Here are three approaches to help you communicate the total value of projects to customers.
An emerging and effective way to engage your prospect is to focus on the non-energy benefits of making an upgrade. Can you list all of the project’s benefits, beyond energy? Which ones would resonate with your customer? These may include reducing environmental impact and operating and maintenance costs, or increasing comfort, productivity, sales, reliability, safety, and asset value.
Focus on what your customer values most. Tailoring your conversation to your customer's specific experience and understanding what they care about can get your foot in the door, remove barriers, and encourage decision-makers and their advisors to embrace your projects.
You can also ask your existing customers what they like about projects you have already completed for them; their responses may help you identify what’s important to them to sell similar types of projects. For example, a hospital facilities manager was asked about the benefits of variable speed drives installed on a set of chilled water pumps. He knew they saved energy, but beyond that, he also saw the financial value in avoiding two pump seal replacements. This information could help you pitch a pumping project to another hospital customer.
Sticking with the age-old metric of simple payback often stops projects in their tracks.
Take the next step and provide a more complete view of the project’s value. Evaluating additional financial viability indicators can put a project back in the running.
While there are a number of financial indicators that can be used to sell energy projects, one of the most straightforward to explain is the savings to investment ratio (SIR). It represents the number of times you recover the initial investment over the full life of a project. This can be the key to demonstrating a project’s full financial value.
Unlike simple payback, the SIR considers all of the returns from the project over its lifetime and takes into account both the cost of capital invested and inflation—showing your customer a full picture of what they are getting for their financial commitment.
The formula is:
In the example below, $4,200 is invested in an energy project, but it generates $1,800 in savings each year of the project’s ten-year lifetime. After converting inputs to present value, this project delivers a SIR of 3.2. (While any project with a SIR over 1.0 is viable, the higher, the better.) In other words, over the project’s life, this customer will get back their money more than three times over.
|Cost & Incentives
Save on Energy Incentive
Net Project Cost
Annual Energy Savings
Total Annual Savings
Inflation Rate for Energy
4 per cent
10 per cent
Savings to Investment Ratio
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Incorporating incentives into your financial analysis can increase the project’s demonstrated financial value, and better the chances that your customer will make the upgrade. Third-party incentives will also lend credibility to your project proposal—so it pays to do your homework. Save on Energy has a variety of programs that increase the viability—the SIR—of the project you are pitching.