You’ve completed a thorough audit, compiled the optimal solutions, and generated an attractive proposal that makes the lighting retrofit project a no-brainer to the customer. But there’s one obstacle standing in your way – the prospect isn’t ready to commit to a large capital expenditure.
Fortunately, there’s a solution our team at Waypoint Lighting has used successfully to move projects off dead center: retrofit project financing. Let’s go over a real-life example of how we’ve used financing to win a large lighting retrofit project in the midst of the pandemic.
An All Too Familiar Scenario
Over my 20+ years in the lighting retrofit industry, I've found that the secret to landing a project has generally been the development of a customized solution with a competitive price and compelling energy savings. While this requires an up-front capital investment, the energy savings typically covers the initial capital outlay within 1-3 years. After the initial investment is paid off the ongoing energy savings provide a positive impact to the customer’s bottom line for the life of the project, up to 20 years for LED retrofit projects. It’s a straightforward, proven process and often has few hurdles.
Fast forward to 2020, the financial landscape began to present considerable barriers, the most significant of which was a lack of financial confidence or worse, a complete budget freeze.
Our team at Waypoint Lighting was invited to perform an audit and present a proposal for Nexans-Amercable, a large power cable manufacturing facility in Arkansas. The project was designed to help the site reach corporate-mandated sustainability goals. We presented a highly engineered solution that was superior to our competitors’ cookie cutter proposals in price, scope, and energy savings. We were confident we would be awarded the project after getting a favorable response from the customer. Unfortunately, the facility's capital budget was frozen due to the pandemic. With no capital funds available it appeared that the odds of the project moving forward had spiraled to zero.
Exploring Lighting Retrofit Project Financing
Encountering a prospect with a complete hold on capital spending was frustrating territory for our team. Knowing that the customer's primary objective in considering the project in the first place was to achieve corporate energy savings and sustainability goals, we were motivated to find a solution that met or exceeded those goals and didn't require the customer to make an up-front investment.
Fortunately, we had been introduced to the idea of project financing through the 2020 SnapCount Retrofit Showcase and SnapCount Showcase guest DLL. We reached out to DLL to explore the possibility of including a financing option in our proposal and our DLL representative quickly demystified the process of lighting retrofit project financing.
In the end, we were able to structure a proposal that didn't require an up-front payment and was cashflow positive from day one. This option not only helped the facility and energy managers reach their energy and sustainability goals, but also provided the initially reluctant CFO with the financial confidence to go forward with the retrofit project. Truly a win/win situation.
Benefits of Offering Project Financing
Beyond the obvious benefit of removing the burden of an up-front payment, financing includes a slew of additional benefits that can be presented to the prospect. The most important is a customer can start generating energy savings immediately instead of waiting for the next budget cycle or even longer.
Adding additional technology (and energy savings)
With the elimination of an up-front investment, customers are often open to expanding the scope of the project. A popular option for our clients has been to add enhanced lighting controls which might not be considered when a customer is only looking at first cost. Considering a project on a life-cycle-cost basis instead of first cost is always a better option for a customer.
Instilling security and confidence on both ends
During a time of economic uncertainty, project financing adds a level of comfort and certainty not only to the customer, but to the contractor as well. The customer receives financial security and is able to have a retrofit performed without immediate financial commitments. Plus, offering the solution and financing from one source offers the customer a single point of contact for service and serves to “de-risk” the project further.
From the contractor's perspective, receiving an advance payment or mobilization fee immediately means not having to wait for the customer to go through a drawn-out payment approval process. The down payment also improves the contractor's cash flow and frees up capital for additional projects.
Ability to couple with rebates
While the case to add a financing offer is great as a standalone, it becomes even more compelling with a strong rebate offering. Working with Entergy Arkansas, we were able to present the customer with an 18 cent per kWh saved (due to the advanced controls specified) rebate savings which amounted to nearly 75% of the total project cost. This large rebate, coupled with a financing offer that now amounted to only 25% of the initial cost created the ultimate “no-brainer.”
Retrofit Financing Creates Happy Customers
In a financial climate rife with uncertainty and risk aversion, adding a financing offering is almost as big of a no-brainer as a lighting retrofit. In this particular project, we were not only able to let the customer accrue a few months of energy savings before making their finance payment, but we were able to best a few large competitors with our DLL finance package.
As the economy and spending confidence begins to show signs of growth, adding a financing option is a competitive advantage worth exploring. Learn more about lighting retrofit project financing and how combining it with industry leading retrofit software like SnapCount can help you win more projects than ever by clicking here.