“What’s Wrong With The Home-Energy Audit Industry?”

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That was the question on a recent industry forum, the gist being why home auditors are having a hard time breaking into the mainstream.

Well, I’m not sure I agree with the premise of the question. Some in the industry are having a relatively easy time reaching mainstream customers. They’re growing sustainably and profitably as they do it. However, I get the point. Many existing home energy auditors are struggling.

Here are some of my observations about why, and what many in the industry are missing.

1. It’s not (usually) about the audit.

For most homeowners, it’s not all about energy or energy-savings. Even more rarely is it about the audit. Yes, there are exceptions, but it you want to go after the bigger market, you have to think outside narrow energy-efficiency box until the rest of the market wants that. People buy want they want, and this is not necessarily the audit or even the energy savings you want to sell them.

2. You can’t do an audit if you don’t get invited to the home.

Many home energy auditors or efficiency-centric contractors don’t know how to generate leads. If you can’t generate a lead, you can’t do an audit let alone convert that opportunity into a meaningful home improvement. Problem number one: most look at this as an eat-what-you-kill, deliver and say goodbye approach, rather than a customer-for-life approach that can deliver value and profits over 20 years or more. Problem number two: see the first point above–today, “energy audit” isn’t the sexy message that makes the phone ring off the hook. Problem number three: poor customer service, from taking weeks or months to complete and deliver reports or simply not retuning calls, makes customers unhappy and stymies what should be a huge lead source, referrals. There are a lot more than three lead generation problems, but let’s keep moving.

3. Energy audits don’t save energy. Improvements save energy–and you have to sell the improvements.

Many auditors, especially some of those pushing for an independent audit, think selling is evil, that sales are to be avoided, and that anyone doing sales are not to be trusted. Hogwash. Sales are what leads to home energy improvements. Yes, the sales should be based on a combination of sound science and customer motivations. Yes, “do no harm” should be part of the equation. But without taxpayer money, and often even with it, you can’t fix homes without sales.

4. Most homeowners don’t want to pay the cost–in either dollars or time–for an independent home energy audit.

The insistence that audits MUST be independent of the person doing the work ignores market realities. Despite assertions that it’s what they do best, independent audits do not ensure quality—and sometimes inhibit quality and reduce value.

People don’t want to pay for the audit. The market decides whether they are willing to pay the additional cost—more on that in a moment. Some homeowners are—and more power to them. I support their decision and accept the business model of those who choose to deliver independent audits. Most homeowners are not willing to pay the extra cost for that independent audit, and I support their decision and accept the business model of those who deliver the audit services right alongside turnkey installation service all under one roof.

5. In my observation, most home energy audits do not generate accurate and actionable work scopes.

One auditor recently suggested that “Many contractors do not have the knowledge & experience of a good energy auditor.” That is true. But more true is that most auditors don’t have the knowledge and experience of a good contractor. Often audit reports contain recommendations which have no practical basis. They do not address fundamental code and structural issues. They do not contain specifications that can readily be handed to contractors to perform. And they make cost-effectiveness recommendations without knowing actual costs (because that is unbiased!)! I said “most” not “all”. If you are an independent auditor who provides accurate and actionable workscopes, good on you! But almost always a contractor has to redo the essential elements of an audit to develop and price a work scope. The are many reasons for this including the need to gather the necessary information for installation and pricing and liability. What this means is that the customer pays twice—without twice the value.

6. Nominal price doesn’t not necessarily correlate with the quality or thoroughness of an audit.

A lot of auditors focus on the price of an audit as a measure of it’s quality. These folks should study profit-centers, loss-leaders, lean approaches to service delivery, and other basic business principles. I’ve seen crappy reports generated by crappy clipboard audits at a price of $600. And I’ve seen several hour audits with a battery of diagnostics and an understandable report delivered for free. (I’m not advocating that approach.) What price you charge the customer for the audit depends on a lot of things, including the business’s growth strategy, what additional revenue opportunities you have available to you, and how patient you can be to wait for those opportunities.

7. Costs without value are waste.

While the nominal price doesn’t determine quality, there is undoubtedly a cost associated with an audit. An independent audit which might cost $700 (no wonder you’re not making money delivering it if you sell it for $500!) represents $700 worth of air-sealing, insulation, equipment upgrades or other measures that many customers no longer have the cash to pay for. One auditor reports, for example, that he is able to deliver it for $350 per audit. To make money, that $350 has to cover not just his direct and indirect hourly time, but also his truck, his gas, his insurance, his equipment amortization, his health care, his retirement plan, his vacation and holiday pay, any office supplies, any marketing needed to ensure he stays busy, and lots of little things I’m not listing. If he can deliver an accurate and actionable set of recommendations that provides value to the customer, and make enough money to stay in business (without relying on “program” handouts or mandates), good for him and his customers!

8. Independent auditors do not equal accountability.  And independent auditors are often not accountable.

Accountability. Sure, some contractors don’t hold themselves accountable. But most auditors don’t hold themselves accountable, either. Independence doesn’t equal accountability. They don’t guarantee results, they don’t have contractual obligations for results, (and results go way beyond energy savings) and often their work product doesn’t lead to results. Circle back to number one. No results means poor referral leads.

9. Good work only happens if there are contractors who can do good work. 

Good work doesn’t just happen because there is a recommendation in a report (especially if that recommendation isn’t accurate and actionable). Maintaining 100% independence from the contractor doesn’t magically lead to quality installations. You need good contractors for that. There aren’t enough of them. If you’re not doing the work, you’d better find or develop contractors who can.

10. If you don’t make money you can’t sustain the business or scale and fix more houses.

If you don’t don’t well on the business side, you can’t do as much good—even if doing good is all you really want to do. Part of a sustainable business is profitability. Learn how to succeed in business and you’ve got a better chance of fixing more homes–and succeeding in business!

11. The audit-only approach can and does work.

There are guys doing it well. They are smart. They pay attention to the business side of things, not just the technical side of things. If that’s the approach you choose, have at it!

Audit-only isn’t the only approach, though. There are one-stop shopping businesses fix a lot of homes, do a good job of it, and growing year after year.

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About the Author:

Mike Rogers is the President of OmStout Consulting. A nationally recognized expert in residential energy-efficiency, he works with contractors and programs to scale sustainable market approaches to improving homes. More on Google+

Comments

  1. Adam Gloss  July 25, 2013

    You are spot on Mike. There are lots of models that will work, but ALL of them need to provide homeowners with actionable solutions – that is what we are selling, NOT just testing. We hear complaints from homeowners who have had testing done, but are left to their own devices to find quality contractors to do the work afterwards. A diagnosis without access to the proper course of treatment is bad medicine just like treatment without proper diagnosis.

    As a contractor who does audits, we find that most of of our testing is done as part of the process of identifying the root cause of problems in customers’ homes. But we can also provide them with prioritized solutions, pricing, and a way for getting them done. In the end, we are accountable for the result. So we put as much care and attention into the testing and recommendations as we do into the actual work – and we do it all with Integrity. I don’t see any conflict of interest in our model – just real benefits for the homeowners we are helping.

    reply
  2. Jason Malikow  July 25, 2013

    Lots of good observations here, Mike, thank you. The value proposition for the homeowner or landlord is probably the number one factor for auditors trying to sell a new customer. If an auditor can’t quickly show the current performance of the envelope and real world energy costs versus improved home comfort, efficiency, and lower operational costs post-retrofit, the owner isn’t going to buy. Homeowner education is a service the industry has to do effectively in order to grow.

    Jason Malikow
    Director of Marketing & Operations
    AREVS

    reply

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