Taking a few minutes to write down a few of my thoughts on utility energy efficiency programs, tax credits, utility or third party financing for efficiency projects, and how this relates to running a successful Home Performance Contractor business.
Don’t Let the Past Predict the Future
While it is impossible to predict with certainty the future of energy efficiency programs and their subsidies or financing aspects, a few things are for certain:
- Energy efficiency programs come and go
- Periods of relative fluctuation will alternate with periods of stability
- Times of uncertainty will alternate with times of certainty
- Private contractors enter and exit the efficiency industry at all times
Contractors face the real world every day marketing and prospecting to consumers winning some bids while losing others. The most important thing that Home Performance Contractors can do is to plan for the future of their businesses with an eye towards independence from utility program rebates, tax credits, and third party financing. Taking advantage of available resources is important, but determining your own destiny independent (as much as possible) from the overall microcosm your business is operating in may be even more important.
Expanding the Platform of Operation – Bundling of Products & Services – Adding to the Menu
An interesting observation I have made working with Home Performance Contractors is the difference in platforms from which individual businesses operate. Some businesses specialize in test-ins and test-outs. Other businesses specialize in insulation and air sealing jobs. Some businesses come with a background of performing general home remodeling services such as carpentry, drywall, or paint jobs. Other businesses have a strong base in HVAC services.
Comfort comes from the experience that a contractor can draw upon when delivering a product or service. If there is enough work to go around there is nothing wrong with sticking to the familiar. The problem with comfort is that it can lead to complacency. Some contractors may not have to worry. They are sufficiently strong to weather a storm. However, businesses strong in one area may have to look at adding products and services to the portfolio to be viable in the long run.
The most successful businesses I encounter in the home performance industry make sure to perform their core service well and consistently evaluate the addition of products and services that are easy to implement and will not compromise the focus of the business.
My Top Product Category to Consider
Electric water heaters are at the top of my list of new product categories for contractors to consider. Home Performance Contractors spent 2-4 hours in a customer’s home. It is very easy to look up the age of a water heater by writing down the manufacturer, model, and serial number because the serial number includes the date of manufacture. Each manufacturer has a different way of encoding it, but it is easy to look up via a quick and easy Google search.
My recommendation to contractors is to write up a bid for a water heater installation every time they see a water heater 10 or more years old in a customer’s home. Most plumbers are competing on price not on quality or energy efficiency because they are called in to replace a hot water heater due to failure. Home owners simply pick up the phone: “Get me hot water!” When servicing a home with a 10+ year old water heater, a contractor can encourage the homeowner to be proactive and replace the water heater with a more efficient model prior to failure. This can allow the homeowner to work with a professional to make a more informed decision about what water heater is the best fit for their household as opposed to being stuck in a dire situation when all they are concerned about is getting their hot water back.
Home Performance Contractors can play an important role in helping out with good water heating solutions. Contractors that don’t have water heater know-how or experience but would like to add this product category to their list of business services can do so easily.
Entry Level to Advanced Water Heating Solutions
Electric water heaters in general are easier to work with than other water heaters on the market. Consider using Rheem Marathon water heaters as an initial water heater product for your home performance business. Marathon water heaters have been around for roughly 30 years and are manufactured in Eagan, Minnesota. Marathon water heaters are super-insulated and carry a lifetime warranty against rust or corrosion. The failure rate of Marathon water heaters in the field are at less than 3%. The manufacturer stands behind its warranty making it easy for home performance contractors to quote the product and installation with confidence.
Energy Trust of Oregon sees more than 700 Marathon water heaters installed annually by contractors specializing in energy efficient solutions. The product is generally not available in big box stores or via your standard plumber in your area. Plumbers are most often interested in installing products that require a new water heater installation every 6-15years – why wouldn’t they? Marathon water heaters offer home performance contractors an opportunity to differentiate themselves from the crowd.
Home Performance Contractors should consider partnering up with a local friendly plumber that will provide the installation for a negotiated flat fee. Installation costs for an electric water heater vary by region from $300 – $600 per installation. The product cost for a 50 gallon Marathon cost roughly double of what a 12-year warranty water heater costs depending on where they buy it. Contractors in Oregon and Washington usually mark up the product and installation between 10-20%. This provides an additional $100-$300 towards the contractor’s bottom line per home performance job that uses a Marathon water heater. Stretched over the period of a year these water heater installations can pay for part of your variable or fixed costs or in the best case: can result in profit.
Besides being a trouble free, durable, long-lasting electric water heater on its own, Marathon water heaters can be used as part of a two tank solar thermal water heater installation for regular sized households. The Marathon water heater takes the role of the so called booster tank. A standard solar thermal system with a preheating tank can be installed right beside it. Home owners can finish the conversion towards going solar at any time or decide to stick with the Marathon water heater on its own.
Similarly, it is possible to set up a heat pump water heater as a preheater in combination with a Marathorn water heater as booster tank. This may be a good solution for environmentally friendly electric water heating solutions for homes with higher demands for hot water.
With this foundation of knowledge about different installations and applications for Marathon water heaters to pass on to clients, home performance contractors can feel more comfortable to go out in the field to customers’ homes with prepared ready-to-go bid sheets. The bid sheet gets filled out and handed over to a potential customer if the water heater is 10 years old or older. This is the first step in the process to encourage the homeowner to be proactive and install a more energy efficient and reliable water heater before a failure can occur.
Given the uncertainty of energy efficiency programs and tax credits, Marathon water heaters provide home performance contractors with the opportunity to expand their business with an easy to install product that also provides an assurance of high quality and durability.
Next Steps to Take When You Feel Comfortable with Water Heating
Once a contractor is familiar and comfortable with the technology, the bidding, and sales of Marathon water heaters, the foundation is laid to increase the business’s water heater portfolio by considering heat pump water heaters. Heat pump water heaters have come a long way since their introduction in the US-water heater market in 2009. The products available are much better today than what they used to be in the early 1980s.
With that said there is still the gas water heater side of things. I will leave this side of water heating to future blog posts.