Wow, we are now 32 days into the government shutdown, meaning we have been without Energy Star Portfolio Manager (ESPM) for a month. Ugh. That creates challenges for managing portfolio clients that use building scores to track building performance. With no end in sight I wanted to ensure our industry is aware of a viable alternative.
What’s Your Plan to Double Your Pull-Through Revenue?
Most management teams we work with have a pretty good idea of what this number is every year and what the ratio of annual pull-through dollar to service contract dollar results are versus a predefined target. It’s one of the areas we’ve focused our Software Development and Channel Development teams on for the past couple of years.
We’re beginning to see a sea change in some of our partners’ results the past few years. Those that have begun using Real-Time Building Analytics are using this technology to drive Continuous Commissioning services as an enhancement to their traditional contract services. While these companies are experiencing some lift in their initial contract values, the real increase is showing up in pull-through work, including service, project and controls opportunities.
This shows up in the form of additional HVAC dispatch service and controls service, but it’s also leading to significant equipment and systems upgrades. As the value of these types of services become obvious to the client (fewer if any comfort complaints, measurably extending equipment life and measurably reduced costs), our partners’ credibility builds with their customers. They condition their clients to expect updates using building data and results. This leads to trust such that when they show up with a financial proposal that meets the client’s financial hurdles, they tend to get the work.
While traditional HVAC service contractors hover in the $1-2 range of pull through work for each $1 of Service Contract value, I am seeing numbers that range from $3-$5, and even up to $6 per $1 of contract.
Sounds pretty outrageous, doesn’t it?
Alex Waibel is a Principal of BuildingLogix, an analytics platform developed by Waibel Energy Solutions a sophisticated HVAC Service Provider based in Dayton, Ohio. The Waibels have been clients for almost 10 years and we’ve worked closely to align our technology and processes to leverage both parties’ expertise. They’ve been a great incubator for testing out new service offerings like Guaranteed Savings PM programs and integrating Continuous Commissioning into traditional PM service offerings. Alex and I just finished a project analyzing their service revenue growth over the past 10+ years.
According to Alex, "We've increased our service revenue by 231% since the economic recovery. The primary drivers for that growth have been integrating Building Analytics into our service offerings and equipping our sales force with automation and training that enables us to efficiently scale. Distilling complexity into value and benefits that our clients understand is the catalyst to sustained growth."
Jon Fruetel operates MRG out of Nashville, TN. Jon has pioneered the integration of our platform with Building Analytics. He has had tremendous success this year leveraging data from his Continuous Commissioning process to drive project upgrades, $3MM worth! Measurable reductions in energy costs (over $1MM) are driving this growth.
While these methods are driving tremendous project growth, they are also driving new PM contract growth as well. Jon bundles building analytics into most of his service contracts betting that the investment will generate a healthy return. It’s working.
These are but two examples of rapid revenue growth our clients are driving. So, what are the keys to
driving this type of growth?
Commit to delivering measured reductions in building operating costs as your core value proposition.
Use software automation to help sales teams efficiently uncover and simply present opportunities to leverage your service offering to deliver lower costs.
The senior team needs to commit to using building analytics to drive a continuous commissioning program. Drive the Strategic plan including KPI’s to hold teams accountable.
There’s a wave coming. I’ve seen these tools evolve over the past 10 years and over the past 18 months I am seeing accelerating adoption in the HVAC channel. The “bigs” are already in. Large national and regional companies are, for the most part, in the early stages.
Are you adapting? Do you have a plan? Think seriously about this opportunity. The industry is moving this direction.
BuildingAdvice has been analyzing buildings for well over a decade for Carbon Dioxide levels, Temperature, Relative Humidity, and Light among other variables. The results from each building and zone allows us to highlight Trends in the Built Environment like the persistent overventilation of buildings. In fact, according to our research, 77% of all zones in buildings across the United States and Canada are over-ventilated. Of the total population, only 5% are under ventilated, and a modest 18% are acceptable when compared to ASHRAE Standards, U.S. Green Building Council, Indoor Air Quality Association, Health Canada, BOMA, ENERGY STAR, and DOE. Carbon Dioxide levels measured during the occupied times that fall within 700-1000ppm on average are considered acceptable. Those below 700ppm are considered over-ventilated, and those above 1000ppm are considered under ventilated. While results included all building types, the highest concentration of building types experiencing under ventilation were K-12 buildings.
I heard those words come out of the mouth of one of my clients as he trained a team of Project Salespeople on our Project Financial Analysis software platform. While I appreciated his exuberance, I must admit I was taken aback by that statement. While I didn’t challenge him in front of the class (believe me I didn’t have to), I made a point of challenging him later that evening over dinner. His responses form the basis of this post.
Benchmarking has become universally accepted as a logical and efficient first step in assessing a building’s energy efficiency. For many of our clients it has become an effective way of engaging sales in the front end of the energy services delivery process. Benchmarking provides an indication of relative performance among common building types as well as total energy spend. Often used in the survey process of both service contract and equipment upgrade sales, it is a great way to quickly qualify buildings in the commercial environment.
While there are many different types of benchmarking tools available, Energy Star’s Portfolio Manager (ESPM) is the predominant tool used for this function. Its breadth of buildings, years of existence and the power of its data normalization combine to make it the “go to” tool for our industry.
However, like any tool, it has its limitations. Over time we saw patterns of sales adoption of the benchmarking process.
What is your Project Sales to Service Contract Revenue Ratio?
Do you track it? Should it be better? How could you improve it?
Having spent the past 11 years working closely with mechanical contracting and controls sales teams, I’ve always been perplexed by the lack of evident proactive harvesting of equipment upgrades from our clients’ hard won base. Well run commercial contractors track their ratio of “add on” business to service contract business so they are aware of the importance of this segment of revenue. While many clients that we work with seem to be relatively satisfied with their results, it’s interesting that the bulk of that revenue comes from a highly reactive, run-to-fail, repair and replace business model.
BuildingAdvice was formed as an offshoot of AirAdvice, a company founded in 1999 to address IAQ issues in the built environment. Established in 2008 as a division, BuildingAdvice’s mission was, and continues to be, enabling the mechanical contracting, control and ESCO industries to partner with clients to measurably reduce their facilities’ operating costs and carbon footprint through software automation. Working through our channel we have gained valuable experience in thousands of buildings throughout North America and intend share our experience through this blog.