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38 minute read
"We don't think you can do in New England, at least a remote sale. We tried. Partners have tried. We did installations for partners that did remote sales. They were kind of a disaster."
That's Mark Kasdorf, CEO of Forge, setting the tone for a panel that surfaced real disagreements about the future of heat pump sales. Recorded at the US Heat Pump Summit in Worcester, Massachusetts, this conversation brought together three startup CEOs — Mark Kasdorf (Forge), Grant Gunnison (Zero Homes), and Evan Anderson (Pearl Edison) — who've each built tech-enabled heat pump businesses with very different answers to a central question: can you design and sell heat pumps without visiting the home?
And throughout this panel we ask the question, “What does this mean for heat pump contractors today?”
The Remote Design Debate
Grant Gunnison's Zero Homes has built its entire model around remote design. Homeowners walk around with their phones, the software creates a 3D model, and they calibrate the building against utility bills to produce Manual J calculations without a truck roll.
"We leverage the homeowner to send us a lot of information, so we have eyes on the inside of the house. We create a 3D model of that home. We take a bunch of photos and layer on all the semantic data for the walls, windows, et cetera, so we understand what the constructions are, and then we use our utility bills to actually calibrate that building."
But Grant was honest about the trade-offs: "We're at a big disadvantage, right? We're all 3D creatures. Humans like to be with humans. Operating over Zoom definitely doesn't help."
Evan Anderson's Pearl Edison takes a different approach — remote lead qualification, but always a site visit for system design. His reasoning came down to one specific limitation.
"I'm a long-term optimist that you can do an accurate load remotely. I'm a short, medium, and long-term pessimist that you can get airflow and static pressure data needed to do a good job with ducted systems without going to that house."
For Pearl Edison, if you're touching ductwork, you need instruments in the home. Period.
Three Models, Three Bets
Each company has built something distinct.
Forge is the most traditional-looking — but purpose-built for a younger workforce. Every job gets a site visit, but software makes the person in the truck dramatically more capable. "All of the software that we've embedded throughout the company is designed to do one of two things," Mark explained. "Either allow a 27-year-old salesperson to do something that would normally take a master electrician like a load calc. Or take a 20-minute task and turn into a 5-minute task."
The result: revenue per salesperson well above industry standard — with a site visit on every single job.
Zero Homes operates a marketplace connecting homeowners with contractors. They don't run ads or compete with their partners. Instead, they provide fully designed systems through their remote platform and let contractors execute. Grant noted they run at lower gross margins than typical contractors to ensure their partners can still be profitable.
Pearl Edison works with utilities and municipalities, operating white-labeled concierge services. "A lot of our process is built around the promise that we make to [contractors] upfront, which is when you get involved, this will be a fully designed, fully contracted project. It's not lead generation."
Partner or Competitor?
For contractors wondering how to think about these companies, the answer varies.
Mark was direct about Forge's position. They tried working with installation partners and couldn't make the margins work. "On a job I was making [a certain amount] working through a partner. Today, my average ticket's [higher] and my margins are close. So the same amount of labor. I'm making three times as much money by going directly to the homeowner."
But he was also clear there's plenty of work to go around: "There's not nearly enough contractors to do everything that needs to be done in Massachusetts."
Grant and Evan see contractors as partners, not competitors. Both emphasized protecting contractor margins. "If something goes sideways on a job, we just eat that," Grant said. "We're not going to string out our contractors."
Radical Transparency
One note: these CEOs were unusually open. They shared margin numbers, close rates, average tickets, and conversion metrics — the kind of information most founders guard closely. We bleeped the specific numbers to respect that transparency, but the insights remain valuable even without exact figures.
The core takeaway isn't about any specific number. It's that three smart founders, all building tech-enabled heat pump businesses, have reached very different conclusions about what works. Remote design might be the future. Or it might only work in certain markets. Or it might work for lead qualification but not for system design.
These three are placing different bets — and all three are growing.
Key Takeaways for HVAC Installers
- Every model dies if installs fail. All three CEOs — remote, hybrid, and in-person — built quality controls into their process. Cutting corners on design might win the sale, but callbacks and bad reviews will kill the business.
- Software can let junior salespeople do expert-level work. Forge uses embedded tools so 27-year-olds can run load calcs that would normally require a master electrician — and they're hitting revenue-per-salesperson numbers well above industry standard.
- Remote design works in some markets, not others. Forge tried it in New England and called it "a disaster." Zero Homes makes it work elsewhere. Experiment to see if it can cut down on your soft costs for acquiring a customer.
- Ducted systems still need someone in the home. Evan Anderson is pessimistic — short, medium, and long-term — about getting airflow and static pressure data remotely. If you're touching ductwork, plan on a site visit.
- Utility and municipal partnerships can cut acquisition costs to near zero. All three companies get leads through partners instead of paying for Google ads.
- Serving planners instead of emergencies means higher close rates. Pearl Edison's customers see pricing upfront and self-select before anyone visits. That filtering pays off at the close.
- Marketplace models only work if contractor margins are protected. Zero Homes runs at lower gross margins specifically so their installation partners stay profitable. If a partner isn't protecting your margin, the math won't work.
- Young workforce + embedded software + senior mentorship = scalability. Forge proves you don't need all veteran techs to grow — but you do need systems that make less experienced people effective.
Timestamps:
[00:00] – Episode Teaser
[03:44] – Introduction To The Panelists
[06:44] – Discussing Challenges And Their Solutions In The Hvac Industry
[14:20] – How Each Company Uses Technology To Improve Processes
[23:37] – Sales Process And Customer Engagement
[26:55] – Lead Qualification To Closing The Deal
[32:29] – Scaling The Businesses, and Conversion Rate Success
[39:04] – Discussion On Financing Options And Their Impact On Affordability
[47:17] – Closing Thoughts: Reflections On Electrification And The Future Of The Market
Connect with the Guests:
Transcript
00:00:00.000 — 00:00:46.120
We started the panel that we might have a little bit of a disagreement. We don't think you can do in New England, at least a remote sale. We tried. Partners have tried. We did installations for partners that did remote sales. They were kind of a disaster. And we've ultimately come to the conclusion that you have to do a psych walk.
00:00:50.200 — 00:01:58.240
We’ve got an awesome episode for you today. It's another recording from the US Heat Pump Summit, which was back in November in Worcester, Massachusetts. It's a panel I moderated with three awesome innovators in the space. It's Evan Anderson, Pearl Edison, it's Grant Gunnison from Zero Homes, and it's Mark Kasdorf from Forge. All three of those guys have been guests on the Heat Pump podcast. But what's really cool here is a they're all doing super interesting stuff, but B they're on one panel answering the same questions kind of back to back to back. So it's a really interesting juxtaposition of these different models and different ways to go about things. If you're building a business in this space, I think it's a fascinating mirror to hold up to your business, to just ask yourself, could I be doing things differently because all three of these guys are trying to do things in quite a different way. So it's a great episode. All right. One note these guys were crazy transparent like crazy transparent. They were giving margin numbers, average ticket prices, conversion rates. I mean they went above and beyond. It's one thing to share all that kind of information in a room of 100 to 200 people. It's a completely different thing to put that in a podcast, in a transcript out there for all eternity. So we basically bleeped out every number. We probably went a little too far, but we just felt bad with how transparent and honest these guys were. Having just listened to it. With all those numbers bleeped out, you can still learn a ton here. The exact numbers don't matter. You can really get a picture of what they're building, why, and how it's different from your more traditional HVAC model. So I think it's still a great episode. I love listening to it again just now, and hopefully you'll get a ton out of it.
And one quick announcement in a day or two. We're hosting a training with the Building Performance Association called Don't Compete on Price. Win on trust. It's gotten great feedback in it. We're going to break down how to diagnose your business. We're going to provide real examples of contractors earning price premiums today, and recommend process and sales changes that you can implement immediately to avoid the race to the bottom. It's on February 5th. The link is in the show notes to register, and if you register but can't make it, you'll automatically get a recording to it. All right. Hope to see you on the training and enjoy the episode.
00:02:01.800 — 00:18:58.940
All right, everyone, welcome to rethinking the Heat pump business model, a look at companies leaning on innovation. I'm Ed Smith, I'm co-founder of Amply Energy, and I'm super excited about this. I know all these guys. They've all been gracious enough to be on our podcast over the last year, and they all have super interesting businesses.
More innovation is happening in heat pumps than anywhere else in HVAC. I'm biased on that, but I think it's totally true. And these guys are all running companies that I think are excellent examples of that innovation. And so we're going to hear from them about their businesses, how it's going and what they're seeing.
So basically we're going to cover more than this. But like three big topics. So what the heck is your business. Why did you start it. How is it going and what does it mean for the rest of us. And there's a smattering of different folks in here, contractors who are like really thinking about. But there's folks from utilities distributors all over the place.
So I want to cover all that. Before we get into the specifics, though, I just wanted to do like rapid fire intros. So if you guys would each introduce yourselves and give us your business in like two sentences, you will get way more than two sentences for the rest of this hour. But yeah, give us who you are and what your business is.
Mark, you want to start us off? Sure. So my name is Mark Kasdorf. I'm the founder and CEO of Forge. My background in 30s. I'm a software guy, so I started a software company when I was like 25. That did pretty well. I worked at a big company for a little while, and in 2020 I started Forge 1.0, which I'm not going to talk about today.
That was in carpentry. And in 2023, we morphed into Forge 2.0. Forge 2.0 is a next generation. We call ourselves a next generation heat pump contractor for this room where he pump contractor. We are probably the most similar to everyone here. I don't know the third one, but of all the companies on the stage, we pretty heavy emphasis on training.
So we train a lot of our own talent. About — of my field we trained in, about – were senior technicians. We go get leads, we do site walks, we quote jobs and we go install heat pumps. We're about – install and – service today. By the next year will probably be more like —. Excellent. Thank you Mark.
Great. Cool. Yeah. Grant Gunnison, founder and CEO of Zero Homes. We are a home upgrade marketplace primarily focused on heat pumps, but we do a long tail of projects. Yeah, my background in 30s. I grew up in a general contracting business, you know, tried and true business, ran that for a couple of years, kind of doing everything from sales to ops, etc. sometimes it's running around with my bags on and these days, well, and then after that background's in technology, actually pretty similar.
I spent a lot of time building space systems and small satellites, and today really focus on a tech forward version of a marketplace that can really be the enablement layer for consumers and contractors. All right. We're going to dig a lot more into that. Evan. And I'm Evan Andersen, co-founder of Pearl Edison.
My background I also am a recovering startup guy. I spent a good portion of my career in automated driving, saw something a little bit closer to, you know, tangible value for real customers. In terms of what we do at Pearl Edison, we really serve three stakeholders try to help homeowners navigate project complexity on energy efficiency and electrification retrofits.
We send fully designed, fully contracted work to a small, closed network of high performance, owner operated contractors. And then we work with utility and municipal programs to do that, so we'll get into it in more depth in this session, I'm sure. Awesome. I was worried none of you would be able to hold that to like, you know, —.
That was excellent pass at the bar. That was very good, Mark. I knew who to start with. All right. I'm adamant that in this session I'm not just going to go down the line, down the line, down the line. So Mark, you're not going to start every time I want to get deeper. So I want to get a little more into like give us the story.
Like the why. What's the problem you saw. Why did you want to solve it? And in that touch on who your customer is and how you solve that problem for them, because like who you identify as your core customer, I think is a great way to understand like where you stack in the market. All right, Evan, we're going to go reverse now.
You want to give us the story where you guys started and a little more detail on the business? Yeah, definitely. Well, maybe I'll start by answering your last question there. Who's the customer? I think the reductive answer to that is a homeowner. We get paid by a homeowner, but like by my co-founder and Jake like to remind our team every day the, you know, the partner that we are going to interact with every day, every week over a period of years is this small network of owner operated HVAC contracting businesses.
And so we view them as sort of the core constituency that we need to focus on most. I'd say a lot of our process is built around the promise that we make to them up front, which is when you get involved, this will be a fully designed, fully contracted project. It's not lead generation, so we do a lot of software driven and remote lead qualification, but eventually we've got, you know, BPI certified energy auditor in the home doing design, load, airflow and static pressure testing, all that good stuff so that we can hand off a robust scope of work to one of our partners.
Excellent. And then you don't touch on utilities because they're a major constituent for you too, right? They are. We looked hard at how do we save money for ourselves and our contractor partners. What we realized is that trust and distribution are expensive things to build if you don't already have them.
As those of you who are buying ads on Google know. Utilities and municipalities have some measure of trust or authority on energy efficiency and distribution to lots of people. And so we partner with them. We don't spend any money on marketing or lead generation. Those partners play that role, and we operate white labeled services on their behalf.
Awesome. All right. Not to be reductive, but the homeowner is your customer. You promise them a fully designed job that's going to be go extremely well. You do a bunch of remote qualification. Yeah. You have BPA certified in-home energy auditors. You're going to do it the rest of the way. You hand it off to trusted contractors to do the work.
And all of this is done. White labeled for utilities who really care about electrification. Yeah, I've ever had anything to that. I'd say, you know, it's not news to a utility that they could blast a listserv about heat pumps. The promise that we're making to them is about install quality and enforcement of best practices around design, installation and commissioning.
And so a lot of our processes also built around kind of reinforcing those processes to make sure we don't burn the promise that delivers the $0 leads. That makes sense. Awesome. All right. And on $0 leads, let's turn to zero homes. All right. Give us that. Like next level. Right. Yeah. So not too dissimilar.
We have a three sided marketplace. We also don't want to compete with our partners. So we don't run ads and those types of things either. We want to help our contractor partners access business that they wouldn't otherwise be able to get. And then we want to provide access to homeowners that, you know, in a lot of cases, can't get help.
Right. I mean, we have the ability to help people in extremely remote parts of the world and then bring highly qualified contractors and a well-designed system to their home. And so, yes, similarly, homeowners are in fact the folks that pay us. They are customers. And we also have contractors that are long term partners with us.
Right. So our goal really for our contracting partners is to help them make their lives easier. I've sat in that seat. Being an owner operator is very hard. It's very complex and really low margin typically. So we want to help those folks make more money and just make their lives easier for our customers.
We want to give them access to high quality design in some areas of the world. It's pretty early in the country. It's really difficult to find contractors that are really well trained on design and execution of installation, so we can help enforce that. We can help train people and the like. And then similarly, we have other partners today at cities, utilities and corporate partners that are looking for help to help their constituents in various ways.
And so we can bring an enablement layer to them to give folks access and be able to do all the orchestration and logistics behind the scenes. Awesome. And Grant, you do fully remote design work where you sometimes go to the home, sometimes go to the home. That's right. I mean, we built a novel software product to be able to pull information out of the house.
Do we did a big study with us on that to verify that we could, in fact, get information out of the house accurately. And then we did get our software certified for manual J as well, and working on some additional components of that. But in order for us to deliver remote work, we needed to really set a quality bar there.
So we did that work. It took a long time to get that up and running, but we're being quite successful with that. There are some exclusions though, right? And so we do ask our contracting partners to go to the house when we need to, but try to make that about —% of the overall homeowners we work with. Awesome.
Good. Thank you sir. Mark. Yeah, I'm going to start with the why behind Forge the R. Why is that? The US is rapidly running out of its skilled trades labor force. My guess is that anyone here that runs an HVAC firm, you're struggling with new talent. So that was our starting point. I originally wanted to start a company just like this one, and we were.
I was gonna build software. I was gonna build a marketplace. I did a bunch of primary research. I spent some time with contractors, and I made the decision. I didn't want to be in the business of selling software to contractors. I think that most contractors don't really want software. It's pain in the neck.
It doesn't work all the time, and I wanted to build software that made it easier for young people to get into the traits, and that was even harder software to sell to contractors. So we made a pretty early decision that we were just going to build a new construction firm, and we were going to embed software in the company.
We were going to design the whole company so that we could deliver an incredibly high quality product to homeowners and do it with a labor force that's average age is like 32, so it's not 25. We've got at least 140 year old master technician for every 3 or 4 young people in the company. But we kind of built this software first culture that enables us to deliver heat pumps to homeowners at a great cost, with a high quality, with a young new labor force.
I'm really torn. I mean, our customer is the homeowner, right? They're the ones that pay the bills. I spend as much time thinking about the young people were bringing into the traits. Right. So we're not a marketplace with one customer, it's the homeowner. But our labor force is our number two customer by a hair.
Awesome, Mark, thank you for that answer. In one fell swoop, you said you don't like my business model or Grant’s, which I love because I would love to, like, dig into some real stuff up here and like, in a minute. I don't sell software to contractors, so I think I think we're still good over here. Okay. So just it's just me.
Good. Start with the moderator. It's an easy way to place to start. So I do want to dig into like differences and have folks understand I think that's awesome. So that was like the base layer. What the heck do these companies do? Do folks have questions before we move on from that? What do they do? How do they do it?
We'll dig in deeper, but if there's any questions or clarification, I'm happy to take them now. All right. We feel like we got a good understanding of what these guys do. Okay, great. Let's dig into the technology. All of you guys are tech enabled in some way, which I think is a decent differentiator. So what's the technology you're using that changes the economics or approach or experience of what would be a traditional HVAC contractor?
Grants. You're about to drink, but you'll get to go first. So a little bit of the why as a part of this, if we want to go solve the climate challenge, which is a lot of our mission, we really have to be able to scale up this work. Folks have worked on training for a long time, but we need a ton of that. We needed a lot faster than it's happening, and it's very expensive to do.
And so our approach a little bit different is just to say, how can we bring access to high quality design closer to the homeowner so that they can get that and then help our trade partners, as we do deliver the work to actually enforce some high quality design delivery of that work. So as a big piece of that, though, in order to actually grow, you really need to reduce costs.
The best place that we can do that is in the sales process. And we don't look at that as saying taking dollars out of someone's pocket. But our sales folks, instead of targeting —- of sales a year. We want them to be able to do —-. And that is technology enabled by not having to go to the home. It is by enabling them to get a complete proposal done that hits all of our check marks in 30 minutes, and then they can crank out ten of those a day and close, you know, —- of those.
And so that really enables them to make a great living, but also help, you know, dramatically more folks on a daily basis to actually get the work done that we want. And then, of course, be able to help folks in Seattle and Boston and Colorado and northern Minnesota all in the same day. And so that's really the suite that we're trying to build.
It's a unified technology suite across electrical load calques, heat load calques, being able to select systems in that. So you're doing manual tests as well and then building full proposals in that. So there's a lot of software there to do the heavy lifting, but really enable folks to do a lot more work without having to jump on a truck, which is not the most fun thing.
And then separately, our go to market, we operate through partners as well. And so we also don't spend any money on marketing. And our acquisition cost is about a — of the average contractors because of that. That was great. There's a lot in there from —- in sales to — fully remote design as much as you can.
And then customer acquisition through partners, reducing acquisition costs. That's a lot of substantial differences for anyone who wants to check it out. Grant put a short video on LinkedIn three months ago. Yeah, and if you want to check it out, you can come by our booth. I'll. I'll show you how it works.
It's pretty cool. It's worth checking out. Awesome. Thank you. Grant. Evan, you want to go on tech that you guys are using? Yeah. I'll ground it in in the value we're aimed at, too. So those pillars basically are free, lead gen or efficient lead qualification and then quality system design, installation and commissioning.
I'd love to throw pixie dust, but all the software we're building does is one of three things. First, it's a a white labeled enterprise product. So there are things we build to be able to offer a concierge service in a box to a utility or municipality. Second, there's customer facing software that's intended to educate them on the scope of work.
You're trying to qualify purchasing intent. So we're giving them as specific information as we possibly can remotely to try to qualify them well. And then third is a software enforced workflow for everything from the data that we collect in the home, how we interpret that data into a scope of work, and then the job documentation that goes to a contractor and proposal that goes to the customer.
At the end of the day, it's just, let's have an enterprise product that our partners love. Let's do a good job of qualifying customers and educating them. And let's make it as efficient as possible to get to a contract with a great proposal for the customer. Create job documentation for the contractor.
Clear a lot of stuff. Yeah. How long have you guys been in it? Oh, man, we've been at it two years. Basically two years. Yeah, yeah. Great. Mark. Mr. Cosgrove technology. Yeah. So again, I, we kind of started and I've iterated a lot and tested a lot of what Grant described. I mentioned to this before we started the panel that, that we might have a little bit of a disagreement we don't think you can do in New England, at least a remote sale.
We tried. Partners have tried. We did installations for partners that did remote sales. They were kind of a disaster. And we've ultimately come to the conclusion that you have to do a psych walk. All of the software that we've embedded throughout the company is designed to take to do 1 or 2 things, either allow 27 year old salesperson to do something that would normally take a master electrician, like a load calc, or take a 20 minute task and turn it into a five minute task.
We're not quite getting to $ — million per salesperson, but we're like – to –, which I think is quite a bit more than industry standard. And that's with doing a site visit for every single job. We build relatively little software internally. I think we let Silicon Valley and tens of billions of dollars try a zillion experiments, and then we try them all and we embed the best software.
So just to clarify something from earlier at I love it when people make software. I just didn't want to be in the business of selling software. I like doing real thing. I like installing heat pumps, but I love it when it makes great software for us to use.
00:19:00.060 — 00:20:03.220
I appreciate that you've got your back in my good graces, which is really important, and I should have put you guys in a slightly different order. Evan, you should have been in the middle, because my sense is on the spectrum of like, fully remote to nots and building custom software to not. I think that's sort of the like.
Grant, I think you're on that extreme, Evan. I think you're in the middle. And, Mark, I think you're on this end. At least that's how I'm bucketing you guys in my mind. Oh. Any disagreements? No, no, I think that's right. Go to market perspective. We look a lot like Grant. We look more like Mark on how we get projects done.
Awesome, cool. I should have asked this in the intros. Where are you all operating? Because you're all operating in select states. But some of them are different. Some of them overlap. So Evan, we'll just go straight down. Where are you guys operating? Michigan and Pennsylvania. Grant. Yeah, Colorado.
Chicagoland, Minnesota, Northern California and Boston. Mark. Yeah, we're just in Massachusetts for now. Probably hit a second state next year. Okay, awesome. I got more questions. Does anyone have a question? They want to get in now. We'd love it to be a dialog.
00:20:04.260 — 00:22:18.410
Yeah. Hold on. Let me give you this so everyone can hear as an example, just in the Vasby I liked it. Two condos. Same condo complex where we would be putting out a hybrid gasser and a seat for one condo. Unfinished basement. Base. Second try the same color, same furnace, same key for the base homes. Entirely finished plaster ceilings, which I'll have to cut open to run.
New electrical, new waffle a new fridge provides new exhaust pipes. You have to check to make sure you get that exhaust pipe correct location, etc. if you're not going to those two conduits in it, you would just be looking at opposite the outside of the brick pathway or else. And you think it would be possible to think well as you build is are you the same price yet they're vastly different installs.
So how are you approaching that you don't have somebody getting eyes on what's in the apple. What's it. Yeah. So let me paint a more full picture of what what that looks like. We built some software actually quite similar to Conduit and Amply, but it only uses photogrammetry. So what that means is any cell phone can operate on top of it.
We leverage the homeowner to send us a lot of information. So we have eyes on the inside of the house. We create a 3D model of that home. We take a bunch of photos and layer on all the semantic data for the walls, windows, etc. so we understand what the constructions are, and then we use our utility bills to actually calibrate that building.
And so we can do very accurate manual JS of that. But we also have enough information to mostly understand the practicalities of install with some exclusions. And so there are some cases we do need to send a person to the house. You know, we really want to hold a high quality bar. So we're not going to set up our installers for failure.
We want to make sure that they are prepared to be successful in the field. And sometimes that does require site visits, but it's a lot more than like a quick video walkthrough or just some photos from Google Maps or, you know, the outsides of their house. There's a lot going on there. And you know, again, happy to show you guys what that looks like, but really try to encapsulate the entire project scope as opposed to just get like a general or small idea of what's going to happen.
Great answer. And Joel, I'm coming back. Joel, you're president of ACA any
00:22:19.450 — 00:32:00.920
you step down but incredibly well-respected contractor in Massachusetts. How does that sit with you? And you follow up questions? Because it was a really good question before this becomes the Grant Gunnison show, which would be a show I would watch, like let's expand it. So for it would be awesome to hear you guys each say more about your sales process and why you landed on it.
And then maybe pros and cons, right? Like that would be interesting. But Grant, I'll let you go first because it is the most extreme of the levels up there. I mean, I would say we're at a big disadvantage, right? We're all 3D creatures. Humans like to be with humans operating over zoom definitely doesn't help.
It does help in the instances where, you know, it's really hard to get to at home. Maybe no one's going to that home because it's two hours from the nearest contractor, but in that way, we certainly have a disadvantage. What we try to do is really layer on like very high quality design. We're really giving people very dense proposals, lots of information there to get them confident about what we're going to do, because there is some skepticism for sure.
So, you know, pros and cons of the approach. I think we're being successful, but it's not for everyone, right? We do have some folks that go, hey, you know what? I don't want to go use your app and, you know, produce information that you need to be successful. And then we say, okay, great. Like we can't help you because we're not going to get into the zone of, hey, we're just going to take 3 or 5 pictures and then give you a quote.
And I don't know, maybe it'll work. Maybe that's like a dangerous one for sure. Great. Evan, you on your next? Yeah. I'd say starts from a constraint that we're going to be in the home. Because while I would consider myself a long term optimist, that you can do a accurate load remotely, we've not figured out a way to do that.
And there was a good debate on this yesterday that ample team led. But I'm a long term optimist on that. I am a short, medium and long term pessimist that you can get airflow and static pressure data needed to do a good job with ducted systems. Without going to that house and using the instruments, you need to collect that data.
So we start from we are going to every home. It's expensive. I don't need to tell you that. And so from a remote perspective, what we lean into is Lead qualification. So it's an online onboarding process. We collect lots of information. We do not require you to download an app and walk around with the cell phone.
But we are requiring you to answer, you know, 20 questions, sometimes more about your home. We are putting a price and a preliminary load and scope of work in front of you to force you to try to try to consider costs and benefits, and then you're speaking to a member of our team that's going to ascertain purchasing intent before we send someone to the home, because the number we care most about is if we go, we want to win.
So a lot of our focus is upstream on qualification in the home. We use our own application for data collection primarily because it feeds the workflows on the back end that we've written to say, are we modifying the stuck work and where are we adding supplemental dehumidifier and why? But a lot of the work we try to do from a cost out perspective is upstream of going to the house.
And let me I'm going to clarify two things across you guys. So Grant all of your homeowner customers download your app. Yeah that's right. Definitely a point of friction for us. Okay. Definitely a point of friction. How many other contractors in the room have their own app? Someone downloads off that.
That was yeah. Nobody does. And then, even if yours isn't an app, how is it just a survey and like how are they getting that to then do it. It's a web app that's white labeled under the partner. So it's a TLC home or TW heat pump concierge. They're going to get a bunch of questions. A lot of people are going to go screw that.
I don't want to answer 25 questions about my house. But like Grant's describing with their process, we live with that friction because it's what's required to get to some kind of qualification of purchasing intent. So web app, they just go to a website and. Yeah. That's all. Okay. Claire. All right. Marc.
Sales process and what's it look like? How do you get to those numbers with home visits? Why'd you choose home visits? Pros, cons? Yeah, yeah, I think at your assessment of the spectrum was pretty accurate. As I'll become clear with my answer. So we probably have the most traditional looking process. Homeowners can contact us via email, call, text like however they're most comfortable.
They're hopefully going to get a response pretty fast. On the near future, we may use AI for this to get them a response instantly, but we're not doing that yet. We'll try to get on the phone with them same day. We'll do a 30 minute lead qualification call. So we don't do prescreening and refuse, you know, collect information ahead of time.
There's no app to download. There's no questionnaire. They're talking to a human. That human is doing a lead qualification and really trying to figure out does this person want a heat pump or they likely to buy. From there we schedule a site visit. We. Our biggest friction point in our sales process right now is time from lead qualification to site visit.
I think we're booking out like — weeks, which a lot of homeowners don't want to wait — weeks. So that's a pretty big problem that we need to solve. Site visits are — minutes. We're doing a lot of homeowner education. We're doing a local. While we're capturing the information for a load calc, we're capturing a ton of info.
We're getting a J calc, doing a manual J. And then we recently implemented, which is working pretty well on the drive to the next job our salespeople are calling in. And basically we're generating the quote while they're in the car. Our time from site visit to quote is down to — days. We're super data driven.
That is data driven as you can be. If you're not a pure software company where everything is just data, and then we've got about a — close rate. So that's a bit above industry average. I think it's that of course I'll be really interested what their close rates are. And the math all works for us in general.
I think it works a little better at —. It doesn't really work at —. Awesome. Very helpful and I hope you all are getting the sense for like the amount of technology. Some of the differences, some of the similarities from what you would call a traditional HVAC or heat pump installer. It's a good moment to pause any questions coming up at this moment?
Multiple. Hal. Let's go to you first and then Marci. Three good questions. What was the last one? I'm sorry. A service after the sale for like a heat pump installed. You guys do service after the sale brand. Service after the sale was the third one. And now I've forgotten the second one. How so? Brand of heat pumps, envelope improvements if needed.
Service after the sale? Yep. We carry Brynt, Mitsubishi and quilt. So is there a brands? We'll open group mints I always some of my salespeople are here. I don't think we do much there. We typically refer people to partners or that work has already been done by the time someone gets to us. Might be an area of opportunity that we should explore though, and then service after the sale.
We offer a service plan, you know, a couple hundred bucks a year for us to come out once or twice, depending on what level people pick And you generally want to stay close to that homeowner. And I want to install their, you know, replacement in 15 to 20 years. And I want to be helping them maintain a great system every year in between.
Awesome, Grant. Yeah. So similar. We use several major manufacturers. So not quilt yet, but Mitsubishi Bosch, Daikin are typical for us. Though we're not married to anything. We do have opinions, frankly, on performance. We don't sell service contracts. If our partners in network would like to do that, they're welcome to do that with the homeowners.
So we have mechanical weatherization, plumbing and electrical contractors, primarily a network. We don't price out the weatherization work ourselves today. We can't get in all of those spaces. So we will have someone come do a walkthrough to price that out. My answers are very similar to Grant’s, and it's a funny collection of questions because I think we've changed how we do each one of those things in the last six months.
On equipment. We do mostly Mitsubishi for all electric applications and mostly Amana for dual fuel applications. We started out agnostic. We've moved away from that in order to aggregate enough demand to push equipment prices down a little bit. And because our partners have found it easier if we just buy what we want versus sending them a cut sheet.
Second, on shell, our data collection process is designed to get what we need to quote that we are not good enough at that yet either. I'd say probably not fully living up to fully designed, fully contracted there. So we have a number of multi trade partners in network that we get involved on, on shell work and then on services.
We're very brand forward with the installers brand. We want the homeowner to have a relationship with and trust them. We don't have a service business, so we generally tell customers who ask, which is most of them, that they ought to work that out with the installing contractor we pick for them. House question Sparkman for me, which is Evan, you mentioned airflow measurements.
So you're doing ducted and ductless. I'm actually curious for all three of you guys. Ducted ductless, dual fuel. Which do you cover? Which do you not? Evan, you want to go first? All of the above. I'd say it's interesting. Market by market in Michigan. A lot of our customers have a certain antipathy for Douglas.
So we're trying to make ducted work and a lot of those scenarios. And then Michigan has the highest spread of delivered costs of natural gas to electricity anywhere in the country. That means we're doing dual fuel. So we do all three of those. Great. All the above. And we'll add air to water as well.
Add air to water as well. Oh, yeah. It's a big topic. Cool, Mark. All the above are. I just looked at our analytics. We were like — ducted, the exact same percent ductless and then a little bit of dual fuels new for us, but we're selling one more. Awesome. Thank you. Marci. Have you forgotten your question or.
You look scared. Oh you got it. Okay. There we go. Do any of you get paid for your initial assessments if you're working with the utility, did they reimburse you for those assessment yours that you're doing with real numbers. And then last question is would for your conversion rates after you've gone through that assessment process.
00:32:01.960 — 00:47:50.580
All right. This time I wrote them down. Actually, I didn't write down the third one, which is conversion. Yes. Let's take them one at a time and go kind of three for three. Let's do how people find you guys. Mark. Actually it was to Grant again. So, Grant, why don't you start us off and how people find you if you don't do marketing.
And then be cool to hear from the other two as well. Yeah. So primarily we run programs for partners or we have web funnels that our partners are hosting. You look at our website today, you almost can't get in contact with us. I mean, there's very little there. And and so primarily just through partners or you can call us.
Awesome. Mark. Who are your partners? A utility cities and corporates. Cool. That's awesome. And I would like more intro panelist questions. Excellent job Mark. Yeah. Keep going. Sure. We're about —% referral roughly I think, and then —% paid search, maybe —% paid search. We've had some luck recently with radio.
Radio? Yep. Oh, cool. That's cool. That's all. That's great. Evan. Very similar to Grant’s. It's either partner facilitated outbound marketing. It's about — with inbound partner referral. So someone comes to one of their existing web assets and gets linked out to us. Awesome. I'm going to hold off on the pay for assessments because I want to talk about rebates more broadly.
I think that's interesting for all you guys. So let's do conversion rates success. A couple numbers have been dropped throughout, but like the suggestion of how well it's going so far. Mark if you're willing. Yeah. So again we're super data driven. Our lead to site visit conversion rate changes constantly when we're running different experiments.
We tried social for a while. We had a — conversion rate and it was awful. Social was a pretty big waste of money for us at least the way we did it. Maybe someone else could be successful there, but we didn't have a lot of luck with social like Instagram and stuff like that. I think today we're pushing close to an — conversion from we're qualifying on the phone to we're booking a site visit, and then our conversion from site visit to quote is it's got to be above —-.
We go to a home. We're generally generating. Quote I think occasionally our salespeople realize that, oh, you don't agree with the homeowner. You don't want our services. And then from quote to close, we're running. It varies from month to month. But over the course of this year, it'll be searching — tried to set a high bar because I'm interested in their numbers also.
Yeah, frankly pretty similar. In the last five months or so, we've been about —% or above on closed rate from, you know, virtual call to sign a contract. And the numbers above that vary a little bit in the funnel. I would say we have a lower booking rate at the moment and probably could invest a little bit in sales ops.
But generally, you know, the quotes that we're sending out to folks who are doing a pretty good job, close enough. I'll I'll caveat that we're doing less volume probably than both of these guys, but our close has been —% for the cohorts that are back in April or May. I think one of the unique features of our business is that we don't serve emergencies well.
So our customers are planners. Planners take their sweet time making a decision. And so the the pressure data from, you know, people that entered the funnel last month just we don't have yet but it's basically —% for the Q2 cohort. Awesome. Great. I think there's kind of two questions there. And they're both interesting.
The first one is can you do a countertop sale? If you price high enough you can like you can let your margin vary a bit. You throw out a high price. And if they sign, great. If we don't love to do that, we probably run a slightly lower margins, certainly, than a PE firm and probably some of the people in this room right now.
We want to give homeowners great value while charging a fair price. We can't do that at the countertop like we don't have a load calc yet. We don't know if there's going to be a panel upgrade. Like there's just too many question marks for us to other than a very simple system for us to generate a quote on the spot.
From there, I mean, I was talking to one of our sales guys the other day, like he was telling me a job he just closed was 50 emails back and forth to the homeowner and probably another half a dozen phone calls. Right. So we have no problem building a relationship. We're talking to those homeowners. We're spending real time.
It's work to do it when you don't do it at the countertop. The countertop is sexy. Like, that would be great. We just haven't figured it out yet. Evan, you want to go next? Yeah. We don't do it in the home because the software we build is not good enough for that yet. Like, we want eyes from one of our experts on it before it goes out.
It's not that you couldn't run the workflow in the background and generate it. It's just quality control for us right now. I think that's a limitation we hope to eliminate. So that's not not the long term plan, but in terms of how you avoid sticker shocking people. We just try to stick or shock them up front.
So if we're going to the house, they've already seen something online that says — and had to reckon with that. Where we get into trouble as if you gave them — and then you show up and you know, Duckworth's a disaster. There's a hole in the wall. And somehow we didn't get that in a lead cold call.
But for the most part, people already know roughly what they're paying Grant. In a perfect world, for us, if someone's called in or you know you have a touch point with them, they use our app, we jump on a video call with them, we'll do a load count right in front of them, talk through what their system design that they would like and or what works for the home.
We'll actually draw that out on a schematic right in front of them. We can talk about how they'd like to control heating and cooling in individual rooms, or if they have a ducted system. We'll kind of lay that out. Talk through electrical complications. We'll do an electrical load right in front of them as well.
We don't have proposal right in our platform today, so we kind of leave it at that point and then we'll follow up, you know, maybe an hour or two later with a proposal, but our product goal is to be able to get through that entire process in under — minutes and do it right in front of a homeowner so they can really understand what's going to happen in their house, really what the trade offs are with pricing, and then pull in incentives and financing and be able to have the complete conversation with them, but not be in their living room.
Can I just say, I know all three of you guys, so I'm not surprised by this, but I've been in many panels with CEOs and founders of young, risky startups. And like, the transparency and honesty is nowhere near what you guys are giving right now. So it's awesome. Thank you. Actually, I had one more thing to add because we did talk about margins and things, and I'm happy to be transparent about that as well.
We run our business at – gross margin, which is typically like half of the target of an HVAC business. That is to do two things. One is to make sure that our contracting partners can drive a profitable outcome for themselves. In this, we can make a little bit of money, and often we are, you know, maybe — percentile and costs that we're delivering to homeowners as well.
Your margin is – or you plus the contractors, –. Our margins –. Your margins and your gross. That's right. We tried to target – gross margins for our contracted partners. Got it. And – percentile. So you're like your net profitability is is sub the what you typically expect from a contractor.
That's right. I mean we're we're trying to reduce costs for consumers. Try to make a little bit of money to run our business. And then ultimately, you know, try to help our contracted partners have profitable, easier to run businesses. Yeah. Well, if we hire our contracting partners for their time so they're not purchasing equipment.
So —% on their labor. So the math is not as simple as that. But we've worked with a bunch of partners initially, and I won't name any of the specific partners or specific experiences. But we had two general issues with working with partners. The first one was we would walk into a home and feel that the wrong system had been sold for that home or that homeowner.
We struggled with that, and we worked with those partners as much as we could, but we've got a really high bar. The second issue we had was margin, right? If you know, we think that we price as best we can with the margin that we want to get, like we couldn't possibly mark that up by another —% and come close to delivering value to the homeowner.
I think the it's own like Grant's business, if he's if you're a contractor working with Grant and you don't need a warehouse because he's purchasing the equipment and you don't need certain insurances and you don't have a cost of sales, I think you could just barely get to that –. The partners we were working with, we did have to bring some of the equipment.
We had to bring all the fixings. We had to bring a bunch of stuff. We just couldn't make the margins work for our business when we're working with a partner. Our average ticket, because they brought some of the materials, I think was — and I had — margins. Right. So on a job, I was making four grand today.
My average ticket's — and my margins are closer to –, right. So the same amount of labor I'm making three times as much money by going directly to the homeowner rather than through partner. So we just with our model, we struggled to make it work. Probably slowed down since the podcast. New England is hard and big, right?
I mean, we're going to sell — worth of heat pumps this year, I think, and there's a —- to —- million company to build here. And that's without taking a business away from anyone in this room. Like there's not nearly enough contractors to do everything that needs to be done in Massachusetts. My guess is we're two years away from spreading across New England and five years away from spreading nationally.
At the rate we're growing today. This ties into a question I had on here, which is basically the headline of it was partner or competitor. So Mark, that was very well said that I think basically competitor. But there's plenty of business to go around. So don't. So don't worry about it for. Is that fair? Yeah.
I mean, I think the only people I want to put out of business, and I apologize if you're in the room, are the p roll ups, which I think are like bad for homeowners, bad for they're bad for everyone. But the person that sells to them, they're great for those people. But I'm not a big fan of how the P roll up street homeowners.
Awesome. Always an easy one to throw under the bus. Well done. Grant and Evan, how do you guys want contractors to think about you and their relationship with you? Like you need them as subcontractors? Not making margin on the boxes is tricky. So like, it's actually Evan, I don't know if that's true for you or not, but like, weigh in on how would you want if there's a contractor in here operating where you operate?
What would you want them to think about you and be asking themselves? Grant, I guess you can go next. Oh, yeah. Cool. So, yeah, I mean, we really want to be partners, right? At the end of the day. I mean, I ran a GC business and I had crews swinging hammers and the like, and we really just wanted to be the enablement layer for the folks that are doing that work.
We want to make it as easy as possible for you to go do that work, and as profitable as it could be. We really do try to protect our contractors margins. And if something goes sideways on our job, we just eat that. We're not going to, you know, string out our contractors and we really don't want to burn them. It's hard enough to run one of these businesses we're working with, a partner adds complexity to those businesses.
And so we really try to be as friendly as possible. It doesn't mean we're perfect, but we do our best, and we are also trying to access parts of the market to bring business to our contractors that they wouldn't be able to otherwise. We don't want to compete, you know, to the same marketing channels or any of those things.
We really want to be partners and help them grow their businesses. And frankly, I just have a lot of empathy for the folks that run these businesses. I was in that seat and it's hard. So just trying to make it easier. It's great. Evan, I would say by percentage, most contractors are competitors for us. Now say I'm at the US Pump Summit.
That doesn't mean by percentage for this room. Most contractors are competitors, but we shy away from using the term marketplace because we try to work with a very tight, closed network of small contractors that want to grow and our performance focused and our owner operated, so we view them as our partners.
They need to be more profitable with us, not less. We view everyone else as a competitor. Awesome. All right. We've got six minutes. I want to get in a couple more questions, Dave from LG, because it's a partner branded channel. Oftentimes it's utility or municipal partner picking a lender of choice. So we've got in both Pennsylvania and Michigan cross promotion of the local green bank.
We find that a lot of our customers make use of of that to get their arms around a — average ticket. I don't have the numbers in front of me. It's not — like it might be if we were in a different interest rate environment, but it is significant. Thank you. Mark. Yeah, we're only in Massachusetts. I think this the answer to this question probably varies dramatically.
State to state. I don't envy Grant and how he's going to have to answer this. Massachusetts with the rebates and the zero interest loans, I think — of our homeowners, they're getting a — year interest loan. They're getting a — tax credit, which is going away. They're getting — rebate, and that's covering most of the project.
If it's a — project, they're paying for the rest of out of cash, and they can probably afford that. Thank you. Grant. We're about — cash to finance in almost every program we run. There's some kind of advantage financing solution. And that's quite helpful, certainly. But every once in a while, I, I get very surprised when we had someone the other day and steamboat — project, they paid cash or some — truck to start the project.
And it's just mind blowing that people have that kind of cash sitting around. So, you know, I don't think I'll ever not be surprised by that. Yeah. We provide a double layered warranty. Our contractors are required to provide a labor warranty. And, you know, basically workmanship warranty. We provide a second one on top of that to the homeowner for any reason that the contractor were to go out to business.
We still provide that warranty. Anything after 12 months is paid by the homeowner. I'll go quickly. We've been very fortunate to be able to grow our business without having to do really any targeting that I assume will, you know, become much more important as we want to grow beyond where we are today. But fortunately, we've been very successful past, you know, a couple of years without having to do that.
We call them planners. So they're either retiring a system early to try to reduce the carbon intensive ness in their home. They're trying to farm a rebate. They've got a specific comfort challenge that they want to address, but it does limit us to not serving acute failures. I think the other thing that's interesting about that is the planners we hear from our contractor partners are often their least favorite segment to serve.
It's like the looky loo with a thousand questions. We serve that that person pretty well and pretty efficiently. You guys might not want to. So I think we're just about a time you guys have been awesome. Is there anything you want to close with as we start to wrap Mark? Sure. I think I'll close with a thank you for everyone in this room for helping the country transition to heat pumps, because the number one thing a homeowner can do to help the climate today, other than not fly to Australia, is replace a fossil fuel system with a heat pump.
I think everyone here is doing awesome work. I like to tell people whenever I can that for every dollar profit I make, we're creating a job, we're helping the climate, and we're making someone comfortable. I think it's a really kind of nice position to be in running a business like that. Awesome, Grant.
Yeah. Two notes. Maybe the first is eventually we do want to provide our tools to folks to be able to do inside sales, much like we do, and I promise you, we won't charge for it. I really believe that we can help folks without having to charge for software. And then the second is just an invitation, if you know what I've talked about is interesting and you'd like to work with us, you know, we'd love to draw.
And yeah, I'd just say if the description of the partners we work with sounds like you, I'd love to talk. Awesome. Thank you all for joining. There's some super interesting innovation happening here. Thank you to you three for being so open and honest. That was awesome. Thanks everyone for joining. Enjoy lunch.
00:47:53.700 — 00:48:16.100
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