we do direct mail in this manner. Nobody buys anything until they understand what’s in it for them, so the direct mail pieces that we send out, let’s say to real estate agents, the message is written so when the real estate agent reads it, they understand what’s in it for them, to refer our clients. In other words, you’re going to get a professional inspection, we’re not going to be scary. Some home inspectors out there, they go out there and say things like “oh my gosh!” when they see something on a home inspection, but you know two places you don’t want to hear “oh my gosh” — brain surgery and a home inspection, because what happens is buyers of homes get nervous and upset when you couch your findings like that, a lot of times and they’ll decide maybe this isn’t the house for me, when really the problem was something that could be easily remedied. So referral sources like you to be even-keeled, not reactionary, so you write that message on your direct mail and let the referral source know what’s in it for them, then they buy from you. And so we’re big on that. Same way to the consumer, we’ll go and put a classified ad in the homes for sale section of the local community newspapers, and we’ll run an ad like “Was your last home inspector blind?” and we’ll give away a free lead generation report on why they should select our firm over others. And then we go direct to the public that way. So I’m huge on direct mail. So Internet, direct mail, and marketing your prior clients are three ways they could really go to work immediately.

Should you try to network with real estate agents and mortgage brokers in order to get more referrals?

There’s two schools of thought. There is an association out there that makes you sign a pledge that says you will never talk to a real estate agent or mortgage broker. I will tell you I’m not from that school of thought. I understand that my fiduciary responsibility is to the client, the person who is paying me, the buyer of the home. I would never say anything other than the actual facts about the property. Whether the referral came from a real estate agent, a lender, or one of my buddies. We work with lots of very professional real estate agents who have the same goal in mind that we do for the client, and that’s that they get a good house, get the house that’s right for them, because the real estate agent would like to get referrals from that client over and over again. So we think that you can do a quality inspection, maintaining that fiduciary responsibility with the client, and still have a professional business relationship with real estate agents and lenders. I will tell you 67% of my business last year came from mortgage broker bank referrals, real estate agent referrals. It’s still the number one source. Our company is huge and we do lots of inspections, but a big, big percentage of that comes from them. I think you can manage that process successfully.

Ken, does the home inspection industry have any trade associations that are worth joining?

Oh sure. There’s three big trade associations, NACHI (National Association of Certified Home Inspectors), then there’s NAHI which is the National Association of Home Inspectors, and then there’s ASHI, which is the American Society of Home Inspectors. All three of them are excellent. They have standards of practice by which the inspector members need to abide, and they provide lots of member benefits and support. Most of them have local chapters where you can be involved in the local chapter as well as the national chapter. They all have big annual conventions where you can meet exhibitors and vendors to find the tools, equipment and software that you need. Also, Matt, a lot of the states will have their own association. I know North Carolina does, Kentucky does, Texas, California, all have state ones as well as the big nationals. I think if you’re going to be in the home inspection business you definitely need to belong to at least one of the associations. It’s just good networking, it allows you to see what’s going on tool and equipment-wise, market-wise, that kind of thing. Almost all the nationals have big lobbyists that try to prevent adverse things from happening to the home inspection business. So it’s worthwhile, membership’s worthwhile. I want to say, Matt, that membership runs probably $300 on average, $350 a year for a member.

You’ve got a great website, but can you recommend any other books, websites, magazines, or Internet forums for home inspectors.

There’s not many public forums for home inspectors, all of the national associations have great forums for their members, and so when they join the national associations they’ll be able to have access to forums. The smallest association, which is NAHI, they have around 1,700 members, and then ASHI and NACHI are both much, much larger than that, they also have monthly trade publications, all three of them, where you can get great information, then you can go to specialty websites to learn about everything from radon testing to radon remediation and, of course, all the other things as well. So most of the publications and the forums are association-related.

What’s the biggest mistake people getting into the home inspection business make?

The biggest mistake I think they make is they think they just need to be technical, and they ignore the marketing. I say this all the time in presentations all around the country. You can be the best home inspector in the world, but if the message never reaches the market, you go right out of business, so the biggest mistake I think they make is they ignore marketing. They get totally focused on mastering the technical skills, because I will tell you, Matt, there is a lot to know in the home inspection business, I mean it took a builder and the subcontractors a year to build a house, and in 3 ½ hours I have to go in and analyze all their work, manage the client, and produce a report. And that’s not that easy of a task, but with all that said, you can master the technical skills but if you don’t master the marketing piece, you’re out of business. I don’t know about you, but I couldn’t come into the home inspection business and do 60 or 70 home inspections in the first year and make it. You’d have to have some significant reserves set aside, but if you paid as much attention to the marketing aspect of the home inspection business as you did to the technical, you’ll be in great condition.

Ken, do you have any final thoughts for someone considering getting started in home inspection?

If you’re going to get started in the home inspection business, I’d want you to treat it as a business. And Matt, what I mean by that is have a written plan, and you don’t have to have a big business plan because you’re not going to raise capital and that kind of thing, but what you need is a marketing plan with what I call a marketing calendar, and on that marketing calendar you have all the marketing activities you’re going to engage in each and every month for the next twelve months, and then when you wake up and say wow, my business is slow, you don’t have to say what am I going to do, you just work the events that are on your marketing calendar, whether that’s relationship marketing strategies or on-line or off-line activities. I say to home inspectors all the time, if you were to go on a vacation to a destination that you’d never been to before, I know you would pull a road map. Well, it’s the same thing with a business. I mean, a marketing plan is nothing more than a road map for your business. So if you’re going to get in the home inspection business, get your marketing plan put together and you can be successful.

Ken Compton is the president of Home Inspector Start-up and Growth, an Internet coaching program and membership website for home inspectors.