HVAC contractors have the inside track to billions of dollars of new profit in a red hot market that has little or no competition. That market is energy services.
Everybody's talking about the need to save energy. There are those who see every dollar we ship overseas to buy energy as funding a threat to our own national security. Others see every kilowatt generated as another nail in the coffin of a warming planet.
In the middle are those who simply see rising energy costs as a burden on the finances for their homes and businesses. Using less energy is good. I think that's the one statement we can all agree on.
Several energy agendas compete for airtime, including renewable energy, alternative fuels, and energy efficiency. While most are worthy pursuits, they are challenged in being able to make a significant financial impact, especially in the near term. But, the opportunities in energy services - helping reduce the amount of energy used in existing buildings - are both real and immediate.
Look at the world through the eyes of your customer - the building owner or property manager. Vacancy rates in commercial real estate markets are approaching 20% nationally. Rental rates are dropping. Property managers are cutting budgets wherever possible in an attempt to offset these losses. Right now, it's all about reducing operating costs.
“A couple of years ago, rent appreciation had a major impact on asset values,” according to Mark Fitkin, managing director for national developer, CB Richard Ellis. “Operating costs were not at the top of building owner's priority list. Today, as rent growth has slowed, reducing operating costs can have a significant impact on the value of a building. Energy efficiency has now become a priority.”
In the midst of the doom and gloom, there's an opportunity for you to position yourself differently, as someone who can provide solutions, not add to the problem.
Energy is the Key
If you can expand your service business beyond standard preventive maintenance to include basic energy services, you create true differentiation of your service offering. Moreover, if you can't prove that you save your customers more than you cost, you risk losing service agreements. With energy services, you reposition your service offering from a cost (which might get cut) to a catalyst for savings that they can only get from you.
Commercial HVAC contractors are uniquely positioned to successfully provide energy services for three key reasons:
- You already know the customers
If you provide mechanical service today, you have a base of customers to which you can immediately begin selling. You know the buildings and systems and you're set up as a supplier - none of these barriers is an issue for you. You simply need to qualify which of your existing customers are good candidates for energy services.
- The solutions are cost effective
You can deliver projects that have a quantifiable return on investment that can meet the most stringent criteria. Low and no cost changes to operations and maintenance procedures can have immediate payback. Demand controlled ventilation and VFDs can pay back in less than two years. And larger capital projects like equipment replacements and controls retrofits can have payback periods of 5-7 years, and there are often rebates and tax credits available.
- The service infrastructure is in place
You own trucks. You employ technicians and salespeople. By leveraging your existing infrastructure, a small shift in what you're currently doing can both increase your profit and solve a significant problem for your customers.
To start, keep in mind a few key principles.
First, treat this as a sales initiative, not a service initiative. Your sales team needs to drive this, not your technical team.
Second, focus on the financial buyer, not the technical buyer. This may be a new way of selling for some of you. If you're only talking to the building's engineering staff, you're in trouble. They don't write the checks. Find out who controls the purse strings, and talk to that person.
Third, make it easy for your customers to say yes, by clearly communicating the benefits.
Incorporating energy services into your business is uncomplicated. Define the services you'll offer, incorporate them into service agreements, and make sure that your service and project/equipment sales teams are properly incentivized to work together to bring in projects.
Energy Service Agreements
Because one of the key principles involves clear communication of the benefits of working with you, you'll want to create a branded program that immediately signals a differentiated service offering. We've coined the term “Energy Service Agreement,” as a simple way to communicate that you're doing something different from everyone else who's doing preventative maintenance. An Energy Service Agreement includes what you're doing today to properly maintain mechanical systems and controls, plus a few basic services meant to attack energy costs:
- Benchmark energy performance against peer buildings
- Establish a baseline of energy performance
- Identify ways to improve energy performance
- Provide for continuous improvement.
This small shift in what you deliver would be perceived as a world apart from the standard maintenance agreement. Most importantly, you're now directly addressing the building owner's pain.
Here's a simple model for how you could structure a tiered energy services offering:
This example provides a range of services that can be tailored to match the needs of the customer, driven by their current annual energy spend, pressure to reduce operating costs, and sustainability initiatives. The benefits to you are that you protect and grow your service base by addressing the most relevant customer need, deliver more profit per service contract, and gain the inside track to winning future retrofit projects.
Through a minor modification to your current service agreement model you can deliver solutions that your customers are looking for in a very underserved market. You can change the buying criteria from a price-based commodity (mechanical service) to an ROI-based value (energy consulting) and realize significant benefits for your company in the process.
It's not hard; it's just different. And, in this market, different is good.
Tim Kensok is vice president of market development for AirAdvice, a leader in diagnostic technology and programs that enable service providers to improve the energy efficiency and mechanical systems operations of their customers' buildings. Call 866/247-4800 or visit airadvice.com/commercial for more information.