Start an energy consulting company by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your energy consulting company. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
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.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your energy consulting company is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Certain state permits and licenses may be needed to operate an energy consultant business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Energy Auditing Licensing
Certain states require certification for energy auditors. The Building Performance Institute is the largest organization responsible for these certifications.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market an energy consulting company
For residential services, advertising by using flyers left on the doors of homes in an area of older homes is a good way to find new business. Working with local chambers of commerce and realtors are other ways to find sales leads. Direct mail marketing pieces that target certain neighborhoods are effective.
The best way to promote your services for commercial businesses is to go to conferences and give public talks that describe successful case studies and give real examples of the clients that you helped. Creating white papers to show how you helped your clients discover energy saving is a terrific way to get new commercial clients.
How to keep customers coming back
Many energy consultants build their business and attract new customers by word-of-mouth referrals from previous customers that were satisfied with the work. Content marketing that provides rich information about new technological improvements is useful to establish yourself as an expert in the field. Distribution of this content can be done through email newsletters and postings on blogs. Join industry associations and make alliances with equipment manufacturers as a source of customer referrals as well.
Retain customers by providing excellent customer service and making solid recommendations that help them save money. Stay in contact with them to be the energy consultant company that they use for additional properties that they acquire in the future. Offer customer loyalty discounts for using your services more than once and for successful referrals to other new customers.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start An Energy Consulting Company In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
An energy consulting business is a great business for individuals who are environmentally conscious and wish to make an active contribution towards fighting global warming. This is a rewarding business opportunity on many levels for yourself, your clients,and the betterment of the world.
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.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
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.