This is the third of three posts about the two common business models in the field of energy audits of existing homes. The first one introduced the two models, contractor and consulting. The second one looked at the contractor model.

Again, there are two distinct points of view when looking at these models: the homeowner’s point of view, and the audit company’s. We’ll look at the consulting business model from the homeowner’s point of view first.

The audit company employing the consulting business model performs the home energy audit, but doesn’t itself perform any of the work which the audit recommends. In other words, the consultant can tell you what about the house is deficient, and how to improve it, and usually even write the specifications for the improvements, but the homeowner will need to find someone else to actually do the work. Actually, this fact is what is most attractive about the consulting model to some, and most unattractive to others. Some homeowners absolutely love the fact that the consultant isn’t trying to sell them anything (beyond the audit, that is). The homeowner is nearly guaranteed an objective, unbiased report. On the other hand, this makes it harder for the homeowner because he or she then has to go out and get bids for the work. Most consulting auditors provide a list of recommended contractors, insulators, and what-have-you, but still the homeowner must do their own due diligence in the bidding and selection process.

Some don’t mind at all. A consultant might be the obvious choice for homeowner who wants to do some or all of the work themselves, and most consultants are pretty good at helping the do-it-yourself’er. Another advantage with the consultant approach is that the improvements can be phased in over time. They don’t have to be done all at once. The homeowner can do a little bit now, a little bit later, and then finish it all up even later, and perhaps avoid financing the work in the process. In any case, the homeowner is almost certain to only have the work done that needs to be done.

The consultant’s audit can be more expensive than the contractor’s, but not always. This is because the consultant must make their profit on the only service they perform: the audit. A contractor, as mentioned in the second post, often does the audit as a loss leader and makes their profit in the improvements.

Additionally, the quality assurance performed by a consultant is usually performed on every job, not just a percentage of them. In other words, most consultants will come back and do a “test out” after the improvements have been made in order to ensure that the work done for the homeowner was up to snuff. (Sometimes there is an additional fee for this, sometimes not.) One thing to note: the quality assurance only works if the homeowner takes advantage of it. Many times, the homeowner simply doesn’t.

From the home energy auditing business point of view, this consultant model only usually works for an individual or a company if they are also a HERS rater and therefore do new construction as well. Being a Green Rater for LEED for Homes also helps. In the Midwest, anyway, there usually isn’t enough business to focus on doing audits on existing homes only. The consultant almost certainly will need to diversify into new construction. The only exception to this might be in those states where there are additional state or federal incentives that either generate more business for the consultant, or add profit to each job (for example, via a payment for each home completed). One big advantage for the consultant in all this is that their own overhead can be extremely low. The majority of consultants run their businesses out of their homes. Once the equipment is purchased, usually the biggest operating expenses are for insurance and perhaps for on-going training.

As before, the key for the homeowner or the potential home energy auditing business is to weigh the pro’s and con’s of each model, and then decide which one is right for them. I hope these brief posts have helped in that endeavor.

This is the second of three posts about the two common business models in the field of energy audits of existing homes. The first one introduced the two business models: contractor and consulting.

In looking at the pro’s and con’s of the contractor business model for home energy audit, there are two distinct points of view: the homeowner’s and the company’s. Let’s look at the pro’s and con’s from the homeowner’s point of view first.

Most of the companies offering home energy audits that a homeowner encounters will be of the “contractor” type; that is, the company will not only do the audit and the report, but they will do the necessary work also. This “one stop shop” is often attractive to homeowners because it alleviates the homeowner having to take the extra steps of getting bids and making a decision about who is to perform the work. Sometimes the cost of the audit can also be lower than one done by a “consultant”. Contractors often use the energy audit as a “loss leader” in order to secure the work. In other words, the audit is performed at cost, or at a discount, and the money is then made up (or added to) the cost of having the work performed.

There are disadvantages of the contractor business model for the homeowner. The primary disadvantage is that there is less guarantee of objectivity in the evaluation of the home. The homeowner has to put more of his or her trust and faith in the contractor: the contractor tells you what’s needed, and then sells you the fix. Unfortunately the “fix” can be what the contractor specializes in, or what work is easiest to perform, or what work makes the contractor the most money.

For example, one contractor refused to bid on the work of insulating the attic of a shed roof (where the attic height is quite low), telling the homeowner it couldn’t be done effectively and that it wouldn’t be cost-effective. Actually, it could be done (the attic’s siding could be removed and insulation blown in). In addition, the issue for the homeowner wasn’t cost-effectiveness, anyway. It was comfort. In this case, the homeowner was more than willing to pay for a comfortable home.

In another variation, I’ve seen situations where an energy audit performed by a insulation contractor finds that insulation is needed, or one by an HVAC company that finds a more energy-efficient HVAC system is needed.

But that’s about the only downside to this business model for the homeowner. Additionally, if the contractor is part of a local program (such as a “Home Performance with Energy Star” program), or is an Accredited BPI company, they will have a certain percentage of their home audits reviewed. (But note that the company must be Accredited – and not simply have a certified BPI Professional on staff – before this quality assurance actually takes place by BPI.) The existence of that kind of quality assurance certainly helps the homeowner consider putting their faith and trust in a contractor. There are definitely a lot of good contractors with satisfied and happy customers in the marketplace. (But, like everything else, there are a lot of not-so-good ones, too.)

From the home energy auditing business point of view, this business model is about the only truly viable option. It’s almost that simple. In other words, the “contractors” are the most successful in the marketplace. They make money. For a company that is already in, let’s say, the insulation, or HVAC, or remodeling business, it’s relatively easy to add home energy audits to the mix and thereby increase sales. For admission into most local programs or BPI accreditation, a company only has to have one BPI trained person on their entire staff.

The contractor is also the business model preferred by federal, state, city and utility energy efficiency programs. Why? Because contractors are almost guaranteed the ability to “test out”. They can do the “before” and “after” pictures and thus demonstrate the energy savings that the energy efficiency programs must themselves demonstrate in order to stay funded.

The key for the homeowner or potential home energy auditing business is to weigh the pro’s and con’s, and then decide which option is the best for them. The next post in this series will continue the discussion by looking at the “consulting” business model from both points of view.

This short post is the first of a three-part series on the existing home energy auditing industry. Today, we’ll set the stage and define terms. Next post will evaluate the “contractor” business model of home energy audits. The final post will look at the “consulting” business model.

There are two different business models for doing home energy audits commonly used by companies. If the company performing a home energy audit also performs the work recommended by the audit (or subs the work out), that company would fall under the “contractor” business model. Here, the audit produces a report. The report lists items in the home that need to be addressed. Then, that same company provides a bid for the work on those listed items. In other words, the report generally provides the Scope of Work for the company’s estimate, telling the homeowner what they think the homeowner needs to have done, and what they’ll charge to do it.

If the company performing the home energy audit does not perform the recommended work, but acts as an independent consultant to the homeowner, that company would have the “consulting” business model. In this case, a report is produced. Recommendations are listed, and they are usually (or should be) written as specifications, often detailed. The homeowner then contracts with another company to complete the work.

Why is this even important? Well, the advantages and disadvantages of each model are different, of course. But, more importantly, the advantages and disadvantages are different depending on whether you are the homeowner looking for an audit or a home energy auditor yourself. In other words, what is good for the auditor may not necessarily be good for the homeowner, and vice versa. Along the way, I’ll discuss both points of view – hopefully, doing so objectively – and perhaps give you the ability to see clearly which model best fits your needs.

Of course, what is defined as “success” can be viewed from many points of view. Usually, the success of an home energy audit is judged by the homeowner in terms of his or her need. Did it solve the comfort issue? Is the home now more energy efficient? More durable? Clients rarely wonder if their home is safe, but I have seen homeowners immediately decide that their $400 (or so) was well worth it after learning about a back-drafting water heater or a leaking natural gas line. Of course, as a business I’ve always got to keep my ears tuned to what clients define as success.

In fact, some homeowners seem to feel that their home energy audit is successful even if all they have to show for it is a report. It’s puzzling that people will pay good, hard-earned money for an audit and then do nothing about it.

But what about the auditor him or herself? How does an auditor define a successful audit?

Sadly, many gauge simply getting a job as success – at least historically. The history of this industry is rife with examples of utility and government program that funded residential energy audits, but which then have nothing to show for all that funding since the audits were never acted upon. Early on, many defined simply getting an audit done as “success”. Even now, I suspect some colleagues would define it that way. Sure, they’d love it if their audits were acted upon, but short of that, with families to feed and bills to pay, they’d be happy if their businesses was successful financially. One friend of mine, James Trout (who is behind www.mygreentoolkit.com, a website promoting energy efficiency to realtors), should know. The way he put it, “a lot of auditors are home watching Oprah these days”. Sadly, many of us energy auditors are indeed “all fired up going nowhere”.

Perhaps you already see where I’m going with this. Energy auditors absolutely must define the success of their work as going beyond the mere generation of a report and collection of their fee. They must do everything possible to get the homeowner to act upon the report. By my definition, anything short of that isn’t success.

Of course, I’m not always successful.

But am I being disingenuous? Hardly. Which of the following two scenarios do you think is more successful? A homeowner is entertaining in their home and a friend remarks that she is thinking about having an energy audit performed on her home. The homeowner replies, “Oh, we had one done by Show Me Home Energy Solutions a year ago.” The friend then asks how it came out.

In scenario one, the homeowner answers: “Oh, it explained a lot, and the report was very interesting, although we haven’t done anything with it yet. I can show you the report if you want – if I can find it.”

Or, how about this scenario instead: “Oh, it explained a lot – it was very interesting, and very effective. We had the work done and couldn’t believe the difference it made in the kids’ bedroom. You’re not going to believe what else we found. Here, let’s go upstairs and let me show you…”

You get the idea. The latter, of course, is the truly successful home energy audit. And it is the only path, I think, that will reliably generate future business. Remember, only if the recommendations are actually implemented can the house become more comfortable, or more energy efficiency, or more durable, or safer, or cost less to operate, or increase in value and desirability in the marketplace – or ALL of these things! Consequently, this is what people will be more than happy to talk about to others (for you).

In my own business model, I build the cost of a follow-up quality assurance (QA) visit into the price of any home energy assessment. When the homeowner has the work done, I’ll come back out and check it, and also re-test the home. The homeowner has already paid for this up-front so there’s no additional charge. Hopefully, this serves as an incentive to have work done.

What often happens, though, is that the work is performed but I’m never called back for QA. The homeowner is satisfied with the results and apparently never gets around to anything more than a phone call back to me. (In contrast, do-it-yourselfer’s almost always call me back for a follow-up.)

So be warned, homeowner: once I do a home energy audit, you can expect a phone call (or two) from me in the weeks or months ahead.

The whole industry is struggling with this issue. An alternative business model is to combine the contractor/remodeler business with the energy audit (the latter usually as a loss leader). But as models go, that business model has it’s own foibles. But, then, that’s another blog post…

Thus, that’s how I define a successful home energy audit. Whether you are a homeowner or a colleague, I’d be interested in what you think. What makes an energy audit successful, and what suggestions you have to help auditors make them so?