# Unstable Energy Prices Can Help Increase Sales

May 9, 2001
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I believe there are only three things that must be in place before people buy from you:

1. Value must exceed price.

2. Consumers must want your solutions to their problems.

3. They must be able to afford it.

Unstable energy prices can make owning a new comfort system more affordable than ever before.

## ESTIMATE HOW MUCH THEY’LL SAVE

The cost to heat and cool a home, over the life of the home, could be more that the initial cost of the home.

The majority of your customers’ energy bill goes for heating and cooling their homes. One way to determine what it’s costing them now is to take their mid-spring and mid-fall gas and electric bills, add them together and divide by two. This is now the estimated “base load” (the cost to dry clothes, provide hot water, lights, etc.).

Anything above this amount for gas typically goes for heating. Most usage above the electric “base load” electric bills goes for air conditioning.

If it cost \$688 per year to run the air conditioning equipment per year, find the rated efficiency in a resource like Preston’s Guide. If the existing unit is 6 SEER (when new and properly installed) and it is replaced with a 14 SEER unit, the customer would save about \$393 per year.

6 SEER Ã· 14 SEER = .43 X \$688 = \$295

\$688-\$295 = \$393 Savings

If they don’t have past bills, customers can request a 12- to 24-month “utility history” from their utility company. Requirements vary, but customers can usually request the history be e-mailed or faxed directly to you. In some areas, the annual usage appears at the bottom of each bill.

## USE SAVINGS CHARTS

To save time, estimated energy savings charts are usually available from hvac industry manufacturers, utility companies, and hvac sales seminars. To determine your customer’s estimated effective utility rates for the chart, divide their bill by the units of energy used, as in these examples:

(Natural gas)\$269 Ã· \$395(Therms) = \$0.68 per therm

(Electricity) \$247 Ã· \$2860 (KWh billed)= \$0.086 per KWh

Because energy savings charts use therms for natural gas calculations and some utilities don’t, use these factors to convert your customer’s bill to therms.

1 therm equals: 100,000 Btu’s, 100 cubic feet (1CCF)

10 therms equals:1 MCF, 1 million Btu’s (MMBtu)

Don’t forget to let them know these are estimates and can vary widely based on usage, time of year, and rate structure.

In the era of unstable energy prices, yesterday’s energy savings charts are wrong. Due to changing wholesale prices for energy, your customers effective rate will fluctuate, sometimes every month. If your chart originally used \$0.50 a therm for natural gas and your customer’s price increased to \$0.65, divide the new rate by the old rate.

0.65 Ã· .50 = 1.30 (30% rate increase)

On the Estimated Annual Heating Savings line of your energy chart, multiply the savings by 1.30 to reflect the increase.

(Current Heating Cost): \$750-\$500 (Heating Cost after new furnace)= \$250

Estimated Annual Heating Savings: \$250 X 1.30 = \$325 savings at new rate

## ENERGY SAVINGS MAKES IT AFFORDABLE

A comfort system is one of the few things that pays you to own it.

To show how energy savings help pay for their comfort system investment, divide estimated annual savings by 12 months for annualized monthly savings, then subtract the estimate monthly savings from the finance cost.

\$393 (Estimated cooling savings) + \$325 (Estimated heating savings) = (Estimated annual savings of) \$718 Ã· 12 = \$59.83 (Estimated monthly savings)

139 (Monthly investment to finance \$6,000) – \$59 (Estimated monthly savings) = \$80 (Estimated out-of-pocket per-month).

Make sure to tell prospective customers that rates and savings could go up or down sharply in the future.

## SELL INVESTMENT, NOT PRICE

Savings bonds can’t keep you warm at night.

If you installed a new comfort system for \$6,000 that saved your customer \$718 the first year, s/he would realize a 12% return on her investment (ROI).

\$718 Ã· \$6,000 = 12% First year ROI

Most investments are taxable. For the new system investment to be compared to a taxable investment, assume the homeowner’s tax rate is 36% [100% - 36% = .64]. In this case, the homeowner would have to get an 18% return on a taxable investment to equal the first year’s savings from new equipment.

12% Ã· .64 = 18% Equivalent Taxable ROI

Again, it’s impossible to promise certain savings or specific return on investment.

## BETTER COMFORT, INCREASED SAVINGS

If people only bought heating and cooling equipment to save money, they wouldn’t own it. Even in the era of unstable energy prices, people buy comfort systems to be comfortable. Saving money on energy bills is only one benefit. If you want all the profitable business you can handle, offer energy savings and comfort! Remember:

• Variable speed furnaces and air handlers can provide more comfort with constant air circulation and continuous air purification, all for about the cost to run two ceiling fans.
• Precise humidity levels can save up to 5% to 10% on summer and winter energy bills.
• Properly sizing and sealing ductwork can boost comfort while slashing energy consumption by over 25%.

• ## VALUE MUST EXCEED PRICE

Choosing the right comfort system is one of the most important decisions they’ll ever make.

Their decision affects everything from how comfortably their children sleep at night to their energy bills for the next 20 years. To help customers make the right decision, ask the right questions. Answers to questions like these can help you and your customers both determine what they truly value.

• Are there any areas that ever get too warm or too cold?
• Does the home get too muggy or too dry certain times of the year?
• How important is quiet operation of the indoor section of your comfort system?
• On a scale of one to 10, how do you rate the importance of reducing your energy bills?
• Once you know what your customer values, offer the level of comfort and savings they said they want — then show them how they can afford it now.

If history is a guide, unstable energy prices will bring out a hoard of folks trying to offer high efficiency equipment at unbelievably low prices. Find out how to truly set yourself apart from the crowd and eliminate the competition in my next article, “Problems Are Not Solved by Equipment Alone.”

Steve Howard can be reached at 800 515-0034 or Steve@NoPressureSelling.com (e-mail).

Publication date: 05/07/2001

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