How to Start an Energy Consulting Company

Part 1 - How to start an Energy Consulting Company business - Background

Projects for energy consulting companies on a smaller scale include conducting an energy audit of a single-family home. Larger commercial projects include making recommendations for large data centers that use massive amounts of electricity, government organizations with many public buildings, and major national companies with multiple locations.

Energy consulting companies provide energy audit reports to their clients that make specific recommendations for energy conservation and improved efficiency. They also provide information to clients about possible tax incentives for investing in alternative energy systems. Some companies in this sector sell, install, and maintain equipment such as solar panels, wind farms, geothermal systems, and bioenergy projects.

Our guide is in 3 parts:

• Part 1 - How to start an Energy Consulting business - Background
• Part 2 - Our planner tool to see if this idea is the right fit for you
• Part 3 - Action plan to get started

What are the costs involved in opening an energy consulting company?

The least expensive way to start out is to begin as a home energy auditor and later on advance to conducting energy audits for commercial businesses.

In some states, professional certification is required to be an energy auditor. The Building Performance Institute is the largest organization responsible for these certifications.

The startup costs include:

• Incorporation and Business License – $350 to $1,200 depending on the state

• Exam Preparation for Certification as a Home Energy Auditor ($1,000 to $2,000) $1,150 from AEE

• Promotional Flyers $500

• Business Cards $150

What are the ongoing expenses for an energy consulting company?

This is a low investment, low overhead business. There is no need to have big offices or make big investments in equipment at first because most of the work happens on-site at the client’s premises. You do need to create a reputation, so spending money on conference attendance and marketing is important and becoming a key speaker at those conferences will be the best way to get new commercial clients.

A typical marketing campaign for a residential energy audit consists of a door-to-door flyer distribution effort. The cost of printing the flyers is around $500 to get a good quantity of 500 full-color flyers at a decent price. Distribute the flyers by paying low-cost minimum wages and carefully supervising the people who place the flyers on the doors to ensure they actually do the work. In a concentrated neighborhood, a person can place one flyer every 30 seconds on average, or about 120 flyers per hour. If the minimum wage is $10 per hour, the cost to distribute 500 flyers is around $45. Do this once per month in each neighborhood you are targeting.

Who is the target market?

Energy consultant companies market their services and products to residential customers and/or commercial businesses. Every business and older home benefits from a comprehensive energy consultant review. The average company wastes 20% or more of the energy expenses because they simply do not know how to reduce the waste. Older homes waste up to 40% on average.

Cleantechnica reports that when including the power creation side of this calculation, the United States wastes 61% to 86% of its energy. Clearly, there are many customers, both residential and commercial, who benefit from using an energy consultant, so the prospects for this type of business are excellent.

How does an energy consulting company make money?

Energy consultant businesses typically charge residential clients a flat fee for an energy audit, which includes a standardized inspection and written report.

For commercial properties, there are two potential ways to charge customers.

• Charging consulting fees by the hour. If you are able to provide LEED ratings for a building, you can earn more. This requires specialized training and certification.

• Negotiating a bonus as a percentage of the energy savings achieved based on your recommendations. For this fee, you do a review of the energy usage and give detailed written suggestions about how to improve the situation. Then your recommendations are implemented.

Additional revenue can be earned from commercial and residential customers from selling (with an upcharge), installing, and maintaining energy-efficient systems. Some solar equipment installers finance the costs of installation for their customers and receive an ongoing portion of the monthly energy savings from the reduction achieved in the utility bills.

How much can you charge customers?

The amount you can charge and the success you can make depends on your ability to make significant recommendations that save your clients money.

Home energy audits range from $150 to $250 per home. A typical commercial customer will pay a fee of $1,500 to $2,000 and a 10% bonus on the amount of energy savings achieved for the first year after your recommendations are implemented.

How much profit can an energy consulting company make?

For self-employed, business owner/operators with no staff, the goal would be to generate enough home energy audits to create a minimum of two per day or $300 per day. At this rate, working weekends, it is possible to generate about $105,000( gross income) per year.

For energy consultant companies that work with commercial customers, the average pay for this work is about $150 per hour and more if you get a bonus for the energy savings created by following the recommendations you make. Active companies with a good reputation and sufficient staff can easily make $250,000 in profit per year or more, by maintaining an average of two commercial customers per week.

Large commercial energy consultant businesses make many millions of dollars in consulting fees each year by managing significant projects.

How can you make your business more profitable?

Making recommendations is the main business. Selling the solution is an additional source of income. For example, if the recommendation is to use solar power to reduce energy costs then selling the solar panels is an additional income source. Companies that offer equipment, installation, and system maintenance of alternative energy systems earn additional revenue.

There is a fine line balance here because you need to be independent and not have a conflict of interest so when you recommend an energy-saving solution to a client it is sincere and truthful. Your clients will appreciate your help if the suggestions are fair and at a good cost and this helps you make more money as well.

Day-to-Day and Growth

What happens during a typical day at an energy consulting company?

Most of the time you will be on the client’s site and spend lots of time investigating the expenditures they make on energy to find ways to save your client’s money and reduce the usage of fossil fuels with alternative energy systems.

While conducting an energy audit of a home, you will be looking for air leaks around the doors and windows, investigating the efficiency ratings of equipment used for air-conditioning/heating and checking the level of insulation. You will spend time in the attics, basements, and even in the crawl spaces, looking for places where improvements are possible. You will take infrared photographs of the entire home, inside and outside, to find energy leaks.

For commercial properties, you will conduct a detailed physical inspection as well as an extensive audit of the financial records related to energy expenditure. One part of the effort is “blue-collar” work in that you will be inspecting equipment, such as heating and cooling systems. You will inspect the entire facility and even go up on the roof. Another part of this business is more “white-collar” work, including accounting and reviewing the energy bills.

When you’re not doing client work, you’ll need to study up to date on the latest technology applicable to energy-savings. Consequently, you’ll spend a lot of time learning about equipment and innovative solutions available by reviewing technical specs and operating manuals.

What are some skills and experiences that will help you build a successful energy consulting company?

You need to learn how to manage energy costs and study engineering systems to understand how to save money on energy expenses. Having a university degree in electrical engineering is very helpful. Training is available from trade schools that focus on teaching the newest technological systems, equipment, and installation skills. For commercial properties, training to become a LEED-certified inspector is important as well.

There are specialized fields in this type of business that correlate with different types of energy. Expert knowledge of solar, wind, geothermal, and bioenergy systems, when compared with petroleum or coal-based energy systems, will help a business stand out. Energy efficiency practices vary depending on the weather and location. Learning about these differences is crucial when operating this business.

What is the growth potential for an energy consulting company?

You can start small and help small businesses and/or homeowners to save money. You can get LEED certified, which allows you to make recommendations at a major corporate level. Because the need for energy savings is so great, the opportunity to grow in this business is amazing. This type of business has the potential to grow into a nationwide service, employing qualified workers under the banner of your brand name.

The Vault Company ranks the best energy consulting firms, which include McKinsey & Company, The Boston Consulting Group, Inc., Bain & Company, Accenture, and Schlumberger Business Consulting. The top-ten ranked firms in this industry sector have a combined market capitalization in the many billions of dollars.

How and when to build a team

This business can start with the efforts of a single person who has the training, certification, and is skilled in conducting energy audits. As the business grows, one can add skilled staff to help more customers. Successful marketing that creates customer demand is the signal to add more staff. Staff pay can be a portion of the revenues earned per job, which guarantees the company will be profitable.

Part 2 - Is an Energy Consulting Company business the right fit for you?

Part 3 - Action plan to launch your Energy Consulting Company business in 90 days