Mark Jewell's Blog: Selling Energy, page 223

Weekly Recap, December 17, 2017

Monday: Read How to Be a Power Connector, by Judy Robinett, which centers on how to optimize your interactions with contacts.


Tuesday: Explore the costs that should be included in the financial summary of any efficiency project.


Wednesday: Explore the savings portion that should be included in the financial summary of any efficiency project.


Thursday: Learn how to effectively discuss the potential P&L benefits of your efficiency project with your prospects.


Friday: Explore the concept of Cap Ex Reserves, a topic you should really understand when approaching an income-producing property with an efficiency project


Saturday: Check out this article on Inc. for Warren Buffett’s three-step strategy for prioritizing goals.

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Prioritizing Your Time

As the end of the year draws closer many find themselves re-evaluating their lives and setting new goals.  Well, ideally.  You’ve heard me mention the famous Chet Holmes quote, “Most people spend more time planning a vacation than they do planning a life.”  But when it comes to goals, which ones should be put first?

Look no further – Warren Buffet has some advice.  His strategy involves three steps that will simplify the process and remind you what is ultimately not important to you.  You can read the full article here.

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Cap Ex Reserves

Yesterday, we talked about the types of Profit & Loss benefits you might choose to discuss with your prospects. Today, we’ll delve into the concept of Cap Ex Reserves, a topic you should really understand when approaching an income-producing property with an efficiency project… especially one where the tenants presently pay the utility bills and would benefit from efficiency maneuvers.

An income property owner who offers space for lease will inevitably need to address capital equipment failures from time to time. Most leases treat any expenses incurred to replace this capital equipment as the landlord’s responsibility, figuring that maintaining the infrastructure of the property is an inevitable “cost of doing business” when you earn your living renting space to others for a profit. Income properties typically maintain a Cap Ex Reserve account to handle these sorts of expenditures.

Interestingly enough, if your prospect has Cap Ex Cost Recovery language in his or her lease (as discussed in the “Cap-Ex Cost Recovery” blog last month), it may be possible to replace that soon-to-fail equipment as part of an “energy efficiency” agenda before it actually stops working. That way, while your prospect might use Cap Ex Reserve dollars to purchase the replacement equipment, they could recoup that capital within a reasonable span of time by recapturing dollars that the tenants are presently squandering in unnecessarily high utility bills. Essentially, the landlord would assess the tenants for an amount (less than or) equal to the reduction those tenants are likely to see in their utility bills, essentially repurposing those utility savings so that they amortize the cost of the new equipment. In some cases, the lease even allows the landlord to charge a specified interest rate to cover the “carrying cost” of waiting for the principal to be fully reimbursed by the tenants.

Years ago in New York City, former Mayor Bloomberg convened a large task force of developers to explore the opportunities for optimizing the use of this so-called Cap Ex Cost Recovery provision to accomplish energy-saving retrofits in tenant spaces in the middle of existing leases. They came up with a new arrangement called the Energy-Aligned Lease Clause. It said that if a landlord did an improvement that was projected to reduce operating expenses for the tenants, he/she could recover 80% of the projected savings in the form of additional rent and would pass the other 20% of the projected savings to the tenants. This approach would give the tenants a “buffer” equal to 20% of the projected savings in case the landlord’s engineers were overly sanguine about how much savings could be produced by the proposed retrofit.

The advantage of doing this, of course, is that you make the tenants more willing to participate in this Cap Ex Cost Recovery exercise without overly elongating the landlord’s payback period. What would have otherwise been a four-year payback project might turn into a five-year payback project because the landlord is letting the tenants enjoy 20% of the savings.

Still, if it increased tenant goodwill and allowed the landlord to execute capital improvements that would have otherwise hit their Cap Ex Reserve Account without any hope of reimbursement, it would certainly be worth doing.

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P&L Benefits

Energy efficiency can affect many line items on a business’ Income Statement (also known as the “Profit and Loss Statement” or “P&L”). If you look at the full picture through the lens of business acumen, you’ll see how effective it can be to discuss the potential P&L benefits of your efficiency project with your prospects. The following list gives you an idea of the types of line items that you may choose to discuss:

More sales: If you install attractive LED lighting in a grocery store, for example, the store will likely see an increase in grocery sales.
Less payroll: If your efficiency solution increases productivity (as we have discussed in previous blogs), employees may be able to do more work in less time.
Less repairs/maintenance: A new, high-efficiency product usually requires less maintenance than an old, soon-to-fail one.
Less scrap: You may recall a story I told about the aluminum windows and doors manufacturer that reduced scrap rate by 25%, effectively turning a 4.2-year payback (calculated using only the energy savings) into a 39-day payback (calculated using the aluminum scrap savings as well).
Lower utilities: Of course, your efficiency product will probably have a positive effect on the utility bill, so this one will be included in virtually every case.
Higher rental rates: With all of the added benefits of efficiency, your prospect may be able to increase rental rates without deterring potential tenants.
Better tenant retention: An efficient building is more comfortable, more attractive, and requires less maintenance. All of these factors help retain existing tenants who might otherwise choose to move to a building that features the high-end amenities you are offering to your prospect.
Better tenant attraction: As in the case above, an efficient building is more comfortable and attractive than an inefficient one. Add in an ENERGY STAR® or LEED® certification and you’ve got yourself a recipe for tenant attraction.
Less need for Cap Ex Reserves: This is a topic that warrants further discussion, so stay tuned for more on this tomorrow!

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Calculating Savings

Yesterday, we discussed the costs that should be included in your financial summary. Today, we’ll dive into the savings portion of the equation:

Utility tariff: Which utility tariff did you use to calculate the savings? I’m always surprised to see financial summaries that fail to take into consideration off-peak, on-peak, and critical-peak power pricing. In some territories, this is not as relevant since utilities there may charge the same amount per kilowatt-hour regardless of the time of day or year.  However, in many other regions (such as parts of California), you could see a difference of 10-to-1 (sometimes as high as 20-to-1!) between off-peak-power pricing and critical-peak-power pricing. You have to be really careful to take into consideration when exactly the savings you are projecting will occur and what the cost per kilowatt-hour will be at that particular time.

The start of the savings: When are the savings going to start for your prospect? If the implementation process is long, the savings may not start for many months – and this has an effect on the financial landscape of the project.

Interaction between the measures: If you’re putting in a more efficient lighting system, that’s one thing. However, what if you were to layer on lighting controls that decrease the time that those lights would be illuminated by 50%? You have to make sure that measure interactions are taken into account.

Savings: In keeping with yesterday’s blog on calculated costs, you need to consider who will be benefitting from the calculated savings. Is it the landlord? Is it the tenants? Is it both? The landlord and the tenants should both understand how the leases are written, what loads are connected to which meters, who pays for those meters, and ultimately, how the savings will be allocated after the retrofit.

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Calculating Costs

As I’m sure most of you know from reading this blog, compelling (and accurate) financial analysis is a key component in selling efficiency effectively. So what exactly is financial analysis? Most people would probably agree that it’s the accurate cost/benefit analysis of a proposed investment. Before you can have accuracy in this analysis, you have to actually ask yourself, “Where do the costs and the benefits come from?” Today, we’ll discuss the costs that should be included in the financial summary of any efficiency project.

Local labor and materials figures: Are you estimating the cost of labor and materials based on the national average or are you taking into consideration the actual costs based on the location of the project?

Prevailing wage considerations: If it’s a government job, did you remember to incorporate the proper assumptions regarding prevailing wage?

Demolition, recycling, and disposal costs: These are often overlooked in financial summaries. Don’t forget to include them, because they can have a significant impact on the cost of the project.

Soft costs: Did you remember to include any potential soft costs, such as architectural engineering and consulting fees?

Contingency: I’ve been in this business for over 30 years and I don’t think I can remember a time when a vendor included contingency in the financial summary. Why? Perhaps because they’re worried about doing a limbo dance under the simple payback period “maximum threshold” that the customer told them about, and they don’t want to risk any cost increase. That really doesn’t do any justice to the customer in the end, so be sure to disclose a contingency amount upfront.

Rebates and incentives: Rebates and incentives have a tendency to reduce first cost, so any savvy sales professional would be sure to include estimates for these in the analysis.

Tax benefits: Be sure to separate these from the rebates and incentives. Rebates and incentives can be before-tax or after-tax and so can tax benefits (think “tax deduction” versus “tax credit”). It bothers me when someone says, “You’re going to save a thousand dollars per year in energy bills, and in addition to that, you’re going to get a five-hundred-dollar tax credit.” Think about that. If you save a thousand dollars in energy bills, assuming that you’re a business and you can write that energy off as a cost, you’re really not saving that whole thousand dollars. Rather, on an after-tax basis you’re saving a thousand dollars multiplied by “one minus your marginal tax rate.” So be careful how you present rebates, incentives, and tax benefits in your analysis.

Payment: Who is actually going to be paying for the first cost of the project? We talked about this in the blogs that addressed doing upgrades in landlord/tenant settings. It’s important for you to know who is paying and to demonstrate how this affects the project from a financial standpoint.

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The Power of Connecting

I’ve often told my students that networking is essential to their success.  To some, it feels monotonous or even risky. However, performed correctly it can be incredibly fun. If you aren’t committing to networking, what are you missing?  A lot.

Judy Robinett has over 30 years of experience as an entrepreneur and business leader.  She distills her strategies in How to Be a Power Connector, which centers on how to optimize your interactions with contacts.  I have often said making a sale takes up to seven “touches” to come to fruition.  Robinett’s book goes hand in hand with that persistence.  She believes that you need to be strategic about which contacts you pursue, taking the time to identify and focus on the stakeholders who actually make the decisions.

Chances are you already know someone who can point you in the right direction; you just don’t know who it might be.  Robinett’s book will set you on the right path.

Here is the summary from Amazon:

“Create a personal ‘power grid’ of influence to spark professional and personal success.

“Other people have the answers, deals, money, access, power, and influence you need to get what you want in this world. To achieve any goal, you need other people to help you do it.’ – Judy Robinett.

“As anyone in business knows, strategic planning is critical to achieving long-term success. In How to Be a Power Connector, super-networker Judy Robinett argues that strategic relationship planning should be your top priority.

“When you combine your specific skills and talents with a clear, workable path for creating and managing your relationships, nothing will stop you from meeting your goals.  With high-value connections, you’ll tap into a dynamic ‘power grid’ of influence guaranteed to accelerate your personal and professional success.

“Robinett uses her decades of experience connecting the world’s highest achievers with one another to help you build high-value relationships. She reveals all the secrets of her trade, including proven ways to:

Find and enter the best network ‘ecosystem’ to meet your goals
Reach even the most unreachable people quickly and effectively
Get anyone’s contact information within 30 seconds
Create a ‘3-D connection’ that adds value to multiple people at the same time
Access key influencers through industry and community events
Subtly seed a conversation with information about interests and needs
Use social media to your best advantage

“Robinett has based her methods on solid research, proving that social groups begin to break up when they become larger than 150 people, and that 50 members is the optimal size for group communication. As such, she has developed what she calls the ‘5+50+100’ method: contact your Top 5 connections daily, your Key 50 weekly, and your Vital 100 monthly. This is your power grid, and it will work wonders for your career. Nothing will stop you when you learn How to Be a Power Connector.”

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Weekly Recap, December 10, 2017

Monday: Read Scaling Up Excellence, by Robert I. Sutton and Huggy Rao, that provides a game plan for how to infuse your organization with the best everyone can offer.


Tuesday: Explore step three of “The 3-Step Process of Informed Selling” – how to reframe efficiency.


Wednesday: Read up on the correlation between energy efficiency and tenant retention.


Thursday: Learn how to put your best foot forward when meeting with a prospect.


Friday: Discover how to capture an audience’s attention by using words of influence.


Saturday: Check out this article on Medium which argues that attaining knowledge is more important than ever.

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(Book) Knowledge Is the New Money

What is the power of books these days?  What if reading five hours a week could be the currency that guarantees your value and adaptability in the future?

A recent article on Medium argues that attaining knowledge is more important than ever, particularly in an era where our lifestyles are changing at an accelerating rate.  You can read more about this here.

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Capture Attention in Writing

“It ain’t whatcha write, it’s the way atcha write it.” – Jack Kerouac

 

What if I told you that the key to reaching (and exceeding) your sales goal this year could be found in today’s blog article below? Chances are you’d probably keep reading…

 

Whether you’re aware of it or not, the way that you write – and the specific words that you choose to use – can have a major effect on your ability to build rapport and influence your prospects. Certain words and ideas, when framed correctly in writing, can subconsciously capture the reader’s attention and convert them from a skeptic into a believer.

 

In the efficiency sales world, we’re constantly communicating our ideas in writing – whether it’s through informal emails or formal proposals. A sales professional with even the best interpersonal skills will not reach his or her true potential without the ability to capture attention in writing.

 

I’d like to share an article I found on the Write to Done blog that gives some excellent tips on how to use writing to influence your audience. It’s a quick read, and definitely worth the time.

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