“To Be or Not To Be” – Involved in Subsidized Programs
As Shakespeare so eloquently put, that is the question! Given the recent news that Next Step Living (NSL), a large Boston-based home performance contractor that participated in several local, subsidized energy efficiency programs, shuttered its operation on March 18, how you choose to answer this question for your own business has renewed importance for your future success.
Prior to their abrupt closure last week, NSL was a poster child for the success of home performance contractors involved in state/utility subsidized energy efficiency programs. The company, started in 2008, was the darling of venture capital firms, raising $80 million dollars through several rounds of funding. 2014 income was reported to be $100 million, according to Inc.com, and they employed 800 people at their zenith.
NSL was a big player in the Mass Save program, essentially leveraging the availability of rebate dollars supplied by utilities to sell and install insulation, air sealing, and high efficiency HVAC equipment. After decreasing involvement in this area, they bet their business future on incentives homeowners were given by governmental policymakers to install rooftop solar, as well as a newly-launched community solar program — a way for residents to “go solar” without the need for a rooftop, through a remotely located solar array, or garden. Executives in the solar energy industry in Boston say NSL’s closure was most likely due to the lack of movement among policymakers regarding net metering caps, which impacts the economics and feasibility of the solar installations.
So why is this important to you? Many contractors we see in home performance utilize subsidized programs to enter the market and grow their businesses. The mistake NSL and many of these contractors make is basing their business model on these type of program to the exclusion of a free-market based model. When the policymakers responsible for allocating money to the solar program dithered or diverted funding, NSL’s market faded away, along with their venture capital friends.
The moral of this cautionary tale isn’t whether or not to be involved in these programs. Rather, the moral is: Don’t make the fatal error NSL did when they gave power to determine the future of their business to someone else! Make sure your business does and can thrive without or outside these programs.
If you are currently participating in a program, there may be some great incentives/rebates to help your customer decide to move forward with the work; you can use this to your advantage. But don’t become solely dependent on someone else providing leads or granting you access to homeowners interested only in what they can get for free. Build a robust marketing competency that can generate the leads you need to run and grow your business. Develop and teach your sales people how to help homeowners see the benefits of and buy home energy retrofits that make their homes more comfortable, healthy, and energy efficient, without the crutch of rebates and subsidies. Be sure your business is built around satisfying the demands of your homeowner customers, not the demands of third party program administrators.
Once you’ve built your business on a firm market oriented foundation, you will no longer “suffer the slings and arrows” of indecisive policymakers that can have a dramatic impact on your future.
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