As a business owner, improving profitability is a constant, if not a somewhat elusive, goal. It’s easy to get caught up in the daily fires that consume our time and attention. A disciplined focus on maximizing profits must be our foremost concern as the surest path to business success. Or, as famous author Peter Drucker puts it, “Profitability is the sovereign criterion of the enterprise.” So let’s look at five ways that lowering your energy consumption will improve your profitability.
A one-time investment in energy efficiency will permanently lower operating costs.
- How much do you expect to spend on energy bills and building maintenance this year?
- If you could permanently reduce those costs, what would you do with your savings?
An efficiency upgrade can reduce energy bills by 20 – 70%, and studies have shown that green retrofit projects can reduce total operating costs by 8.5 – 19%. Minimizing overhead is one of the fastest ways to improve your bottom line without making compromises like raising prices or reducing employee incentives.
The best part – utility companies fund 30-50% of the upgrade cost through a rebate fund that we all pay into every month (see the “Energy Efficiency Surcharge” on your electric bill).
Energy efficiency is a low-risk investment with predictable savings.
There are only three known ways to improve profitability:
- Raise prices. Often tough to do without losing customers
- Increase sales. Ex: Hire salespeople, advertise, introduce new products
- Lower your costs. Usually the most predictable way to improve profitability
Energy efficiency measures are a safe investment because you can easily determine savings through an energy audit. Comprehensive, whole-building audits provide accurate savings projections as they are based on calculated energy measurements specific to your building. Plus, you’ll be able to see the quick payback and return-on-investment regardless of changes in sales volume.
Better yet, the utility companies independently verify the savings projections determined by the company who performs your energy audit. An expert from the utility will review the project proposal to validate the recommended solutions and savings both before an installation and after the work is complete. This additional inspection further reduces any risk associated with the investment and provides peace of mind to business owners looking to cut costs.
For example, converting from fluorescent to LED lighting typically reduces your lighting-related electric bill by 75%. If you know you are replacing a 100 Watt fluorescent fixture with a 25 Watt LED, and you know how many hours your lights are on, you multiply this times your electric rate (listed right on your bill), and voila – a simple 4 column spreadsheet tells you exactly what you will save.
Reduce energy without replacing costly equipment.
An energy efficiency upgrade doesn’t necessarily mean ripping and replacing old equipment. Retrofitting existing technology is often a better solution as it yields similar energy savings and extends the life of older equipment. In many cases, replacing or retrofitting equipment can be avoided altogether, as small improvements may make some systems run more efficiently.
Energy efficient refrigerator evaporator fans produce 2/3 less heat, meaning coolers don’t have to work as hard to stay cold. And they use 2/3 less energy.
Switching to LED bulbs can significantly reduce light-generated heat gain by 50%, so HVAC and refrigeration systems need to work less to cool the same amount of space.
Installing a cool or white roof coating can save up to 15% of annual air conditioning energy use, significantly reducing wear and tear on the HVAC system.
Energy efficient solar window film can also reduce cooling costs by up to 30%, especially in buildings with lots of south/east/west facing windows. A side benefit: the film eliminates glare on your computer screen, so shades are eliminated and you get back your wonderful window view.
Instantly Improve Curb Appeal.
If you own a convenience store or repair facility, then you know the importance of curb appeal. With more and more of the competition upgrading to LED exterior lighting, a customer can instantly tell which store is new and modern – even if it was built many years ago! LEDs have a profound impact on both the interior and exterior of a building, plus they use 75% less energy and last 5 times longer than fluorescent bulbs. If you want to keep pace with your competition or maintain brand standards, LED lights are a low-cost and low-maintenance solution.
Financing Options Keep Your Cash-Flow Positive on Day One.
There has never been a better time for small and medium size businesses to take advantage of energy efficiency. Federal and state governments, utility companies, and lenders are realizing that businesses of this size have significant savings potential and are working to remove barriers to participation. This has led to a huge increase in available rebates, tax incentives, and financing options.
Almost all energy efficiency upgrades qualify for a utility-funded rebate, which means the utility company will cover anywhere from 40-70% of the total project cost. Business owners who wish to finance the remainder can utilize bank loans, on-bill financing from utilities, and a wide array of equipment leasing options. Once the project is complete, qualifying businesses can also take advantage of the 179D tax deduction of up to $1.80 per square foot.
Below are three podcasts that discusses these concepts in more detail.
Part 1: How to use cost reduction to improve your bottom line
Part 2 and Part 3: Using rebates and Mass Save programs to increase your energy efficiency while reducing costs
Frank is a passionate environmentalist with 33 years of experience in both Corporate and Small Business arenas. His background includes technology design, customer support, marketing, sales, and management. Frank is the recipient of numerous awards including Salesman of the Year for a Fortune 100 company, President’s Award, and several Customer Support awards. Frank helps businesses improve profitability and curb appeal via multiple energy efficient solutions. Frank works with local utility companies to access free rebate money, to design the efficiency upgrades (LED lighting, HVAC retrofits, Refrigeration retrofits, VFD’s, Controls, Solar Window Films, etc) and to manage the installation.