Home Performance Contracting: A Growing Opportunity
Many believe home performance contracting (HPC) is on deck as the next big thing for HVACR contractors. And, while customers may not yet be aware of the term, once they understand that the practice may grant better comfort and safety, in addition to cost savings, many are quick to embrace the idea.
Jerry Unruh, owner, ABC Cooling and Heating, Fresno, Calif., noted that customers are virtually clueless when it comes to the term HPC. “We don’t even mention it. Instead, we talk about looking at the house to see if there’s any need for comfort, safety, or energy upgrades,” he said. “We explain that we can do an assessment that includes testing the envelope, walls, and ceiling for leakage, and then offer suggestions for affordable improvements.”
And the tactic has paid dividends.
“It differentiates us from other contractors,” said Unruh, who has experienced tremendous growth since offering HPC. “It really sets us apart.”
Where to Begin
Even though Unruh is very enthusiastic about how much HPC has benefited his business over the last three-plus years, he is quick to point out that the concept initially confused him.
“At first, I wasn’t sure what it meant,” he said. “But, fixing a home’s envelope seemed to be something that fit with our core competency and ultimately benefited the homeowner.”
That expectation was confirmed when Unruh sent several employees to training and certification courses through the Building Performance Institute (BPI). About halfway through the training, Unruh received a call from his installation manager, who said that they needed to start addressing home envelopes — right away.
“We sell a lot of high-efficiency equipment, and we always test, seal, and/or replace the ductwork, because we don’t want to give customers a top-of-the-line unit and have it leak all over the attic or under the house,” said Unruh. “But my manager pointed out that we had been installing these expensive systems with sealed ductwork, but it was the houses — not the ductwork, that was leaking significantly.”
Several months after this eye-opening training, Unruh partnered with Green Homes America and embarked on a crash course in HPC for all employees. After 90 days, more than 300 hours of training, and a serious investment in new employees, trucks, tools, and equipment, the company lunged into the HPC market.
“It literally changed our company,” said Unruh. “At first, I thought I would just add an HPC department, similar to our plumbing and solar departments, but that was the wrong direction to go. I found out that the entire culture of our company needed to change. Everybody needed to understand what it meant to look at a whole house and recommend improvements that truly benefit our customers’ comfort, safety, and savings.”
The customer response was overwhelmingly positive, as evidenced by the company’s record rate of growth. “Thanks to HPC, our employees are energized, and we’ve hired 20 additional people,” said Unruh. “Best of all, our customers are phenomenally happy, and they tell other people about how happy they are, which leads to referrals. Our growth has been way beyond our expectations.”
Shaping the Future
While ensuring optimal system performance has always been a focus at Bel Red Energy Solutions, Mukilteo, Wash., the company specifically became involved with HPC about three years ago. “We had explored this industry segment for over a year, but the turning point came when a former chairman of Air Conditioning Contractors of America (ACCA) explained how he was forced into HPC by changes in local codes and utility programs,” said company vice president, Adam Gloss. “As we began to look at changes that were occurring around us locally, regionally, and nationally, we came to realize that we could either get in front of this and shape our own future, or we could wait until it was dictated to us. We chose the former and have not looked back.”
After a great deal of research and consideration, Bel Red Energy Solutions joined Comfort Institute and took advantage of the training and tools they offered. The company already owned some of the equipment needed, such as duct blasters and flow hoods, but they had to purchase other items, including a blower door, infrared camera, and smoke puffers, said Gloss. “We had all of our managers, our sales staff, and our key technicians go through the training offered by Comfort Institute, and we also had two of our technicians become BPI certified.”
Once trained and ready to go, comfort specialists were able to start helping customers identify and solve problems. “Customers are usually receptive to anyone who listens to them and can solve their problems with comfort, health, safety, and energy-efficiency issues. Our closing ratio for HPC calls is over 80 percent, and that alone shows they are pretty receptive,” said Gloss. “Our focus is on asking them questions that help us uncover problems or areas of dissatisfaction with their indoor environment and then getting them to understand that there are solutions available to them.”
Those solutions, which are designed to fit a homeowner’s specific needs and priorities, are offered after the comprehensive home energy and safety audit is completed, said Gloss. Solutions may include upgrading or replacing the HVAC equipment; duct renovation or repair; duct sealing and insulating; insulation of the attic, floors, and/or walls; sealing of air leaks in the building envelope; ventilation; humidification and/or dehumidification; window replacement; crawlspace renovation; and more. All improvements to HVAC, ductwork, and IAQ systems are performed in-house, while most others are subcontracted out.
While there was a pretty big learning curve getting into HPC, Gloss noted that all the hard work has been well worth it. “We have developed an additional profit center for our business; evened out workflow for our installers in shoulder seasons; seen an increase in our HVAC conversion ratios and average sales; reduced callbacks and warranty work, by proactively identifying underlying issues we would have otherwise missed; distinguished ourselves from competitors; and provided significant benefits to our customers, which have increased their loyalty and referrals. We have also been able to provide a new career path for several of our team members, which contributes to employee retention.”
A Good Fit
When business was a little slow in 2009, Jeff Wheat, operations manager, James A. Wheat & Sons Inc., Gaithersburg, Md., decided to look into some HPC rebates that would help homeowners improve the energy efficiency of their homes. After doing some of this work, HPC seemed to be a good fit, especially since the company already had most of the equipment needed — with the exception of a blower door — to perform energy audits.
“We started out with a non-dedicated person performing audits and sales and found out that it took too much time,” said Wheat. “With a dedicated BPI-certified person, we were able to get back to customers in a more timely manner and increase sales. We are working toward being able to perform the energy audit, run the reports, and go over the results with the customer the same day.”
Customers have been receptive to HPC, especially when they are educated about how the mechanical systems are integrated into their homes,” said Wheat. “We explain that they need to look at their home as a system, including the equipment that makes the heated or cooled air, the ductwork that delivers that air to the living space, and the envelope that keeps that air in the home. A breakdown in any one of these systems causes loss of efficiency and comfort.”
Most HPC fixes include sealing the home, adding insulation, and fixing and sealing ductwork, as well as safety items such as spill switches on water heaters and carbon monoxide detectors, noted Wheat. And the feedback from customers has been almost instantaneous. “People quickly realize that their house is different. We often get phone calls from customers the day after we made these changes, telling us they can’t believe the better level of comfort, especially between floor levels.”
Becoming involved with HPC has not only improved the bottom line, said Wheat, it has differentiated his company from the competition. “Actually, we don’t have any true competition when it comes down to it. We have seen our installation sales increase and with that, a higher gross profit on the installations that incorporate HPC.”
Higher sales, better profits, happier customers — seems like HPC may offer a very strong trio of benefits for HVAC contractors.
SIDEBAR: Words of Wisdom
After implementing HPC, Adam Gloss, Bel Red Energy Solutions, learned four very valuable lessons that he would like to share with other HVAC contractors who are considering getting into HPC:
1. Don’t rely on government or utility programs to drive this business. If it can’t stand on its own, what would happen if those programs disappeared or lost their funding?
2. Unless you have a lot of resources, wade in — don’t dive. Start with what you know — HVAC — and become great at system performance. Move on to another thing once you’ve mastered that, then another, then another. Before you know it — you will have it all in hand.
3. Help is available. There are some great training organizations, franchise options, trade organizations, conferences, publications, etc. And just like you do in HVAC, find or build a business network and be active in it.
4. Unless there is a very compelling reason to do so, don’t rush into anything that adds overhead or demands new resources. This includes accreditation programs or building new divisions (with new tools, equipment, and staff) for HPC work you don’t already do, such as insulation or windows. Start off by subcontracting work you don’t do, and then see if taking it in-house really makes sense. Learn the business first and then see if accreditation is worthwhile.
Publication date: 4/15/2013