Mark Cannella started his energy auditing business in Cleveland 16 years ago. Two years ago he co-founded Pro Energy Consultants, a franchise for energy auditors.
Remodeling: How did you get into the energy auditing business?
Mark Cannella: I got out of college and went to work for a mechanical contractor. We sold heating and air conditioning. In the course of that I heard a lot of complaints: that people weren’t getting any improvement in their energy bills, that they were uncomfortable, that there was too much dust. Oftentimes the equipment I was selling didn’t solve these problems.
RM: So you moved in a new direction?
MC: Sixteen years ago I attended a seminar put on by a public utility, and there was some building scientist who talked about the house as a system. He said the only way a heater or furnace would work is if the rest of the house is efficient. Same thing with comfort issues. If you’re putting in a brand new furnace and air conditioner next to ductwork that’s super leaky, that’s not a solution. I had one of those light-bulb moments. So I started my own company in 1994
RM: What kind of response did you get?
MC: I knew there was a huge market and opportunity. And the response from the homeowners was terrific. It made a lot of sense to them. The vast majority of HVAC guys or insulators or building officials had never heard of [auditing] and didn’t know what to make of it.
We can come in and diagnose the building performance problems of a home or a business. Most people just address the symptoms. We need to understand what’s going on first and then make an educated decision on how to make the home perform better. We address causes.
RM: What equipment did you use then?
MC: We had a blower door system that depressurizes the home so we can identify leakage points, and a hand-held calculator. That hasn’t changed much. What has changed is infrared technology. I’ve been using it for six or seven years. Six years ago I was using $12,000 cameras. Today we use a much better camera with better resolution for $4,500. And it’s all laptop-based software.
RM: How was Pro Energy Consultants formed?
MC: Derek Sola and Chris Simonich approached me through a business associate in Cleveland who owns a USA Insulation franchise. Their background is in franchising. Derek had asked the owner, Pat Pitrone, if he knew of anybody who does energy audits. I’ve worked with Pat’s company for years. I don’t come out of the franchising industry. I knew from doing it for 16 years that energy auditing was a sustainable business model. And in the last two or three years we’ve grown significantly. I thought we’d have 20 to 25 franchises by now and we are close to 60.
RM: What are your franchisees like? Where do they come from?
MC: It’s a work-from-home and low-overhead business. You don’t have to have an engineering background. We have owners who are golf pros, real estate agents. All backgrounds. We have some owners who have basic building skills, whether they worked for a builder or were one at one time. We have some owners who came out of remodeling or home inspection companies. They’re looking for something new to do.
RM: What kind of homeowner is your customer?
MC: We see homes that are six months old and 96 years old. We’re in newer homes because builders make them really tight — and that’s a good thing — but you can have a home that’s too tight and not well-ventilated and then you’ve got moisture and humidity problems. I see homes less than two years old with high energy costs. Oftentimes they have ductwork issues. They can’t deliver air to the rooms. I see ice damming because houses aren’t properly insulated.
RM: Are these situations typical?
MC: Oh yes. I was in a seven-year-old home recently and the homeowner says he can’t heat or cool the upper floor. He’s got major ice damming issues. The homeowner was adamant that I test every single window. He was very interested in my opinion of the HVAC system. We were able to show him how air was bypassing the rooms where it belonged because of missing or failed insulation and leaking ductwork. His wife opened up a file folder. They had three quotes from window guys and three quotes from HVAC companies. Combined cost of replacing all that would’ve been about $33,000. And they were prepared to purchase these products. So going in and sealing the ductwork and adding foam insulation … for less than $2,700 their problems were solved. That’s what’s happening. Our company motto is: We don’t have to guess.
RM: How many audits do your technicians do in a day?
MC: We do two or three audits a day at an average of $500 an audit. You can generate $1,000 to $1,500 a day, $4,000 to $5,000 a week.
RM: And you don’t do the retrofit?
MC: No. The problem I have with the folks who do audits and then the retrofits is … I would be skeptical if I were a homeowner. There are all these companies coming out of the woodwork to do audits. Window companies doing audits … And of course the first thing they say is: You need to replace your windows.
So if we say you need air sealing or duct sealing or insulation, we can bring in those contractors and help our customer. If they do those improvements, we can come back and re-test the house.
RM: What percentage of the homeowners you audit end up hiring a contractor for retrofits?
MC: It’s pretty high. If I test 10 homes with recommendations, six to seven actually do the improvements. They may not do all of them, but they definitely will do a good portion. Keep in mind that if someone is paying $500 for an audit, they’re serious.
RM: How do you train new franchisees?
MC: They come to Cleveland for a kind of four-day boot camp of building science training. We take them in the field, into houses. So they get a good understanding of our process. We train them to understand airflow, air distribution, building leakage, where air enters and exits, and the thermal properties of the building.
After four days they go back and we require a certain amount of practice auditing, which I review. We have eight continuing modules, webinars that I put on. So we go from the basics all the way up to combustion appliance, zone testing, carbon monoxide testing. It can be complicated.
RM: How does that distinguish what you do from what others do?
MC: It’s not about the equipment or the auditor, it’s about the homeowner … their specific need in their home. I could pick the home apart and produce a report 25 pages long with recommendations the length of my arm, but the homeowner is not going to read it. They want to know why the second floor is hard to cool in the summertime. They’re paying us to identify those things.
RM: Where do you go from there?
MC: The [homeowner] will get a report in 24 to 48 hours e-mailed or mailed to them. In many cases we stop back for another meeting with the homeowner to go over the report. We won’t do an audit unless the homeowner is there. That’s another thing that separates us. A lot of auditing companies would prefer not to have the homeowner present. We require it. If that means seven at night, or on a Saturday, so be it.
RM: How do you determine who does the work?
MC: We work with strategic partners, and when we test a house, we recommend them to do the work. We stay in touch from the initial contact to the post-test.
RM: How do you find new customers?
MC: The majority of strategic partners deliver us a ton of testing. For instance, we have an HVAC guy who will say to a prospect, “Before we do anything, let’s come in and figure out what’s going on in the house.” They don’t want to come back time and again on warranty calls. They’ll sell the equipment anyway. Ours is mainly a referral business, between strategic partners and existing customers.
RM: Are there more contractors offering this service today than there were when you started?
MC: Definitely more and more guys and companies are trying to get into it. It’s a very knowledge-based industry. You have to be properly trained. You could go on the Internet and find out how to set up a blower door and take readings, but at the end of the day, it’s about the customer.