Last month in this space, I reviewed a series of market projections for 2014 from Harvard University as well as the industry’s leading associations.
Green Remodels That Sell
Efficiency, return on investment keys to making sustainable remodeling work for homeowners
In a remodeling climate that has homeowner eschewing the wants for the needs, selling green can be a challenge, but remodelers that are successfully doing it say focusing on the potential return on investment is the path to success.
That’s the approach that’s worked for Meadlowlark Builders in Ann Arbor, Mich., where even in the state hardest hit by the recession, the company is successfully selling what they call “deep energy retrofits.”
“We’re reclaiming old houses that are in poor shape, because in our local market everyone wants to live close to downtown and there’s just not that many parcels of vacant land anymore,” says Doug Selby, who started Meadowlark with Kirk Brandon six years ago.
Those deep energy retrofits typically include an addition, a redesign of the home’s interior, “super insulating” the building envelope and installing high-efficiency heating and cooling systems, Selby says.
And although many remodelers struggle to sell it, Meadowlark frequently installs geothermal heating systems as well.
“When people look at the numbers we’re able to achieve with it, it’s fairly easy for us to do it,” Selby says. “Spending a $7,500, $8,000 premium for the system, but getting down to a $45 heating bill on average makes people want that.”
Showing potential clients the long-term cost savings is what has allowed Meadowlark to succeed so well at selling energy efficiency. Selby and the rest of the Meadowlark team have spent the last several years working with energy auditors and collecting data about the long-term performance of various energy improvements. This allows Meadowlark to create incredibly detailed graphs and charts that, although it started as an educational mission for the company, has become an important part of the sales process.
“A big part of it is letting (clients) know what the opportunity is,” Selby says. “Unless people have done the research, of course they’re not going to want to spend the money. When you put it in front of them with a lot of math, it changes the calculus.”
Matt Beaton, owner of Beaton Construction in Shrewsbury, Mass., agrees that money is the first thing that turns potential clients off about “going green.”
“People don’t want to spend on a feel-good sort of thing,” he says. “If it’s something that has the environmental benefit and the same time has the financial benefits as well, it’s much more palatable for people.”
Like Meadowlark, Beaton has found success by focusing heavily on educating clients about return on investment. Clients have to be fully informed about their potential decisions before they can be expected to decide, Beaton says.
“For example, from an energy efficiency standpoint, everyone thinks the first thing they need to do is replace their windows, while from an ROI standpoint and cost savings, it’s probably one of the last things you do,” he says. “It’s our job to educate them about that.”
Expand the definition
When Renewal Design-Build embraced green remodeling several years ago, it was driven largely by the owners’ eco-consciousness. Rethinking the way the company approached green in the last few years, though, has lead to more success, says CEO Peter Michelson.
It’s a mistake Michelson has seen many of his remodeling colleagues make as well, he says, by focusing too much on the “tree huggers” and not the full political spectrum.
“Typically we’ve been defining green in too narrow of terms,” he says. “If someone is motivated because they want to have lower utility bills – they might not even believe in global warming, but they want lower utility bills – that’s green.”
Just by asking lots of questions and listening to the answers, the Renewal team can identify many ways a client can go green – even if they don’t realize it.
“If you even use the word ‘green,’ they say, ‘Well, not if it’s going to cost more,’” Michelson says. “They think it’s about eco-conscious countertops or flooring, products that have a premium.”
Instead, Renewal focuses on asking questions like, “How long do you wait for hot water in the morning?” and “Is your house comfortable?”
“The important thing is to frame it within a context that’s of interest to them, not to push a different agenda,” Michelson says. “If their agenda is about saving money, that’s how we talk about it.”
As a full service remodeler, Renewal also emphasizes its expertise with the entire house as an opportunity to reach more homeowners.
“Why not just call Joey’s Insulation Company instead of Renewal Design-Build? Because we actually understand the entirety of your house,” Michelson says. “It’s leveraging our expertise, which creates a differentiation between us and a one-off guy or a remodeler that doesn’t understand the complexity of how homes work.”
A more educated consumer will continue to make that distinction easier, Selby says.
“People are going to start to see that a house is a system and it really takes a company that works with the house as a system,” he says. “That makes it easier for me to sell that high-performance house.”
Tax credit hangover
With many of the tax credits included in the stimulus package – most notably those for windows, insulation and many heating and cooling systems – expiring at the end of the year, remodelers are worried about what the future holds.
“I’m really worried about it,” Selby says. “I think it’s going to have a direct depressing effect on what we do.”
The credit has helped Meadowlark close sales, especially on smaller jobs.
“A lot of the customers feel like they’re getting something extra for our services,” Selby says. “It sweetens the bottom line.”
Renewing the credits would be an important first step, Beaton says, but they also need to be increased. Right now, many of his clients cut off their projects as soon as they max out the credits.
“I don’t think they’re serious enough,” he says. “I think there’s a great opportunity if we made more of a serious commitment to that. I think it would be a jolt to the industry.”
The credits have helped push people to make a decision, Michelson says. He cited the example of a client who recently decided to undertake a $150,000 remodel now so she could take advantage of the credits.
“It definitely motivated people,” he says. “There’s no doubt about it.”
Despite the tax credit challenges, there are still great opportunities for growth in green, especially in the areas of water heating and solar power, Michelson says. Homeowners experience water heaters’ efficiency (or lack thereof) every day, ensuring it stays top of mind, and all the manufacturers jumping into solar are pushing costs down as they become more efficient, he says.
“Costs are really starting to come down and expertise is continuing to grow,” he says. “And I do think there’s going to continue to be federal money and state and local money to support that. I think there’s going to be huge opportunity.”
Even with the growth opportunities, Selby isn’t concerned about companies jumping on the green bandwagon. He says companies that are doing it now will have a built-in advantage against any company that decides to start offering green services.
“We’ve spent a lot of resources doing research and tracking our results, figuring out things that should work,” he says. “It’s going to be darn hard for somebody to run a company and catch up to us. The basics you can learn very easily but once you get to a deeper level you have to get experience under your belt to really confidently say this is this and this is that and get efficient at doing those.”