Slideshow

Case Study: Neil Kellyís High-Energy Growth

In Portland, Ore., Neil Kelly's home performance division sees 109% annualized growth in six years.

View All 3 Photos >

Neil Kelly began as a small family-owned remodeling company in Portland, Ore., in 1947. It has steadily grown to become one of the city’s most well-known full-service remodeling companies, with sales peaking at $25.7 million in 2008.

In the 1970s, Neil Kelly worked as a weatherization contractor upgrading Portland homes involved in the U.S. Department of Energy–sponsored Weatherization Assistance Program.

Although it stopped participating in WAP in the 1980s, Neil Kelly picked up home performance again in 2006. By all accounts, that move has been a highly successful venture. Home performance revenue has grown from $73,000 in the first year to $3 million in 2011, when the division completed more than 200 energy-efficiency upgrades in homes around Oregon. Since 2006, average job size has grown from about $1,300 per home to more than $14,000, and the division’s staff has grown from three employees to 28.

Business Metrics

Like most remodelers around the country, the current recession has significantly affected Neil Kelly; it had seen a drop of almost 40% in total revenue since 2008. Company president Tom Kelly notes, “We are a recession-challenged company. Adding home performance has helped us recover some of our losses.” In 2011 alone, revenue in all divisions grew by 29% over 2010, a feat nearly impossible without the influx of home performance upgrades, which grew by 118% in 2011 over 2010.

Because Neil Kelly was already a well-established remodeling company, initial costs to enter the home performance market were relatively modest. Costs for equipment, training, and marketing totaled approximately $20,000 to $25,000. Since that initial investment in 2006, Neil Kelly’s home performance division has continued to grow (see table).

Public Programs

Neil Kelly has benefitted greatly from its participation in Clean Energy Works Oregon, a nonprofit program started by the City of Portland and expanded with U.S. Department of Energy funding in 2010 to communities throughout Oregon. Clean Energy Works has partnered with Home Performance with Energy Star and the Energy Trust of Oregon to offer homeowners energy assessments, no-money-down on-bill financing, information about local and federal rebates, and access to home performance contractors who are trained and qualified to participate in the program. Through its participation, Neil Kelly has received more than 625 leads from Clean Energy Works since early 2010.

In addition to receiving leads from homeowners who apply through the Clean Energy Works website, Neil Kelly is also allowed to offer the program’s financing package to customers it markets to independently. Clean Energy Works has negotiated with Oregon utilities to offer homeowners the option to pay for the home efficiency improvements via their utility bills at low interest rates and with no money down. Because the financing options are so attractive to homeowners, Kelly says “the closing rate in our home performance division is a lot higher than for any other service we offer.”

Marketing

Marketing to its extensive database of prior remodeling customers with emails and newsletters, Neil Kelly directs them to the Clean Energy Works Oregon program, which currently produces 70% of its home performance leads. Radio and newspaper ads, website coupons, and participation in trade and home shows are other avenues for marketing. Neil Kelly monitors the effectiveness of its marketing techniques by asking homeowners to fill out an initial consultation request form where they are asked how they heard about the company.

Neil Kelly has found that the primary motivation for its home performance customers is comfort. Other important considerations include indoor air quality, health, noise reduction, moisture issues, and utility bill savings. Environmental issues are a popular topic in eco-conscious Portland, and many homeowners have cited “being green” as a motivator for energy-efficiency improvements.

Every customer who agrees to a home energy audit (which Neil Kelly offers free to every current remodeling and design customer) is assigned two Neil Kelly staff people — a salesperson and a home energy assessor. All of Neil Kelly’s sales staff and assessors have received building analyst certifications with the Building Performance Institute.

The salesperson acts as an educator and helps the homeowner understand the assessment process and how upgrades can help meet their goals. The assessor conducts the checkup and prepares a comprehensive report of findings. The report is concise, easy to understand, and does not focus on the energy savings or payback of the proposed work. Instead, it is tailored to address the specific concerns of the homeowner.

Tom Kelly notes that having both staff involved in each assessment (one focused on the technical aspects and one focused on the needs of the customer) is “part of the key to why we are so successful.”

The remodeling division’s traditional target market has been higher-income homeowners, but now, due to the exceptional financing available for its home performance services, the company can reach out to home­owners with more modest incomes. This allows Neil Kelly to diversify its target market and opens up the possibility of the home performance division becoming a source of referrals for future remodeling work.

Although current customers can receive a free energy checkup, the company offers the service to others for a fee — typically $395 with a $100 coupon available online. According to Tom Kelly, one in three checkups results in home performance upgrades. “This can add $20,000 to an $80,000 remodeling job, and providing the additional financing through Clean Energy Works Oregon can make the deal sweeter.”

This article is adapted from a profile originally published by Building America. The buildingamerica.gov website contains expanded case studies, technical reports, and best practices guides.

Related articles:

Diversify With Caution: Tax incentives make home-performance contracting look attractive, but diversification is not necessarily a magic bullet for your business.

Performance Partition: Adding a Home Performance Division as a Way to Diversify

Watt’s up Doc? A Home-Performance Division ‘in the Box’ — Getting a home-performance division set up quickly using the expertise and training materials of Home Performance Matters