Energy Efficiency Reference/Industrial/Assessment Opportunity Details/Productivity/Revenue Growth thru Energy Savings

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Revenue Growth thru Energy Savings[edit]

This concept was first presented by Tim Maloney in early 2009.

Currently, it is being looked at as an addition to the Exec Summary, and as a way to better prove why energy savings is integral to a firms revenue stream.

Revenue Growth Example A

Company A savings = $611,768 but from a managers perspective they should expect to see at least a $12,223,536 in revenue growth (at an estimated 5% profit margin) by implementing the recommendations. Putting it in revenue terms is more powerful and tells the real story (it isn't about saving money, it's about making it).

This is also a better pitch to future customers, i.e. IAC audits resulted in an average revenue growth of x for a certain industry. In others words, "we want to come to your business and help grow revenue".

We would use average industry sector profits margins, the company can use their own data to get the real number.

Calcs: (Cost savings/profit margin) = revenue growth

Revenue Growth Example B

Here is the story of Hippy Widgets Inc. It is intended to demonstrate how energy management and energy savings can increase revenue while reducing a company's exposure to risk.

Background:

Hippy Widgets makes widgets at its factory in Veneta, Oregon. The company is easily able to sell $1,000,000 in widgets each year using all of Hippy Widgets Inc.?s available capacity. The company?s owner, Barbara Streisand, wants to generate more revenue and make more money.

The company owns 10 machines costing $300,000 each. Each machine can produce 10,000 widgets (10,000 widgets/machine x $10 revenue/widget = $100,000 in Revenue capacity/ machine).

A recent IAC audit found $10,000 in potential yearly savings at an initial investment of $20,000.

Hippy Widgets has $20,000 available to invest and also has a credit line available.

Hippy Widgets has a 10% profit margin.

What should the company do?

Option 1: The production manager wants to use the $20,000 as a down payment on a new machine and finance the remaining $280,000. The machine will produce an addition 10,000 widgets and generate $100,000 in revenue.

Option 2: The maintenance manager suggests using the $20,000 to implement the IAC recommendations.

Evaluate:

Option 1: $300,000 investment for $100,000 revenue/year

Option 2: $20,000 investment for $10,000 energy savings $10,000 energy saving ÷ 10% profit margin = $100,000 revenue/year

Option 2 generates an equal amount of revenue and requires less financial risk.