If your monthly electricity bill approaches $20,000 for a single location even the smallest of savings can eventually make a large difference, particularly if you have few other opportunities to eke out additional profits.
Not even a $1.2 million price tag would stop Scott-McRae Automotive Group from installing energy-efficient lighting and power conservation tools at three of its six automobile dealerships.
The long-term reduction in overhead expenses could provide the company a competitive advantage, given that the industry’s average net profit margin is 2 percent to 3 percent.
”All of the pieces together make sense,” Vice Chairman Hampton Graham said. “You have to sell a lot of cars to make money, so any expense reduction drops straight to the bottom line.”
Graham estimated that improvements to the company’s Duval Honda and Duval Acura dealerships would provide a combined annual savings of more than $120,000, thus paying for themselves within 2.5 years. The company will reap additional savings from similar improvements that will be made to the Duval Ford dealership.
“It’s a lot of money out of pocket, but there was enough return that even if we didn’t get it exactly right, we were still going to save a lot of money,” said Graham, who has managed the project for more than 18 months.
The company knew that it could save big based on the numerous pitches that it received from prospective lighting vendors, which sometimes ran to two or three a month. Though companies offered to finance lighting upgrades, often in part for a percentage of the savings, Scott-McRae Automotive Group decided to eliminate the fees by buying lights outright.
Graham’s primary concern was picking the right lights because he knew that LED lighting had not always performed as promised. He knew that energy efficient lighting could fail within a year or two, even if its cost was three or four times as much as regular lighting.
Tenzing Energy Solutions helped him compare products and negotiate discounts by soliciting competing offers from vendors. “We were looking for the best bang for the buck in terms of return, but we also didn’t want a small manufacturer that wasn’t going to be here a long time,” Graham said.
A 10-year warranty allayed Graham’s concerns by protecting his return if the lights break. “Buying the lights was simpler than the financing options in a lot of ways,” he said.
The company also reduced its fixtures by half and added active controls that allowed it to better manage its energy usage, even from afar via remote access online. The dealerships’ interiors and exteriors are now better lit as well.
“Not only did we reduce their consumption, which reduced their bill, we improved their lighting dramatically,” said Donnie Kincaid, energy manager with Tenzing Energy Solutions. “Lighting is extremely important in selling a car because you want people to feel safe coming out to buy a car and you want the paint to look good.”
Active controls allow the dealerships to set lighting levels based on time of day, motion, occupancy and the amount of natural light. Programmable thermostats provide additional flexibility and savings.
“In the energy space it’s about energy efficient products like LED lighting, but it also is about controlling not just the lighting but other energy-using products,” said Jim Seabury, CEO of Nashville, Tenn.-based Enterprise Electric, LLC, which installed the active controls. “If we can use the contributed light and dim those fixtures, people in their offices don’t see an appreciable difference in the ability to do their tasks but we’ve saved energy.”
Like consumers, businesses are becoming more energy conscious and are thus more interested in technologies such as LED lighting and active controls.
“Fundamentally our culture is a little more knowledgeable on energy consumption, but to ramp that up to the next level we have to talk about active controls,” Seabury said. “We can’t manage something if we can’t measure, so we put controls in there so we can measure and affect the outcome.”
Business owners will invest in technologies based upon their goals, Seabury said. “This is going to become more important in the U.S. We’re trying to remove our dependence on fossil fuels and do what we need to do to reduce our consumption.”
Demand should increase further as prices decline. A business owner can now get an LED fixture that was $300 for $150, which is comparable to buying a fluorescent fixture, Kincaid said.
Though the savings will be greatest among the largest users, investments can be just as rewarding for small businesses, Kincaid said. “Anyone who pays their own utility bill will benefit from LED.”
With plans to have LED lighting in four of its six dealerships by the end of 2016, Scott-McRae Automotive Group is already seeing the benefits and is looking forward to more to come.
Transparency Guided the Right Decision
As vice chairman of Scott-McRae Automotive Group, Hampton Graham prioritizes simplicity and transparency—whether he is buying or selling.
He has sought to find or instill these values in every transaction with which he’s been involved, from selling a car to investing $1.2 million in improving energy efficiency.
“For me, transparency in sales means you’re going to give me all of the information I’m looking for easily and without a lot of friction,” Graham said.
Employees at his dealerships focus on putting the customer in the right car for their needs and budget rather than haggling over price. Customers may shop for a better price but they often come back even if they have to pay $200 more because the Scott-McRae Automotive Group makes it easier for them to buy, Graham said.
“Our challenge is giving somebody the OK to shop,” Graham said. “But give them 30 minutes somewhere else and they recognize the difference.”
Graham purchased LED lighting and active controls for some of his company’s car dealerships based largely on his ability to get information from Donnie Kincaid and Tenzing Energy Solutions. Graham appreciated that Kincaid helped him compare products and to save money on his investment while also attaining a 10-year warranty.
“The sale is only the beginning,” Kincaid said. “Hampton and I just formed a 10-year relationship.
“In two to three years if he has failures he’s going to start calling me. I would rather have a good working relationship than not so it’s easier for me to be honest and open.”
Simple and transparent.