1. business and industrial
2. energy
3. renewable energy

Energy Audit and Retrofit
Business Plan
July 2011
Prepared by
Energy Solutions, Inc.
7584 Olive Street
St. Louis, Missouri
314.644.2629
Energy Audit and Retrofit Business Plan
Table of Contents
Topic
I. Introduction
Page
……………………………………….…… ………. 2
II. Executive Summary ………………………………….…… ……...3
III. Description of Services ……………..………….………. ..........4
IV. Market Research
……....………… ……………….……… …. 11
V. Branding ………………………………………….… …………...16
VI. Sales and Marketing ……………………………… .……...…..18
VII. Generating Sales Leads ………………………… …………...18
VIII. Traditional Media …………………………… …………………19
Energy Audit and Retrofit Business Plan 7/12/2011
IX. Electronic Media ………………………………………………..21
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X. Other Marketing Opportunities …………………………………23
XI. Sales Techniques
………….. …………………………………23
XII. Operational Considerations ………………… ………………..26
XIII. Financial …………………………………… ………………….28
Appendix ………………………………………………………….…. 30
I. Introduction
This report is the result of an initiative undertaken by the Missouri Association for
Community Action (MACA), a statewide association of 19 Community Action agencies that
advocates for Community Action and provides services for low income neighbors. With ARRA
funding, MACA initiated projects to research how Community Action agencies could build
sustainable, social enterprises that provide valuable services to the communities and create
new green job opportunities. Energy Solutions, Inc. a St. Louis based consulting firm was
selected to guide this process of enterprise selection and to create a site-specific plan to serve
as a pilot program.
Central Missouri Community Action (CMCA), based in Columbia, Missouri has very
robust and progressive weatherization program currently servicing over 50 homes per month.
In addition to their weatherization work, CMCA was awarded a grant from the Department of
Energy to oversee the installation of 26 solar thermal hot water systems and 15 ground source
heat pumps. Because of their extensive experience in energy auditing and energy retrofits
CMCA is well qualified to launch a pilot program. This report is intended to serve as a guide for
CMCA’s expansion into the field of energy efficiency.
During the course of the discussions with CMCA, the research team felt that the
emphasis of the report should be in the areas outside of the competencies already established
by the Wx team. It was felt that the technical and operational components of the new enterprise
are very similar to the weatherization program. This report emphasizes the sales and marketing
efforts needed since this will be new discipline for the Wx staff.
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For many years CAAs across Missouri have been providing Weatherization Services
through grants from the Missouri Department of Natural Resources (DNR). In 2009, the ARRA
stimulus package provided a substantial increase in the funds available to each CAA. Most of
the agencies substantially increased the size of their Weatherization (Wx) staff with the
additional funding. The ARRA funding is scheduled to conclude at the end of the 1st quarter in
2012. By that time there will be a large, well trained base of experienced Wx personnel across
the state in the energy auditing and energy retrofitting fields. In September 2010 ESI completed
a generalized report on the feasibility of a CAA establishing a fee-for-service enterprise that
would compete in the market place with other energy auditing companies. This new enterprise
would allow CAAs to maintain these green jobs and possibly expand employment opportunities
after the funding expires in 2012. MACA has contracted with ESI to draft a “Site Specific”
business plan that expands on the concepts presented in the earlier report.
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II. Executive Summary
There is a national trend in not-for-profits to operate social enterprises that create jobs
and generate revenue for the parent organization. The Missouri Association for Community
Action funded this study on behalf of its member agencies to explore entrepreneurial
opportunities in the new “green” economy. One of the more promising areas for Community
Action agencies is in the field of Energy Audits and Energy Retrofits which is an extension of the
services now offered through the agency’s weatherization program. Because of its strong
background in residential energy work and now the field of alternative energy, Central Missouri
Community Action is an outstanding candidate for a pilot program.
Energy Audit and Retrofit Business Plan 7/12/2011
CMCA has a very active weatherization team that has been funded in part by ARRA.
These funds are scheduled to end by April 2012. To help retain these jobs and ultimately create
new jobs, this report explains the steps necessary to move from a grant driven program to a “for
profit” enterprise competing in the market with other energy audit companies. It’s anticipated
that revenue streams will be generated primarily from the audit work and the follow up retrofit
work which includes insulation, air sealing and HVAC upgrades. Much of this work will be done
by internal staff but there will be some work contracted out to outside companies. Another
potential source of income will be from Building Performance Institute (BPI) training and
certification. Currently, CMCA works closely with Columbia Water and Light offering BPI
training to other CAA staff and individuals from the region. This program can be expanded to
include students from the University of Missouri and Moberly Community College. Lastly,
because of their experience with alternative energy grants from DOE, the CMCA staff should
have a competitive advantage in recommending and installing solar hot water systems and
ground source heat pumps.
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The CMCA service area covers 8 counties in mid-Missouri. There are over 150,000
single family homes in this area of which 88% are over 10 old and candidates for energy
retrofits. Studies have shown that in most homes over 10 years old, retrofits can reduce energy
costs by 20 to 25%. These cost savings can payback the initial investment in 3 to 5 years.
There are many programs that will fund this capital expenditure for residential property owners.
The new enterprise will need to understand the financing options and incentives available
through utilities, governmental entities and commercial lenders. There is broad acceptance
across the state on the need to reduce energy consumption. Making homes more energy
efficient is the “low hanging fruit” in this process.
One of the biggest challenges for the new energy efficiency company will be in the area
of sales and marketing. Reaching the sales projections for a sustainable enterprise requires a
sales team that understands the needs of property owners and can explain the benefits of
investing in energy efficiency. Also, helping homeowners arrange for financing will be an
important value added service.
This study includes three years of financial projections for this start up enterprise. There
will be a transition period where the company will be operating simultaneously with CMCA
weatherization services. It’s important that separate ledgers be kept up to date for both
organizations that leave clear audit trails. The new company will be paying market rates for the
rental of equipment that is used on fee-for-service jobs. It’s estimated that there will be a need
for approximately $20,000 of startup capital. These funds may be accessible through grant
applications or possibly a loan from CMCA. After three years, it is projected that the new
company will generate revenues of over $1,000,000 and support a workforce of 16 employees.
III. Description of Services
A) Residential Energy Audits
The residential energy audit currently available from local contractors is very similar to the
weatherization (Wx) assessment done by the CMCA Wx team. The Wx service is a more
comprehensive as it includes much more emphasis on safety related issues.
The residential energy audit includes interviews, inspections, measurements and a variety of
diagnostic tests. The areas of concentration include:
•
•
•
Health and Safety
Combustion safety of HVAC equipment, hot water heaters and appliances
Mold and mildew issues
Carbon monoxide
Ventilation
Building Shell
Calculating R Values for walls and ceilings
Evaluating the insulation of the attic, exterior, foundation and floors
Infrared Scanning (see figure 1)
Air Infiltration - Blower door test to discover air leakage (see figure 1)
Heating and Cooling Systems (HVAC)
Furnace and central A/C equipment evaluation
Draft, ventilation and combustion air
Measure duct leakage and insulation
Hot water system
Thermostats
Once the data from site measurements, observations and the diagnostic tests are
completed, the energy auditor begins the analysis phase. Typically, this work is done back at
the office using special software designed for easy data entry and the numerical analysis of
possible upgrades to reduce energy consumption. The auditor reviews:
•
•
•
•
•
•
Utility Bills – consumption patterns and costs
Load Calculations – determine heating and cooling loads from the data collected
Energy Use Index – evaluates gas and electric consumption per square foot and
compares this index to other similar buildings
HVAC – evaluates efficiency and the need for a tune up or possible replacement
Safety Tests
Air Infiltration – analyze the blower door test results
From the client’s perspective, the deliverable for this phase of the project is the final
report with the data logically presented in a concise fashion. The actionable items include a list
of energy efficiency measures with an estimate for the cost of implementation, the projected
energy savings in dollars and the simple payback. The final report should also comment on
occupant behavior with recommendations (such as turning down systems when no one is
home) to save energy. The final report can be used to solicit bids from contractors.
In addition to delivering the final report, the representative from CMCA would also submit
a detailed proposal for implementing the recommended retrofits. The customer should be
Energy Audit and Retrofit Business Plan | 7/12/2011
•
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encouraged to talk to other contractors for a second opinion and a competitive bid. The quality
found in the retrofit proposal and the trust developed from the quality work on the audit are the
keys to securing profitable contracts for the new company.
Energy Audit and Retrofit Business Plan 7/12/2011
Figure 1 – Blower Door testing and Thermal Imaging
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B) Retrofit Services
Part two of the services offered to home owners involves implementing the energy
efficiency measures explained in the audit. As part of the continuing service, a representative
from CMCA should review the final audit report with the homeowner. This conversation should
be centered around the proposed investments in energy efficiency and the potential savings.
Good communication skills will be necessary to help the customer sort out the priorities while
keeping in mind the financial capacity of the homeowner. Frequently the homeowner will
immediately catagorize the upgrades into two groups: those that should be completed in the
short term and those that will be considered “down the road.” From this discussion a service
contract should be drawn up explaining the work to be performed, the timeline and the payment
terms.
The three major areas of retrofit services include air sealing, insulation and HVAC
systems. CMCA’s Wx team has extensive experience in all of these areas. Nonetheless, there
are options for CMCA to perform the work with their own crews or subcontract with outside
vendors.
Air Infiltration
Uncontrolled air leakage into a home (infiltration) accounts for a significant portion of energy
loss. Leakage can occur in the building shell particularly around the gaps created by plumbing,
electrical outlets, doors, windows and around the foundation. The blower door test from the
energy audit will provide an overall indication of the rate of air leakage. A competent air sealing
technician will work with caulking, weather stripping, expanding foam and other related
materials that reduce outside air leakage.
Most materials used for air sealing are currently in the CMCA warehouse (see figure 2) and
should be readily available for immediate application. At job completion, the blower door test
should be repeated to insure that the reduced air infiltration goals are met. The air infiltration
work should be done by CMCA staff.
Figure 2 – CMCA warehouse with Air Sealing Products
Insulation material comes in two basic forms: blankets (batts) or loose-fill. The type of
insulation used will be determined by the nature of the spaces that need to be insulated. The
most economical way to fill closed cavities in finished walls is with blown-in insulation or dense
packed cellulose. Done propertly dense packed cellulose will not only increase the insulation
levels of a wall, but it will also help to air seal the wall. Blanket insulation is most economical
when the joists are exposed. The most popular types of insulation materials are fiberglass,
foam and cellulose. CMCA stocks cellulose insulation, buying product in bulk to lower its
purchasing cost (see figure 3).
The state of Missouri does not require a special licensing or certification for insulation
contractors; however local governments may have licensing requirements and regulations that
will need to be researched. More information on training and trends for insulation can be found
through the trade group, Insulation Contractors Association of America. Their website is
www.insulate.org.
The Wx team has the ability to do most of the insulation work in-house. CMCA,
however, does have strong relationships with three outside contractors: Danny Allen, JD
Exteriors and DAS Services. The decision whether to have the CMCA staff or an outside
contractor do the work will depend on the complexity of the job and the work load.
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Insulation
Adding insulation to homes typically provides a fast payback and improves comfort.
Insulation can be added to attics, floors, walls and the ductwork. The proposal for the retrofit
should explain how the insulation crew will access the attic, crawl spaces and other difficult
locations that will benefit from insulation upgrades.
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Figure 3 – CMCA warehouse of insulation materials
Energy Audit and Retrofit Business Plan 7/12/2011
Heating and Cooling Systems
Many times an audit will reveal that the HVAC equipment is at life cycle and needs to be
replaced. In some cases, the equipment may be oversized for the building loads and not
performing efficiently. A smaller unit with higher efficiencies could offer a reasonable payback
even though the old equipment may not be at life cycle. The energy auditor needs a working
knowledge about the energy efficiency of the recommended equipment and also the ongoing
maintenance costs. Currently the Wx team outsources all heating and cooling work. The
primary supplier for Wx projects is All Phase with a secondary list of contractors that includes
Senter Heating and Cooling, Rehagen Heating and Cooling and DAS Services.
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There are two approaches to managing the heating and cooling work. The preferred
method is for the new company to serve as the general contractor for the installation of new
equipment. The heating and cooling company will be a subcontractor. Thus billing for the work
comes directly from CMCA. The customer will be aware of this arrangement, since the heating
and cooling contractor will be responsible for follow up service calls. An alternative to this
arrangement is to turn over the sales lead to the heating and cooling contractor and request that
a finders fee or commission be paid to CMCA upon completion of the project.
The former method is preferred as it will afford a higher profit margin for CMCA. As a
general contractor, specifications can be put out for bid which should allow for a mark up in the
range of 15 to 20% gross profit. It may also be in the best interests of the customer to have
CMCA oversee the installation to be sure that the proper equipment is installed and done
correctly.
The state of Missouri does not have statewide requirements for HVAC contractors, but
many municipal and county governments do regulate the industry. Having good relationships
with local HVAC contractors is an important part of providing quality service to property owners.
Over time CMCA may chose to train staff members that have skills and interest in heating and
cooling equipment so that they can become qualified HVAC technicians – thus keeping all of the
subcontracted HVAC work within the organization.
Figure 4 – Checking the performance of a new furnace
Other Energy Efficiency Measures
Lighting upgrades, new hot water tanks, programmable thermostats and Energy Star
appliances are among the other energy efficiency measures that may be recommended. There
may be opportunities for CMCA to earn additional revenue depending on the nature of the
energy efficiency measures. It may turn out that the best way to approach this miscellanous
category is to simply advise the homeowner on what to buy and where.
C) Alternative Energy
Ground Source Heat Pumps (GSHP)
A GSHP uses the earth as a heat source (in the winter) or a heat sink (in the summer).
This design takes advantage of the moderate temperatures in the ground to boost efficiency and
reduce the operational costs of heating and cooling systems. CMCA has received DNR grants
to install 15 ground systems in the service area. The first system is currently being installed by
O2 Geothermal. This experience will provide a working knowledge on the practicalities of
installing GSHP systems. This would provide a competitive edge for CMCA in presenting this
alternative form of energy efficiency on the audit report.
Solar Hot Water Systems
In order to heat water using solar energy, a collector is fastened to the roof section
facing the sun. Water is pumped through the collector and the heated water is stored in the hot
water tank. During the winter months the solar heating system does need to be supplemented
by electricity or natural gas. The DOE grant to CMCA also included the installation of 26 solar
Energy Audit and Retrofit Business Plan | 7/12/2011
Windows
The results of some audits may determine that window replacement can offer a
reasonable payback. In addition, home inspectors will find broken or inoperable windows that
need to be replaced. There will be circumstances where CMCA crews will have the skills set to
replace windows. Similar to HVAC, CMCA management may chose to refer this work to other
local contractors or serve as the general contractor. There are a numerous window
replacement companies and it’s a very competitive market with a significant amount of
consumer advertising. Knowledge about window efficiency and window replacement is an
important area for energy auditors.
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hot water systems. CMCA also works closely with Columbia Water and Light which provides
additional incentives for the installation of Solar Hot Water Systems that use electricity as the
back up. As mentioned above with GSHP, this experience will allow the new CMCA enterprise
to expand the scope of proposals to include this form of alternative energy.
Solar Photo Voltaic System
There continues to be a growing interest in solar photo voltaic (PV) systems. This is a
new, yet growing field that the auditing company should find partnership opportunities for
referrals that would go both ways. Many solar contractors recommend that property owners first
do energy audits before contracting for the solar energy work. The concept is to first reduce,
then install renewable energy. With a working knowledge of the cost, incentives and payback
on Solar PV, CMCA will be in a position to give referrals to the better Solar PV contractors.
These contractors should be able to include a finders fee for the auditing company in their price
quotes.
Energy Audit and Retrofit Business Plan 7/12/2011
D) BPI Training
The Wx team at CMCA has a robust BPI training program. CMCA built a model home in
their warehouse that is used for Weatherization and BPI training (see figure 5). BPI training lasts
4 days and includes the certification test on the last day. CMCA works closely with the local BPI
sponsor Columbia Water and Light in managing this training program. Furthermore, commercial
energy auditors are referred to CMCA when they seek BPI certification. The cost for this
program is $1250 which includes the fees for the actual BPI test. CMCA also has arrangements
to train Wx staff from other Missouri CAAs. During the past 12 months this training program has
generated revenue of roughly $20,000. Recently 3 professors from the University of Missouri’s
Sustainability Department were referred to CMCA and went through the BPI training.
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The training expertise and the on-site model home present additional revenue
opportunities for either the new enterprise or CMCA. In our conversation with Mr. Bill Beachy of
the Community Housing Partner in Virginia, we learned that his training center is part of the
extension program of the local community college. Consequently, CMCA may have an
opportunity to partner with both the University of Missouri and Moberly Community College to
incorporate home energy efficiency into their cirriculum.
In addition to BPI, there is another national rating service called RESNET (Residential
Energy Services Network – www.resnet.us) which primarily issues energy ratings for new
residential construction under the Home Energy Raters program called HERS. CMCA could
offer both RESNET training to other auditors as well as offer the HERS rating service to home
builders. In the city of Columbia there were 200 permits issued for new single family homes in
2010, many of these homes will need a HERS rating for financing and marketing purposes.
Figure 5 – Model Home in the CMCA Warehouse for BPI Training
F) Financing
In May, 2010, the State of Missouri passed legislation author
authorizing
izing the issuance of
Property Assessed Clean Energy (PACE) bonds. This allows property owners to borrow money
for energy efficiency upgrades with financing secured by a tax assessment on the property.
This mechanism would encourage below market interest rates on these types of loans. Soon
after the passage of this legislation, the Federal Housing Finance Agency ruled that mortgages
insured by this federal agency could not be subordinated to PACE loans. Consequently, PACE
loans for individual homeowners ceased. However, the PACE legislation does enable
commercial and industrial property owners to borrow funds under the PACE program. Earlier
this year, the Mid-Missouri
Missouri Clean Energy Development Board was established in Jefferson City
to facilitate the PACE
CE loan process. The PACE loans will only be for the commercial and
industrial market. There is, however, a good chance that this will be opened to residential
property owners sometime in the near future. The energy audit team must stay up to date on
the
he progress of the PACE program.
There has been much activity throughout the state on providing home loans for energy
efficiency upgrades. For customers of Columbia Water and Light (CWL) there is a loan program
that is discussed in the Market Research se
section
ction of this report. CWL will loan up to $15,000 for
energy retrofits at interest rates significantly below market. As of this writing, CWL is the only
utility in the CMCA service area that offers these types of loans. Recently, St. Louis County
announced
ced a program for residential loans up to $15,000 for energy efficiency improvements.
At the federal level the “Homestar” legislation that passed the House in 2010 but is still pending
in the Senate. It’s important that CMCA keep abreast of this activity and positions the new
enterprise to take advantage of these unique lending opportunities
opportunities.
Energy Audit and Retrofit Business Plan | 7/12/2011
E) General Contracting Services
As this new enterprise expands itits base of customers, there will be opportunities for
other types of contracting work. For example, during the course of installing insulation, the
homeowner might need some basic repair wo
work on crawl space. By virtue of having crews out
in the community doing retrofit work, there will be miscellaneous home improvement projects
that will generate additional revenue.
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We also recommend that CMCA seek a financial partner who understands the local real
estate market and the value of energy efficiency upgrades. Many loans for energy efficiency
can be structured so that the future cost savings is sufficient to cover the cost of the loan
payments. This a win-win for the lender and the home owner. Establishing a strong
relationship with a local lender will facilitate the sales process.
IV. Market Research
A) Energy Costs
The residential cost for natural gas and electricity is determined by many factors
including: location, size of the home, age of the home, air infiltration and efficiency of the
equipment installed. Nationally, the average cost for utilities for a 1,800 square foot home is
$1,200 per year for electricity and $1,100 per year for natural gas. In Missouri, electricity costs
have increased dramatically in the past few years while natural gas prices have actually
decreased. Over the past 25 years utility costs have increased on average 4 to 5% per year.
As property owners wrestle with the best way to reduce home energy consumption, they
soon realized that to do the job properly requires a holistic approach. This approach looks at all
the energy consuming systems and their interaction within the building. The energy auditing
industry has developed robust guidelines on the proper methods for assessing energy efficiency
opportunities within a building. Certified energy auditors are trained in using sophisticated
equipment such as blower doors and infrared cameras to ferret out the most cost effective
improvements. The energy auditor’s final report details the cost for improvements and the
expected dollar savings in utility expenses. This “payback” model provides a road map toward a
more energy efficient property. Typically, energy improvements in the range of 25% to 40% can
be achieved with paybacks of less than 7 years. This is a strong value proposition for
enterprises involved in marketing energy efficiency audits and retrofits.
Energy Audit and Retrofit Business Plan 7/12/2011
B) Housing Stock in the CMCA Service Area
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In figure 6 we’ve compiled a chart that shows the population, average income, average
value of single family homes and the number of single family homes by county within the CMCA
service area. The last two columns give an indication of the age of the housing stock. This is
represented by the percentage of homes that are over 10 years old and the percentage of
homes that are over 30 years old.
The 10 year benchmark would indicate homes that are beginning to experience a
decline in performance relative to the age of the equipment and the availability of more efficient
technology. Most homes over 30 years old have equipment that is at life cycle, if it hasn’t
already been replaced. In the two most populous counties, Boone and Cole, there are over
48,000 homes that are more than 30 years old. This would indicate that there is a strong
market for energy audits and retrofit services.
County
Population Median Income Mean price SFH # SFH
% > 10yrs % > 30 yrs
Boone
156,400
$46,900
$172,200
68,956
81
45
Cole
75,100
$53,000
$181,200
31,963
88
55
Calloway
43,700
$46,600
$160,000
17,422
85
47
Audrain
25,600
$38,200
$139,800
11,127
96
75
Cooper
17,300
$42,100
$165,300
7,128
89
65
Moniteau
15,130
$44,300
$165,000
5,947
90
64
Osage
13,560
$47,170
$173,000
4,923
92
53
Howard
9,860
$37,700
$167,600
2,609
86
46
Average
$44,496
$165,513
88
56
Total
356,650
150,075
Figure 6 – Summary of Housing Stock in CMCA Service Area
C) Lessons learned
During the course of the research for this report we interviewed three non-profit
organizations that are involved with fee for service energy audits. Two of the non-profit groups
are Community Action Agencies.
The South Central Cap started a separate for profit company called Home Energy
Management (HEM) in Twin Falls, in 2005. The stock is owned 100% by the South Central
CAP. All profits generated by HEM go directly back to the CAP. This “for profit” company was
started with a $20,000 loan from the CAP. The loan was a two year balloon note with a 0%
interest rate which has since been paid back in full. Mr. Robinette now wears two hats; he’s the
executive director of the CAP and the CEO of HEM. HEM quietly co-exists with the CAP
throughout the week. Basically, the staff at HEM work two jobs. They work for the CAP
Monday-Thursday 10 hours/day. HEM operates primarily on Friday and Saturday. At the CAP
the weatherization staff has been as high as 48 employees. At this point, 13 of them work both
at the CAP as well as HEM. The 13 employees get two paychecks. All expenses and revenues
are coded separately for accounting purposes.
The HEM Company has a separate board of directors from the CAP. All serve on a
volunteer basis. With regards to the use of equipment purchased by the CAP with ARRA funds,
HEM pays the CAP a market rate rental fee for the use of the equipment. Invoices are sent
from the CAP to HEM to leave a clear audit trail.
Robinette says that the biggest challenge in going from a grant driven program to a feefor-service was changing the mindset of the staff. This transition required that the crews be a
little more cost conscious. One example he gave was that frequently the Wx crew would do
extra “favors” to help out their low income clients. In the fee-for-service area, additional work
needs to generate a change order and additional fees should be charged.
In discussing advertising and promotion methods, Robinette discussed the community
services aspect of Twin Falls CAP in helping generate leads. As the Executive Director of the
local CAP he is frequently interviewed by the media and speaks to a variety of civic groups in
Energy Audit and Retrofit Business Plan | 7/12/2011
Agency: South Central CAP – Twin Falls, Idaho
Contact: Ken Robinette, Executive Director
208.733.9351 x 1002
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Twin Falls. He’s usually able to incorporate a story about their energy audit service closing with
the comment that all the profits come back to the non-profit organization which in turns help
build the community. From his perspective, “cause” marketing does help bring in business.
HEM also promotes their services by exhibiting at county fairs, home & garden shows and at
Earth Day celebrations. They also advertise in their local yellow pages and they leverage
contacts at the local utilities for referrals. At this point they do not have a website but they are
planning on building one very soon.
Mr. Robinette indicated that revenues during the past 12 months were in the neighborhood of
$200,000 with a net profit around $40,000.
Agency: Community Housing Partners – Virginia
Contact: Bill Beachy, Vice President Energy Services
540.381.9446 at. 5005
The Community Housing Partners (CHP) is not a traditional Community Action agency,
but is considered a regional community housing partner. Having been in operation for over 35
years, they have an excellent reputation for delivering services to their community. The agency
offers a variety of services all related to housing. This includes architectural services, general
contracting, housing management and energy services. Like many CAAs, CHP has a
weatherization team and has received funding through ARRA for servicing low income clients
throughout their service territory.
Energy Audit and Retrofit Business Plan 7/12/2011
CHP recently opened a 10,000 square foot training facility in Christiansburg, Virginia.
Similar to CMCA there is a model home within the facility, used for training. In addition to BPI
training they also offer certification programs in RESNET and a regional energy efficiency
program called Earthcraft. Additionally, CHP has a partnership with the local community college
and with Virginia Tech where they offer extension classes which are part of the college’s regular
curriculum.
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Their fee-for-service audit and retrofit work are obtained mostly through word-of-mouth.
Because of their standing in the community they receive regular energy audit inquiries. The
average cost for a home audits range from $350 to $400.
Mr. Beachy also indicated that there are agencies in the region that outsource some of
their weatherization work to CHP. For this, CHP receives market rate fees as the subcontractor
to an agency that is receiving ARRA funding.
CHP won a competitive grant from the National Community Action Foundation called the
NCAP ExxonMobil initiative in 2009. Under the terms of this program, CHP offers training
programs to individuals who are interested in starting an energy auditing company. This is a
national program with participants coming to Virginia from various parts of the country.
Agency: Ozark Action – West Plains, Missouri
Contact: Terry Sanders – Housing Division Manager
417.256.6147
Ozark Action Inc. (OAI) is a part of the Missouri Association for Community Action network and
has been active in weatherization programs for over 20 years. In 1993 Terry was the director of
Wx services. There were questions about long term funding for the program so Terry decided
to start a fee-for-service business called the House Doctor. At the time, the application of wet
spray cellulose was popular among contractors building single family homes. The closest
insulation company offering this service was over 100 miles away from West Plains. The
contracting business picked up and they began to market the House Doctor as a provider of
energy auditing, air sealing and insulation services.
In this particular business model, the House Doctor was not a separate corporation but simply a
division of Ozark Action Inc. There was some concern about maintaining the 501(c)(3) status of
OAI when annual revenues of the House Doctor peaked at $100,000 in one year. Terry’s group
was very careful in the accounting to code the use of federally funded equipment for the House
Doctor. OAI was reimbursed at the market rate for the use of this equipment.
To market their services, the House Doctor joined the Home Builders Association and exhibited
at their annual trade show. Occasionally they would place advertisements in trade publication
but the bulk of the work came from word-of-mouth. One of the unexpected benefits of the work
was the increase in the moral of the crews. When they had the opportunity to work alongside
professional builders this raised their sense of professionalism and pride. Profits from the House
Doctor were actually plowed back into equipment rather than OAI. Having their own equipment
gave them more flexibility to compete and perform at a higher level.
D) Related Industries
There are industry trade groups related to the energy audit field that provide insight into
the current market trends. It’s important to stay abreast of these groups as they could lead to
the offering additional services as the industry matures.
Affordable Comfort Incorporated (ACI) is a national nonprofit organization that has
become a clearinghouse of information in the area of residential building performance and
weatherization. ACI held their first conference in 1986 where individual practitioners gathered to
share ideas on making homes more energy efficient, comfortable and affordable. The emerging
themes from these discussions was the “House as a System,” and understanding the
diagnostics to analyze performance. This approach leads to a holistic approach to home
performance that takes into account the building envelope, mechanical systems, indoor air
quality and occupant behavior. ACI sponsors national and regional conferences throughout the
year. There are a number of white papers related to energy efficiency that are available through
their website, www.affordablecomfort.org.
Heating and Air Conditioning contractors play a significant role in energy efficient homes.
The American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) was
founded in 1894 and boasts of a membership of over 50,000 persons. ASHRAE plays a
significant role promoting energy efficiency standards throughout the country. The organization
offers a wide variety of training programs and has three chapters in Missouri – St. Louis
(www.ashrae-stl.org), Kansas City (www.kcashrae.org) and in the Ozarks
(www.ozarksashrae.org).
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There was some push-back from the business community when they observed the OAI trucks
doing commercial work. Over time, competition increased and the Wx funded was more secure.
The House Doctor activity slowed down and is no longer active.
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The United States Green Building Council (USGBC) has a Missouri Chapter
(www.usgbc-missouri.org) located in St. Louis at the Missouri Botanical Gardens. The USGBC
promotes green buildings and offers the LEED (Leadership in Energy and Environmental
Design) certification of commercial, residential and institutional buildings.
E) Incentives
As part of a national effort to reduce energy consumption, there are federal, state and
utility financial incentives available to home owners. These incentives reduce the cost of
implementing energy efficiency measures. One of the best sources of information for these
incentives is the website www.dsireusa.org which hosts a comprehensive national database of
these incentives.
The federal tax incentives for 2011 have changed significantly since 2010. There is now
a $500 limit on tax credits, reduced from $1,500 which had been available in 2010. For building
envelop improvements, which includes insulation, home owners can receive a tax credit worth
10% of the cost of the upgrade. For new heating and cooling equipment the tax credit is equal
to the cost of equipment subject to the $500 maximum.
The State of Missouri offers homeowners a tax deduction of up to $1,000 for the cost of
a home energy audit and the energy efficiency improvements based on the recommendations
in the audit. The energy audit must be performed by a home energy auditor certified by the
Missouri Department of Natural Resources. A list of approved auditors can be found in the DNR
website and in the Appendix 1 of this report.
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From the perspective of utility incentives, Columbia Water and Light (CWL) has one of
the most progressive incentives in the state. CWL has proscriptive incentives (rebates) for
energy improvements in the areas of insulation, air sealing, HVAC, windows, doors and lighting.
On the CWL website they also advertise a “free energy audit.” This service is not a full audit as
prescribed by BPI but more of a walk through assessment. For details on the residential
incentive program and the free audits see Appendix 2.
15
What is unique to CWL is the loan program. Customers of CWL who have a good credit
rating can qualify for energy efficiency loans up to $15,000 at interest rates well below market:
•
•
•
Up to 3 years: 1%
4 to 5 years: 3%
6 to 10 years: 5%
This “Super Saver Loan Program” is financed from the enterprise fund of Columbia Water &
Light. No general revenue funds of the city, or any other forms of public money, are used by the
program. As part of the qualifying process, the homeowner is required to get a full energy audit
from one of CWL’s approved contractors. There are currently 13 approved contractors. The full
list can be found in Appendix 3.
There is a formal application process to becoming an approved contractor. CMCA and CWL
already have a strong relationship. The Wx team works closely with Terry Freeman at CWL on
BPI certification. This relationship should be beneficial in the application process to become an
approved energy audit contractor. Further, CWL is frequently asked for recommendations on
whom to use for energy audits, as CMCA is the BPI training entity this will establish immediate
credibility.
There are other utility incentives for energy efficiency upgrades in the CMCA service. These
details can be found on their websites.
Ameren Missouri
Boone Electric
Co-Mo Electric
www.ameren.com/sites/aue/MyHome/ResEfficiency
www.booneelectric.coop/MemberServ/
www.co-mo.coop/busRebates.aspx
V. Branding
The key to success in the marketing this new enterprise is to build Brand Recognition.
This starts with the name of the enterprise. Company names such as Home Green Home,
House Doctor and Butterfly Energy Works have several common traits: they are easy to
remember, the names are catchy and the name describes what they do. Once the name is
established, the focus moves to building brand awareness. In the sales and marketing section of
this report we discuss various techniques in building brand awareness. It’s important that all
collateral material adhere to brand standards. The type style, colors and themes should be
consistent in all published materials such as business cards, letterhead, brochures, quotation
sheets, audit reports and the website. Consistency in the use of the brand name and logo is
critical.
One of the first issues to be addressed in the forming this new enterprise is the company
name. The weatherization team has developed a logo and a slogan that appears on CMCA
trucks. The logo is a bee next to the slogan, “Be Wise, Weatherize.” Using this as a starting
point, the staff at MACA contracted with a local graphic artisit in Jefferson City who expanded
on this concept to create a logo incorporating an Owl and the brand name Home Wise. Two
other logos were drafted: Efficient – C and Home Edge. These three designs are shown in
Appendix 4. As part of this project, Energy Solutions contracted with Carrie Stone of Mogi LLC
(www.mogillc.com) for new ideas and a refinement of the Home Wise logo. Two additional
company name ideas were Core Energy and Evolve Energy. The results of this work are in
Appendix 5. Our recommendation is to review these concepts with CMCA staff and board
members for feedback. If one of the designs stands out, and there is a strong concensus, then
use it, otherwise a graphic artist should be called in for another brainstorming session. To help
stimulate further conversation on the company name and logo, Appendix 9 is a sampling of
enery auditng company names and logo for review.
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The energy audit and retrofit industry is a relatively new industry having gained
acceptance in the market over the past 5 years. Performing services for property owners is a
business model that has been around for decades in such areas as windows, siding, kitchen
remodeling, pest control, landscaping and painting. In many ways energy auditing companies
compete, not only, among themselves, but with other industries for residential property owner’s
home improvement budgets. There is also an educational challenge in the green building
trades, which is explaining the benefits of energy efficiency. However, this is getting easier, due
to growing public acceptance of reducing energy consumption. People now understand that
investments in energy efficiency not only save money and reduce the release of greenhouse
gases but this moves us closer to energy independence which is recognized as a security issue
for our country.
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One of the competitive advantages that the new enterprise should leverage is the
connection with community service offered by the parent company, CMCA. The term “Cause
Marketing” refers to a type of marketing involving the efforts of a “for profit” and a “non profit” for
mutual benefit. In our discussions with Ken Robinette of CAP in Twin Falls, Idaho he attributed
much of their success to the connection between the “for profit” and the 501(c)(3) organization.
As CAA Executive Director, he spoke frequently at civic events and was able to mention the
expansion of services into the energy field and how the profits from the sister company were
ploughed back into the “not for profit.” He found tremendous acceptance of this concept and
customers enjoyed knowing that part of their cost for the audit and the retrofit were going back
into the community. Based on the progressive attitudes found in both Columbia and Jefferson
City, the Cause Marketing approach could play a significant role in brand positioning.
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Beyond brand awareness, the true long term building blocks of a brand are based on the
quality of the interaction between the customer and all the “touch points” with the company. In
many instances the sales and marketing team is “spit and polish” but when it comes to customer
service, technical support and accounting, the brand message isn’t always understood. In a
competitive environment the entire staff must work with customers in a professional and
consistent manner. This would be true for inside staff as well as the field workers. The team
needs to understand that every customer “touch” is an opportunity to build brand loyalty. True
brand loyalty leads to referrals and additional work from the customer.
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Energy Star Designation
Many home energy audit companies use the Energy Star Partner designation on their
websites and on their literature. Currently, the requirements for use of the logo are minimal.
Essentially, its nothing more than filling out an application and indicating that the auditor’s
recommendations follow the Energy Star guidelines. An overview of how the Energy Star
program is presented by the Boone Electric Cooperative can be found in Appendix 8 along with
their list of energy star partners. The Energy Star logo has gained acceptance in the broader
public as an energy efficient brand. We recommend that the new enterprise make application
and apply to the various utility companies in the service areas. In addition, the new company
should make use of the Energy Star logo where appropriate, see figure 7.
Figure 7 – The Energy Star Partner Logo
VI. Sales and Marketing Strategy
Anecdotal evidence suggests that the home energy auditors have a tendency to focus
on the technical aspects of their work and less on sales. Contracting with home owners for
residential upgrades is a very competitive field. Homeowners constantly struggle with
prioritizing capital improvements such as painting, siding, windows, room additions, updating
kitchens and baths, landscaping and new roofs. Inevitably, there are calls to the plumbers and
electricians for emergency repairs. Home improvement contractors fail, not because they can’t
do the work, but because they are unable to reach enough prospects and/or they are unable to
sell the prospects they find. In order to succeed a contractor must do three things:
1. Find and qualify a stream of prospective customers
2. Educate and sell a large percentage of those prospects
3. Deliver on expectations….with sufficient profit margins.
Coming up short on anyone of these three items will present significant challenges to the longterm economic sustainability of an energy audit/retrofit enterprise.
VII. Generating Sales Leads
Uncovering prospects will be the number one challenge for CMCA’s new enterprise.
While there is no one strategy for identifying prospects there are several proven techniques
capable of providing sales leads. CMCA needs to determine what the most appropriate lead
generation method is. The process takes creative thinking and trial and error. The goal is to find
the least costly method of generating qualified leads, approaching those leads and ultimately
securing contracts.
Homeownership:
Age:
Income:
Interests:
Geography:
Single family homeowner who’s owned the house at least 2 years
older than 25
Household income over $50,000
Civic, Environmental
CMCA service area
Future customers might include owners of multi-family buildings and small commercial
properties.
Referrals
The simplest and easiest way to get sales leads is to obtain referrals from satisfied
customers. This process starts by doing quality work and building the brand through
professional interactions with customers. If the retrofit work results in a real savings for the
customer that’s the best form of advertising, since they will likely share their story with friends
and neighbors
There are also related industries and companies where the marketing team can reach out to,
who are in a position to offer referrals. This includes:
Real estate agents – Listing agents frequently make recommendations to the home
owner for upgrades to the property that should be made before a home is put on the
market.
Interior Designers – Make recommendations to home owners for improving their
property.
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Who is the target audience?
When evaluating the different advertising venues it’s important to define the target
audience from which you are attempting to extract sales leads. A good starting point is to
characterize the ideal prospect as follows:
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Plumbers and Electricians – As these trades work with home owners they will be a
position to recommend energy audits.
HVAC contractors - Prime targets for referrals for audits that may, ultimately, generate
more work for them.
Utilities – The electric and natural gas companies frequently get requests to assistant
property owners in reducing their energy consumption. Maintaining strong relationships
with the local utilities and learning who, on their staff, responds to consumers is a good
strategy for obtaining referrals. Columbia Water and Light and the Boone Electric
Cooperative both have a formal referral program for qualified Home Energy Audtiors.
Membership
One of the best techniques for networking and meeting potential referral partners
is membership in local business organizations. Every community has a local chamber of
commerce and a variety of service organizations (Lions Club, Rotary). In addition there may be
local trade organizations such as the Home Builders Association, Association of General
Contractors or a US Green Builders Council local chapter. When key personnel get involved
with a local trade organization, the new enterprise benefits through added exposure. This adds
to the perception that the company is a part of the community fabric—all of which, supports
developing brand identity.
Energy Audit and Retrofit Business Plan 7/12/2011
VIII. Traditional Media
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Direct Mail
An effective direct mail campaign starts with a targeted mailing list. This list can be built in a
number of different ways. The most common method is to simply purchase a mailing list from a
list broker. While there are many list brokers, our research found two who specialized in energy
projects. The websites, www.sourceleadsource.com and www.cleanenergyexperts.com
specialize in mailing lists geared toward homeowners who are good candidates for energy
efficiency upgrades. Typically, these lists are accumulated from home loan data found in county
records.
Mailing lists can also be built internally through the accumulation of data from local sources.
This would include local phone books, membership rosters from schools, religious groups, civic
groups and neighborhood organizations. Property ownership information is also available
through the property tax rolls at the county recorder of deeds office.
The next step is to create a direct mail piece that will successfully generate quality sales
leads. Here are a few key points on designing effective direct mail programs:
Attract the reader’s attention with a simple bold message
Create interest by elaborating on the benefits of the offer
Make the presentation visually appealing
Give proof of credibility with a short testimonial
Offer a no-risk guarantee
Issue a call to action with a specific deadline
This mailing piece could offer a free energy assessment or consultation with no obligation. The
idea is to get a “foot in the door” to start building a relationship with the home owner. Possibly
the mailing piece could offer a free home thermometer if the property owner agrees to meet with
a CMCA representative. During this free walk through the sales/energy consultant should point
out potential upgrades that would be identified in detail with a full energy audit.
Telephone
The use of the telephone system will be an important part of the sales effort. The phone
should be used in combination with direct mail. Mailing list brokers can include local phone
numbers on their lists. Phone follow up after a direct mail piece can be an effective method for
securing sales leads. Follow up calls should be a made by a dedicated individual who primary
responsibility is to schedule appointments with the inquiring property owners.
One way to reduce marketing costs is to begin with the telephone solicitation to the
property owner to gauge their interest in receiving more information. The telephone solicitor
should ask the prospect if literature should be sent via regular mail or email. Whatever printed
piece is developed there should be a PDF version that can be e-mailed.
Door Hangers
Another effective method of reaching specific neighborhoods is to print and distribute
door hangers. Similar to the direct mail piece, the door hangers would have a special “free
consultation” offer. The phone solicitors follow up by calling individual property owners in the
neighbor requesting an appointment for the CMCA sales representative.
Television advertising can be bought directly from the stations or with the help of an
independent media buyer. Regardless of the method used to buy time, it’s important to match
the message to the target audience in the correct geographical area. Decisions on which
station, which program and what time slots, are based on the demographics of who is watching
the programming. The goal is to reach the defined target market avoiding wasted messages to
the wrong audience.
Radio
The first rule of thumb for radio advertising is to plan early and negotiate a long term (13
to 26 week) contract. Stations often provide discounts to clients who commit to a block of time.
The advertiser does not have to pay in advance, partial billing will occur after the commercial
has been aired. The most expensive commercials are during the morning and afternoon drive
time which corresponds with the highest listening audience. Like television, care must be taken
to match the demographics of the listing audience with the target audience that needs to be
reached. An independent media buyer can offer advice and help negotiate contracts.
Newspaper
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Television
While it used to be true that Television was a very expensive media geared toward a
larger national company, that is not the case in today’s market. With the advent of cable and
the explosion in the number of channels, TV can be an effective advertising medium for local
businesses. The audio/visual nature of television provides the opportunity for potential
customers to visually understand the services that can be provided. Though there may be
substantial production costs for a 30 to 60 second commercial, the video produced could also
be used on the internet (you tube) or as an email attachment.
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The newspaper industry is in the midst of a major transformation. The internet has had
a tremendous impact on circulation. There appears to be a generational dividing line, the
younger internet savvy generation is content to get their news online. However, there is still a
sizeable audience who receive the daily/Sunday paper. This group tends to fit the target
audience for energy services (homeowners, higher income, civic minded). Newspaper
advertising revenue continues to decline, but this can present opportunities for advertisers.
Most newspapers support both the printed copy and post advertisements on their website.
Frequently you can negotiate space on both media. The newspaper will be happy to send a
sales representative out to discuss options and costs.
In Appendix 10 is an example of co-op advertising where the energy audit company ran
a newspaper ad featuring Trane brand HVAC equipment. In this example, the Indoor Comfort
Team was offering a free BPI audit as long as the homeowner was purchasing a Trane system.
Many manufacturer’s will share the cost of advertising with a local company as long it features
their equipment.
IX. Electronic Media
Energy Audit and Retrofit Business Plan 7/12/2011
Internet
In the last few years the internet has become a important tool in promoting local
business. There are several different facets to using the internet for business generation. For
this discussion we’ll focus on Websites, Email and social media like Facebook.
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Website
Depending on the corporate structure of the new CMCA enterprise the energy audit
website could be a link off of the www.showmeaction.org or possibly have a completely different
website. There are certain basic features that website should contain:
About Us
Services provided
Frequently Asked Questions (FAQ)
Utility Programs and Incentives
Contact Us
As use of the internet has grown, consumers feel more comfortable purchasing products
over the internet and tend to rely on the internet for their research in finding contractors for
home improvement services. In surveying competitive websites in mid Missouri, there is an
opportunity to position the new CMCA enterprise as technologically advanced by supporting a
sophisticated website. This enhanced version would consist of these additional features:
Actual Case Studies documenting energy savings
White papers explaining best practices for energy efficiency in the home
Links to YouTube videos
o Blower door testing procedures
o Thermal Imaging
o Installing Installation
o Testimonials from satisfied customers
Links to Energy Star website with consumer information
Reference to Facebook
News stories related to the energy audit company
It’s recommended that an outside agency be used for the design and construction of this
website. Particular attention should be paid to “Search Engine Optimization” which will boost
the Google ranking for consumer searches. This would increase the number of hits and
subsequently the number of sales leads generated.
Email
In many ways, email marketing is similar to direct mail. First, it requires an email
database of prospects. As with direct mail, there are lists of email addresses for purchase. For
example, the list broker www.melissadata.com offers a email list of 10,000 homeowners in the
65202 Zip Code (Columbia, Mo). The cost for this list is $1,200. A less expensive route is to
build a marketing database of emails internally by accumulating email addresses of prospects
and customers. Email addresses can be accumulated in a variety of methods. The CMCA
website can serve as a vehicle to capture the emails of visitors to the site. At public events,
prospects can be asked to fill out forms for prize drawings and/or free auditing. Telephone
solicitors can request email addresses to send out electronic files with company information. Of
course, the biggest advantage of email vs. direct mail is the low to no-cost for distribution.
All printed literature that will be used for marketing should yield an electronic version (a PDF file)
in addition to the hardcopy. There should be a library of files, some with general information on
the company and services offered, others more detailed. For example, there might be specific
flyers on BPI Training, Solar PV panels or HERS ratings for new homes. Prospects are usually
willing to share their email address if they feel that they will be receiving something of value.
Facebook
The use of social media as a marketing vehicle has had dramatic growth over the past
few years. There are 150,000,000 Facebook users registered in the United States, this
represents roughly 50% of the population. The fastest growing segment is adults 35 years old
and above. Many businesses are creating Facebook pages in addition to their website. The
average Facebook user is online roughly 30 minutes a day. This allows businesses to build a
database of people who “like” the company. These “fans” can be updated on company events,
daily. Facebook allows companies to show a “personality” that is hard to convey through
traditional websites. Facebook users expect to see photos of employees and to learn what the
staff does both on and off the job. In the growing world of social media, Facebook can be an
inexpensive way to position the CMCA enterprise with a network of customers and prospects.
There is, however, a commitment of time to keep the Facebook page fresh and up to date. The
use of Facebook depends on the interest and skill level of the CMCA staff.
X. Other Marketing Opportunities
One of the benefits of membership in a trade organization is that they frequently sponsor
trade shows for their members. For example, in many communities the Home Builders
Association hosts the local Home Show. These types of shows are well publicized and draw a
significant number of homeowners. Being an exhibitor can be a cost effective way to reach
Energy Audit and Retrofit Business Plan | 7/12/2011
One of the best ways to stay in touch with customers and prospects is to email a
newsletter on a regular basis. Energy efficiency is a popular subject. Sending out an electronic
newsletter with useful information and case histories is a great way to stay in touch with
prospects and build brand awareness. Depending on the staff writing and editing skills, the
newsletter might need to be outsourced to insure consistent quality.
22
prospects. But, to get the most value out of the show, it’s important for the new enterprise to
prepare marketing materials and supplies in advance of the show, this may include:
Trade show booth.
Promotional literature.
Company branded apparel for staff.
Promotional products for distribution e.g. magnets, pens, rulers.
Forms to record sales leads.
Photos of completed jobs.
Case studies of benefits to property owners.
In some cases, a pre-show mailing to prospects inviting them to visit the booth can build
traffic. The key element to a successful show is how well the booth staff engages prospects in
conversation, capturing critical data such as name, address, phone number and specific
concerns regarding energy efficiency. Drawings with prizes is another way of securing potential
lead information from the cards submitted. Post-show follow up is critical to convert leads into
jobs.
Energy Audit and Retrofit Business Plan 7/12/2011
If attending trade shows becomes a significant part of the marketing mix, the company
should consider building a tradeshow booth that demostrates energy efficiency techniques. Mr.
Korey Hart, who is under contract at DNR, has built a booth specifically for energy auditing
companies. A photograph of the booth can be found in Appendix Item 6. This layout and
design provides a good example of how a booth can convey the energy efficiency message to
attendees.
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Testimonials
As discussed under referrals, the most cost effective source of new business occurs
when a satisfied customer tells a prospect about their experience. One way of gathering
testimonials is to simply ask good customers to write a letter with specific details explaining the
services provided and benefits generated. Sometimes it can be difficult to get the property
owner to sit down and actually write the letter. Another approach would be to interview the
customer and record actual quotations from the customer that can be published later. Adding
photographs to the quotes forms the basis of a case history. Most customers are delighted to
participate in this process if they have had a good experience. These case histories with
photographs become a very powerful sales tool. Backing these testimonials up with actual
performance data provides powerful validation of the benefits and speaks to the professionalism
that will help to separate the organization from other energy service providers.
XI. Sales Techniques
In a competitive business environment, it’s important for the entire staff to realize that everyone
in the organization is in “sales.” The entire energy audit team must be customer focused. The
most powerful and least expensive form of advertising is simply “Word of Mouth.” When one
satisfied customer tells a friend, neighbor or relative about a positive experience, this
endorsement is what provides the foundation for growth.
In addition to this customer centric approach, one or two people within the organization will need
a strong sales background to help turn prospects into customers. The sale of energy auditing
services and the subsequent energy retrofit is a complicated multi step process. Figure 8
shows graphically how the sales cycle starts with prospecting followed by securing the contract
for the energy audit. Once the audit work is complete the sales team needs to explain the
results of the audit and close a second contract for the retrofit or upgrade. The “Follow
Through” step is critical to continued sales. This step is frequently ignored or performed in a
perfunctory manner. If done properly, the follow through will lead to the prized referral that
comes from satisfied customers.
Figure 8 – The Energy Efficiency Sales Continuum
To understand the sales process it’s important to understand what motivates homeowners to
invest in energy efficiency. Generally speaking there are three categories of need:
1. Lack of Comfort – Some rooms are too hot or too cold, drafty, mold, smells or uneven
temperatures
3. Do the Right Thing – Some homeowners want to do their part in going green by
reducing their consumption of non-renewable resources.
During conversations with prospects, sales personnel need to have strong
communication skills to understand how to work with client needs and motivations. A suggested
approach is to introduce a topic with a question, listen to the answer and, based on the answer
ask a follow up questions. For example, a typical conversation might go like this:
CMCA: Are you usually surprised when you get you electric bill in the summer months?
Prospect: Very much so, we’ve been trying to turn the A/C off whenever we leave the house.
CMCA: Do you have a programmable thermostat?
Prospect: I don’t believe we do.
CMCA: A programmable thermostat is one way of reducing you electrical consumption during
the warmer weather. Would you be interested in learning more about how you can reduce your
energy bills?
Sales is both a science and an art. A skilled salesperson must understand the subtleties in
developing rapport with a variety of personalities. While the salesperson develops rapport he or
she also needs to learn about:
Energy Audit and Retrofit Business Plan | 7/12/2011
2. Financial – Utility bills are increasing, consumers are looking for a way to save money
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The home itself
The homeowners
Perceived problems, needs and priorities
Financial situation
Decision making process
Other related issues
Energy Audit and Retrofit Business Plan 7/12/2011
Controlling the initial conversation sets the tone for the relationship with that prospect and/or
customer. It’s important to always remember that asking good open-ended questions allows the
salesperson to take control of the interview. The salesperson needs to be able to identify
problems that can lead to opportunities. This consultative selling approach focuses on the
customer’s issues and addresses these issues with the best possible solution. This selling
method is the opposite of the “high pressure” techniques employed by many home improvement
contractors. Figure 9 below shows graphically how the consultative sales process leads from
uncovering the needs, to gaining agreement.
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Figure 9 – The Consultative Sales Process
Profitability
The third step in the successful operation of the energy audit/retrofit company is to be
sure that all contracts are reasonably profitable. The market price for a home energy audit
varies from as low as $300 to as high as $600. For a typical 2000 square foot home with single
zone heating and air conditioning, it’s estimated that the onsite time for a crew of 2 to complete
a full service energy audit is 3 to 4 hours. In addition once the site visit is complete, the auditor
needs to finish the data entry and the analysis. Then, after a thorough analysis, the final audit
report is prepared and reviewed. This “in the office” time will add an additional 3 to 4 hours. If
you add an hour for transportation, the final tally shows that the staff will spend 10 to 13 hours
on one audit. In general terms, most contracting companies target a billing rate of 3 times base
salary of the employee. In this example if the base hourly wage for the two employees was
$17.50 per hour (annual wage of $36,400) the customer should be charged between $525 and
$682. After the marketing costs and overhead is accounted for, the energy audit by itself
generally does not generate strong net profits. The energy audit needs to be done efficiently so
that, at a minimum it breaks even. Generally, the profits come from the retrofit work that follows
the audit.
Energy Upgrades and Retrofits
The confidence and the trust established during the energy audit are critical to
maintaining solid profit margins when seeking contracts for the retrofit work. True
“salesmanship” comes into play when closing the contract for this second phase of the work.
The CMCA representative will have the challenge of explaining the work to be completed as
well as explaining the anticipated energy savings. Cost estimating plays an important role in
profitability. As projects are quoted to customers there are pricing pressures to maintain
competitive pricing, yet be certain that the gross profit is there for the new company.
One area of adjustment for the CMCA staff will be in the cost estimates that come from
the NEAT software that CMCA has been using for the weatherization program. The cost factors
and the payback models are based on internal costs and do not reflect the true market price for
the upgrades. These costs are 40 to 50% below market prices.
XII. Operational Considerations
The CMCA Wx team had been performing energy assessments for many years prior to
the ARRA funds that were allocated in 2009. Because of this experience the team is very
familiar with most of the operational aspects of energy audits and retrofits. Therefore, the
purpose of this section is to identify issues in transitioning a grant driven Wx department to a
commercial enterprise.
Sales
Audit crews
Retrofit services – internal crews and outside contractors
Customer service
Accounting
Randy Cole has show exceptional leadership in his role as departmental manager and appears
to have the background and skill set to take on the role of General Manager.
Each of these departments would have a departmental manager. Possibly the Audit and
Retrofit Departments could be combined for management purposes. An effective office
manager could also be in charge of both customer service and accounting. The one new
position necessary in the “for profit” business is the sales manager. In the section above, Sales
Techniques, this report describes the skill set needed to compete and to close contracts for
audits and retrofits. This new position will require an experienced sales person with a
background in home sales. Initially, the job description would be for outside sales, but could
lead to sales management as the organization grows. This person should be paid a base
salary, but be incentivized by earning a commission and/or bonus based on sales performance.
Energy Audit and Retrofit Business Plan | 7/12/2011
Executive Team
The first position to be filled is the General Manager. This position might be likened to a
CEO or President. As the key executive, this person is ultimately responsible for all aspects of
the corporation which include:
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Software
The Weatherization programs in place throughout Missouri are required to use the NEAT
(National Energy Audit Tool) which was developed by the Department of Energy. On a
commercial basis there are two other popular energy analysis software programs that should be
considered:
•
REM/rate and REM/design – these two packages are related and are marketed by
Architectural Energy Corporation. Their website is at www.archenergy.com. The
software is designed for the energy consultant and is consistent with the RESNET
protocols for HERS ratings. The starting point for an operating licensing fee is $327
/year. Costs will go up depending on the number of concurrent users.
•
TREAT – Targeted Retrofit Analysis Tool – this was developed by the New York State
Energy Research and Development Authority. This package integrates the utility bill
analysis, local weather data and building modeling with a database environment for ease
of use. The cost to buy this software starts at $495.
In discussions with Kory Hart who is under contract with DNR to oversee the energy auditor
program in Missouri, the REM/rate software appears to be the more popular software.
Energy Audit and Retrofit Business Plan 7/12/2011
Equipment
Most of the equipment used by the CMCA Wx team was purchased with ARRA funds.
It’s our understanding that DOE will be issuing guidelines on the use of this equipment at the
conclusion of the weatherization program. Conventional wisdom among CAAs and CAPs is that
the equipment can be used on “fee for service” jobs as long as a rental fee is paid out of the
funds received. Market rate fees can be obtained from local rental companies who have similar
equipment. It’s recommended that the “for profit” company begin to buy equipment separately
from CMCA as funds become available. This provides more flexibility and allows the new
company to be more competitive.
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Corporate Structure
It is recommended that a completely new corporation be registered with the Secretary of
State’s office. This will require persons to be named as officers of the corporation. The CMCA
501(c)(3) should own 100% of the new corporation. The new corporation should also have its
own board of directors. However, board members could be a subset of the CMCA board.
Board members should be selected based on their ability to give advice and referrals to the new
company. The new company must have its own bank account. All transactions between CMCA
and the new enterprise must be clearly documented and provide a clear audit trail. As this new
company is closely related to the 501(c)(3) it’s extremely important that professional legal and
accounting advice will be necessary to assure compliance with federal and state statutes.
Phased In Approach
As CMCA is based in Columbia, it follows that the first phase for the new enterprise
should begin by offering services to residents in Boone County. We also recommend that
phase one services be offered in Cole County, which includes Jefferson City. Combined, these
two counties cover 65% of the homes in the CMCA area. It’s also recommended that the “fee
for service” business start as soon as possible. As was done in Twin Falls, Idaho, the new
company could have a “soft start” on a part time basis. The CAP in Twin Falls, runs their “for
profit” operation only on Friday and Saturday while the weatherization program is still active.
CMCA’s goal is to transition to full time in April 2012. By starting part time, there will be a
minimal amount of investment and the new enterprise will have opportunity to get a “feel” for the
market before the hard launch in April 2012.
A Phase two expansion could include offering services in Callaway and Audrain
Counties. In addition, audit and retrofit services could be offered to multi-family property owner.
Technically, the same methodology would work in assessing the energy use of a multi-family
building, but approaching a landlord with tenants is much different than dealing directly with an
individual homeowner. The decision on whether to move into this new market would depend on
the skill set and comfort level of the sales team.
The final phase would be to expand into the unserved counties of Cooper, Moniteau,
Osage and Howard. This decision would depend on a market assessment and the commitment
to offer services in the more rural, less populated areas of the state.
XIII. Financial
Start Up Funding
The website, http://mosourcelink.com/resources/get-funding gives a good overview of
private and public funding options for start up companies in Missouri. The business owners tool
kit gives an overview of financing for new businesses which includes a discussion of
government financing programs. Included in this discussion are details on the various Small
Business Administration loans. The SBA CDC/504 Loan provides long term financing for the
purchase of hard assets to be used by a new business. Details on all SBA loans can be found
at www.sba.gov.
At the state level the Missouri Department of Economic Development has a business
assistance program for startup business, this is found at www.ded.mo.gov/businesses.
In addition funding may be available through their workforce development division whose
address is www.workforce.mo.gov.
Lastly, funding can come from CMCA in either the form a loan between CMCA and the new
corporation or by establishing a line of credit at a local bank, where the line is guaranteed by
CMCA.
Income and Expense Projections
Appendix 7 presents a three year budget for the Energy Audit / Retrofit Enterprise. In
the year one model, the pro forma shows non-recurring income and start up expenses as well
as the year one annual budget. Our year one assumption was was that in the first year,
weatherization material will be purchased from CMCA inventory on an as needed basis.
Furthermore, there will be a modest investment in additional tools, computers and software
during the start up period.
In projecting revenue we consulted with the Earthways Center in St. Louis where the
staff had been collecting energy auditing data from businesses in eastern Missouri for over a
Energy Audit and Retrofit Business Plan | 7/12/2011
The ExxonMobil Foundation has funded start up energy audit companies in the past and appear
to be receptive to new ventures in this particular area. Their focus is on community
development. More information can be found at
www.exxonmobil.com/Corporate/community_foundation.aspx .
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year. From these conversations we learned that property owners proceeded directly with the
suggested energy retrofits only 35% of the time. All retrofit work included some kind of air
infiltration work and 90% had attic insulation added to their house. Additional insulation for walls
occurred in about 15% of the jobs. There were many instances of insulation for hot water
heaters and for various pipes, these numbers were not considered separately and are factored
into the attic and wall numbers. We also assumed that there will be some start up funds
available to help with the one-time non-recurring expenses and some first year expenses.
Much of the auditing equipment that could be used may have been purchased using the
ARRA or other public funds distributed to the CAAs through the Missouri Department of Natural
Resources. There are restrictions on the use of this equipment or other assets acquired with
public funds with the new enterprise. Care should be exercised to assure that all restrictions are
understood and followed. We did allow for some equipment replacement and for upgrades
during the first three years.
Energy Audit and Retrofit Business Plan 7/12/2011
This financial model was constructed using conservative estimates to create the platform
for a sustainable enterprise. In year one the company will begin with one full time manager, 3
auditors and a half time administrative person. We are anticipating substantial growth in years 2
and 3 in the range of 60 to 70% year to year increases as federal incentives come on line and
the market expands. Our year three projections show a staff of 11 auditors, 3 full time
administrators and the manager
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In27
Appendix
1 – DNR Approved Auditors
2 – CWL Incentives
3 – CWL Approved Auditors
4 – Group One Designs
5 – Group Two Designs
6 – Trade Show Booth
7 – Financial Projections
8 – Home Performance with Energy Star
9 – Sampling of Logo Designs
Energy Audit and Retrofit Business Plan | 7/12/2011
10 – Newspaper Ad
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