What if contractors could get fully designed, install-ready heat pump jobs without ever rolling a truck for a sales call? What if they could make 50%+ margins on labor while someone else handles equipment procurement, rebate processing, and working capital? And what if this model could scale to solve the 60 million home electrification challenge that's been stumping the industry?
Grant Gunnison, CEO of Denver-based Zero Homes, isn't just asking these questions — he's built a business around answering them. His company has achieved Department of Energy validation that their smartphone-based home assessment is as accurate as sending a person to the house. They're completing 90%+ of projects without anyone from Zero Homes ever visiting the home. And they're paying contractors $180-200 per hour for labor while handling all the soft costs.
But Grant's approach represents a fundamental inversion of how heat pump contracting has always worked. Where contractors traditionally make their money on equipment margins, Zero Homes takes the equipment and pays premium rates for labor. Where contractors spend 25% of revenue on customer acquisition, Zero Homes delivers ready-to-install jobs. The question isn't whether this model works — it's whether it represents the future of residential contracting or a threat to it.
Grant's path to reimagining heat pump sales didn't start in a boardroom or accelerator. It started in the trenches of a family contracting business he never planned to run.
When Grant's father died during his first semester of grad school, Grant dropped out to keep the family business alive. At 23, he found himself responsible for 18 employees, with no price book, no salesman, and a business run entirely on paper in manila folders. "You want to go find a customer file, you might spend an hour going to find the file," Grant recalls.
For 18 months, Grant rebuilt the business from scratch while learning the brutal economics of contracting. The thing that frustrated him most? Customer acquisition consumed 25% of revenue — and most of that was spent in trucks, driving between appointments.
"I was physically and emotionally frustrated with being in a truck all day, going out to meet with people, and most of that time was actually spent in the truck, not actually getting the thing done that I needed to get done," Grant explains.
But the real revelation came when Grant realized the systematic inefficiency this created for contractors trying to sell heat pumps versus furnaces. "It takes about five seconds to design a furnace solution. It could take three hours to size a heat pump system. And if you're not guaranteed to get that job, do you want to go spend $500 of time and effort trying to give someone a quote?"
That $500 problem — the cost of designing a heat pump system with no guarantee of winning the work — is what Grant believes prevents contractors from preferencing heat pumps over simpler “box swaps”.
Zero Homes' solution sounds almost too good to be true: homeowners use their smartphone to create a digital twin of their home in about 20 minutes, enabling Zero Homes to design and quote heat pump systems without anyone visiting the house.
The skepticism is understandable. Every contractor knows homes have endless nuances that can make or break an installation. How can software capture what an experienced eye sees during a walkthrough?
The Department of Energy asked the same question. In a comparison study, they had Zero Homes assess homes using their digital process while also sending people to do traditional in-home assessments. The results? "We’re just as accurate as sending a person into the home," Grant reports. "In fact, we were more consistent than the person going into the house."
The key insight: "Having a machine process information is much better than having someone type it into a form."
Zero Homes has now completed hundreds of projects with their team visiting less than 10% of homes. Their change order rate sits below 2% of revenue.
"Our cost of change orders is less than 2% of revenue," Grant notes. "Really around the fringes are we changing things out. It's almost never swapping a SKU. It's 'hey, we had to pull someone off the truck to add to the job,' or 'we had to punch through a wall that we didn't expect.'"
Traditional heat pump economics reward contractors for equipment margins and punish them for design time. Zero Homes inverts this completely: they handle all equipment procurement and pay contractors premium hourly rates for labor.
Here's how the math works:
Traditional Model:
Zero Homes Model:
The result? "They're going to make less dollars per day, but overall they're going to be more profitable," Grant explains. "The difference is that they're not spending that 25% on acquisition anymore."
Some contractors have embraced this so completely they send Zero Homes their own leads to sell back to them as designed jobs. "Once it gets to be 45 minutes to an hour away from the office, they're like, 'Man, that's two hours of drive time to maybe make a sale. If Zero can actually just sell it and send me back the work, I can just focus on driving revenue.'"
The challenge with any remote design process is ensuring installation quality matches the design precision. Zero Homes addresses this with a rigorous quality assurance process.
Contractors must complete extensive photo checklists — "probably 30-40 photos," according to Grant — plus commissioning data for heat pumps. "People are putting probes in all sorts of places," documenting refrigerant charge levels, airflow measurements, and system performance.
For the first 5-10 jobs with each contractor, Zero Homes conducts live video calls during installation to set expectations on everything from system performance to job site cleanliness.
"It sometimes feels like a little too much, to be honest," Grant admits. "But I'd rather be dialed more towards requiring very high quality than having callbacks and challenges."
The approach stems from Zero Homes' recognition that they need truly skilled installers, not commodity labor. "We're not trying to reduce the value of what's going on in the field. We need that value to be successful," Grant explains. "High quality installation is not a commodity in the market, and there's actually relatively low supply on that end."
Zero Homes' model raises fundamental questions about the future of contracting. If a company can handle customer acquisition, system design, equipment procurement, and project management while paying premium labor rates, what role do traditional contractors play?
Grant's perspective is that Zero Homes amplifies rather than replaces contractor expertise. "We want to help them make more money. We're going to strip away a lot of the things that you're really frustrated with along the way. And we eat that complexity internally."
The model particularly appeals to technicians who want to start their own businesses without building sales and marketing operations. Instead of learning marketing and sales best practices, they can focus on what they do best: installations.
"No one ever walked into my door and said, 'Hey, can I just put money in your pocket?'" Grant laughs. "When we go to engage contractors who want to join our network, they're almost like, 'Wait, this is too good to be true. What's the catch here?' There really isn't a catch. We just want to help you be more successful."
But the model also represents a potential threat to contractors who've built their businesses around equipment margins and customer relationships. Zero Homes owns the customer relationship and controls pricing, even if contractors maintain quality differentiation through installation excellence.
Grant frames Zero Homes' mission around the "60 million home challenge" — retrofitting the 60-80 million U.S. homes still using fossil fuels for heating. This perspective drives every business decision, from their technology platform to their partnership strategy.
"When you frame it like that, a lot of what's in the market just can't get us there," Grant explains. "I've been particularly ruthless about trying to build a business that we actually think can go solve that problem."
This scale thinking explains Zero Homes' marketplace approach, working through utility and government partners rather than direct-to-consumer marketing. They've achieved triple-digit quarter-over-quarter growth for four straight quarters by focusing on partnerships that can reach thousands of homeowners simultaneously.
The question is whether this model can maintain quality while achieving the scale necessary to impact climate goals. Zero Homes' early metrics suggest it's possible, but the real test will come as they expand beyond their current markets.
Zero Homes represents one possible future for residential contracting: specialized companies handling different parts of the value chain, with contractors focusing primarily on installation excellence.
This model offers several advantages:
For Contractors:
For Homeowners:
For the Industry:
The trade-offs are equally significant. Contractors give up equipment margins and direct customer relationships. The industry becomes more specialized, potentially limiting flexibility. And success depends on companies like Zero Homes maintaining quality while scaling rapidly.
Zero Homes' early success raises intriguing questions about the industry's evolution:
Will contractors embrace specialization? The model works for contractors who want to focus on installation, but what about those who've built their identity around full-service customer relationships?
Can quality scale? Zero Homes maintains rigorous standards now, but can they preserve installation quality across hundreds or thousands of contractors?
How does this affect innovation? When contractors aren't designing systems, do they lose the feedback loop that drives equipment and process improvements?
Grant's bet is that the efficiency gains from specialization outweigh these risks. "We're trying to take that $500 and move it almost to zero," he explains, referring to the cost of heat pump system design. "Unless we can do that, it's going to be very difficult to build supply to actually preference these technologies."
Zero Homes' approach offers several insights for contractors navigating industry changes:
Customer acquisition is getting more expensive. Traditional marketing and sales approaches may not be sustainable as the market becomes more competitive.
Specialization creates opportunities. Contractors who excel at specific aspects of the value chain may find new partnership models more profitable than trying to do everything in-house.
Quality installation remains valuable. Even in a more automated, systematized industry, skilled installation work commands premium pricing.
Technology changes the game. Companies that can leverage technology to reduce soft costs will have significant competitive advantages.
Scale thinking matters. Solving climate challenges requires business models that can handle millions of installations, not just hundreds or thousands.
Whether contractors choose to partner with companies like Zero Homes or compete against them, the underlying message is clear: the industry is evolving toward greater technological sophistication. The contractors who adapt to these changes will capture the most value as heat pump adoption accelerates.
Zero Homes may or may not become the dominant model, but they've proven that alternatives to traditional contracting approaches are not just possible — they're profitable, scalable, and potentially necessary to meet the climate challenge ahead.
Want to learn more about Zero Homes' contractor partnerships? Visit zerohomes.io or connect with Grant on LinkedIn.
[00:00] - Introduction
[02:14] - Overview of Zero Homes
[04:54] - Why Heat Pumps?
[11:41] - Building a Marketplace for Home Electrification
[15:10] - The Homeowner Journey
[17:58] - Contractor Economics: Making it Work for Everyone
[29:35] - Quality Control & Design Process
[35:56] - The Risks & Rewards of Partnering with Zero Homes
[41:04] - What’s Keeping Grant Up at Night
[43:05] - Advice for HVAC Entrepreneurs
[00:00:00] Guest: Grant Gunnison: We spent time at the Department of Energy earlier. Last year, we did a comparison study sending a person into the home, doing our process, sending them all the data. You're just as accurate as sending a person into the home. From a data quality perspective. In fact, we were more consistent than the person going into the house. Turns out, having a machine process information is much better than having someone type it into a form from a digitization perspective. Really high quality and we can't do everything. There are some exclusions, and we do have some walkthroughs and we can get through and talk about some of those. But 90 plus percent of our homes were never having anyone show up to out of the project.
[00:00:40] Host: Ed Smith: Hey everyone. Three quick announcements before we start. First of all, we hired an iOS engineer. It happened super fast. It came from a referral. So thank you all for thinking about it and sending us recommendations. So we now have three iOS engineers, but we're realizing we could use a fourth. So we're actually leaving the same job spec open. The link is in the show notes. If you have any more referrals, please send them our way. That was one. Two grant who's our guest today is also hiring. And he's also looking for contractors to join his network. So there's two links in the show notes. 1 to Zero Homes's hiring board and one to the contractor information page. So interested those check those out.
And third, the US heat pumps Summit is coming. We're going to be there. Grant's going to be there. A ton of our other favorites are going to be there: Nate Adams, Tim De Stasio, Peter Trost, Hal Smith from Balco, Kevin Brenner, Joe Meadows. I mean, it's an all star lineup. It's November in Worcester, Massachusetts. The link to their website is in the show notes, and there's a discount code for amply. So if you want to get a ticket, enter AMPLY in all caps to get a discount code for the US Heat Pump Summit. Hope to see you there and enjoy the show. Hi and welcome to the Heat Pump podcast. I'm Ed Smith.
[00:01:52] Host: Eric Fitz: And I'm Eric Fitz. We are co-founders of Amply Energy.
[00:01:54] Host: Ed Smith: Today we've got Grant Gunnison from Zero Homes. Grant. Welcome.
[00:01:58] Guest: Grant Gunnison: Ed. Eric, thanks for having me. Good to see you this morning.
[00:02:01] Host: Ed Smith: Glad to have you. All right, Grant, we're going to talk about a whole bunch of stuff, but we'd like to start with the folks who are active on LinkedIn in the heat pump space. They're going to know who zero homes is. But that might not be a small sliver of our audience. So we'll dig into it deep. But give us the like the two minute overview. What zero homes? Who are your customers? How do you help them?
[00:02:19] Guest: Grant Gunnison: Yeah, so we're a home improvement marketplace. We're really focused on heat pumps and electrifying homes. And our shtick is that we built the technology platform to digitize the experience for homeowners so they can use their smartphone in about 20 minutes. They can build a digital twin of their home that enables us to virtually advise, quote, projects for them. And then we work with local trade partners to deliver projects for homeowners. We do that in several states across the country today, and our team is based here in Denver.
[00:02:50] Host: Eric Fitz: And you mentioned heat pumps as a key focus. What are there other services that you're offering beyond heat pumps today.
[00:02:55] Guest: Grant Gunnison: That's right. We'll do water heaters. We'll do electrical upgrades, whether that's panels, EV chargers, branch circuits, etc. we'll do weatherization and maybe even some light and appliances like ranges and things. So. Primary focus is heat pumps and water heaters. Really from a business and climate perspective. But as add ons we'll do other things as well.
[00:03:13] Host: Eric Fitz: Awesome. All right. We'll get we'll dive deeper into all of this. I'm sure in a few minutes. But let's circle back. I'd love to hear just a little bit more about your background, how you ended up starting this company. Just tell us the Grant Gunnison story.
[00:03:25] Guest: Grant Gunnison: I have a bit of a unique story. It spans almost a whole decade of how I got into this space. I grew up in a general contracting business. Maybe first and foremost, dad was a builder. Maybe 6 to 8000 new construction starts throughout his career. When I was growing up, he started a general contracting retrofit business primarily focused on single family residential. And so from an early age, I was growing up in that business weekends, days after school, all sorts of things. The older I got, the more I think I got involved in and the like, but was never like full time in that business. Most of my professional background is in technology. I got a couple of degrees in electronics and computer science and spent a long time in the space industry, but I did a stint in between that actually running the family business. And so for almost two years was in the trenches doing outside sales, doing operations and the like, really understood what it takes to run one of these businesses. And so we can get through the linear progression of how Xero came to be in the like. But I have a few different bits of professional experience that has led me to build the type of business we're building today.
[00:04:32] Host: Eric Fitz: Fascinating. And so it sounds like you've got technical engineering, computer science background. You've got this experience understanding how homes are built and what goes into them. Yeah. Just go that next step of how did you go from okay, I have all these experiences. Why Electrification. Why he pumps. Why the business you're doing now?
[00:04:55] Guest: Grant Gunnison: Yeah. So when I was running my family's business, the thing I think by far and away I was most frustrated with was the cost and time consumption of acquiring new customers. About 25% of revenue is what it costs us to acquire a new customer, which is not too far off base from what it costs most home services businesses to acquire customers that sales, marketing, wholly burdened expenses, etc. 20 to 25% is pretty typical, and I think what I quickly realize is there's almost no operational leverage in this business. I'm physically and emotionally frustrated with being in a truck all day, going out to meet with people, and most of that time was actually spent in the truck not actually getting the thing done that I needed to get done. And while I really enjoyed meeting with homeowners and helping them solve their problems and whatnot, that was just a small sliver of actually the activity. And so that for me, we can get into even how I got into that position. But that for me was just a huge pain point. I didn't really have a solution for that then, but as being a technologist, it was just continually running my head, going. There's got to be a better way to do this. It was almost baffling to me that hundreds of thousands of people are doing that activity every day. And what a hard life it is. And it was extremely difficult for me to do that. And so I think carrying that forward several years, realize maybe there's an opportunity there to go help those, the salespeople, but also to help the homeowners, the customer experience. Pretty brutal today when you can jump on the internet and buy almost anything. Why is it that we have to send a highly trained person to every single home to help them with every aspect of these projects? Right. It's hard, it's expensive, it's time consuming, and we are really setting out to try to solve that problem for all the stakeholders involved. And there are many. Right. So it's like a multi-sided challenge to actually deliver a delightful, cost effective experience.
[00:06:46] Host: Ed Smith: You're teeing up nicely the why behind zero. But you didn't go straight from family contract business to zero. It's like what happened in between family contracting and zero.
[00:06:55] Guest: Grant Gunnison: That's right. So here's the detailed story. After undergrad, I jumped right into grad school. The first semester of grad school, my dad passed away, so I dropped out of grad school, ran home to run the family business, wanted to help keep the revenue stream going. My sister was still in high school at the time, about to go to college, so on and so forth. Would be really nice to keep the family business going. And so I jumped in and there's a very long story about what a nightmare the whole thing was. But to paint the picture just a little bit. The first day I showed up, there wasn't a price to sell anything. There wasn't a salesman to sell it. The entire business was run on paper with manila folders, and there's rows and rows of filing cabinets. You want to go find a customer file. You might spend an hour, like going to find the file. And I had to reinvent the business day one. And so I spent 18 months under hard circumstances Is figuring out how to get enough revenue in the door. Pay 18 employees and I was 23 at the time. 24. Something like that. It's a pretty wild change of pace, of life. I was in a lab doing magnetic research and then jumped into, oh wow, life is real. All of a sudden and huge responsibilities, and you just got to put your boots on in the morning and get after it. So that was life for me for 18 months and got a face full of like, how painful this really is.
[00:08:14] Guest: Grant Gunnison: So I just have an incredible amount of empathy for owner operators. I stepped into maybe an extra hard situation, but got a really good view of what a life looks like. People are trying to put bread on the table. I understand how painful that is. I also watch my dad do it for 15 years and understand how difficult that is for him. It was for him as well. So that to me like is a huge motivating factor of what we're doing. And part of why I get up in the morning, I want to help those people have an easier life. I want to help them make more money. And there's a way to do that. It comes with technology and the like to actually put some operating leverage in these businesses, right? There's a huge component of that just doesn't exist. But ultimately that's a huge part of the why here. But ultimately, to bring it back to your question, we shut that business down. A little bit of a personal story there. My mom and I were running the business. I basically got it back into the black, but we ran out of working capital. We needed to invest in the business to run it, and we had to decide on how we were going to do that. And I really had to make a personal decision of, do I want to have a mom and maybe not have a business, or maybe not have a mom and maybe not have a business? And I said, you know what, I'd rather have a relationship and maintain that I can always go do another business.
[00:09:30] Guest: Grant Gunnison: So let's just shut this thing down. I'll go do something else. Would rather maintain that. And so that's what we did. And then I went back to grad school. So I jumped back into my old life, spent the next three and a half years building small satellites. Buddy of mine called me up and said, hey, we need some electronics and software help. Would you like to join in on this project? Spent the next three and a half years building laser comm terminals and doing earth imaging. And about halfway through that, realized the technical solution we actually needed to solve the biggest pain point. That business was actually something we were building in that lab. And I went, oh, shoot, maybe I don't want to go build space with lasers, and maybe I should go actually try to solve that other problem with some of the tech we're building. And it took me a while to put all the pieces together, but by the time we had delivered that project, I had put all the puzzle pieces together and said, I'm going to go do that. There's a huge opportunity there. And much like I think you have probably found in your own business, just a white space, there's not a lot of innovation happening, particularly in the customer journey, and said, I think I got to go do that with my time. So anyways, maybe a little abstract at the end there, but a lot of different puzzle pieces had to come together.
[00:10:39] Host: Ed Smith: That is a heck of a story. Deeply sorry for your loss. It sounds like incredible insight came out of that that led you to put the pieces of that together with the technologist that you are to create. Zero. So yeah, thank you for sharing all that.
[00:10:59] Guest: Grant Gunnison: Yeah. Of course. And also thank you for the words. At the same time, I look at that as an incredible opportunity in and of itself. I got to go do an MBA. Trial by fire. I also got to joke about that a lot when I get back to grad school. I took courses at HBS and at Sloan and got to then jump into academic side of the MBA. Just go do it for real. Way better experience than like doing cases and trying to be an academic about it anyways.
[00:11:24] Host: Ed Smith: Totally. All right. So let's thank you for sharing all that. Let's get deeper into zero so that the groundwork that you laid, I think is extremely compelling. You described and you're like two minute overview of Xero. You described it as a marketplace. I can say definitively we've never had anyone come on this podcast. And when asked to describe their business, they say, we're creating a marketplace. Tell us more about that. What does it mean? What do you guys do?
[00:11:46] Guest: Grant Gunnison: Let me actually start back with the why again. And I will probably continue to do that because we have a very different perspective, I think a whole market approach perspective. And the reason why is we're really trying to go solve the 60 million home challenge, or the climate problem in single family homes. Right. When you frame it like that, a lot of what in the market just can't get us there. And so I've been particularly ruthless about trying to build a business that we actually think can go solve that problem. It's nice to build a nice business. It's even better to go try to solve that challenge. And I think we can all agree it's outrageously ambitious, right? Yeah. Okay. Can one business actually get it all done? Unclear. There's a lot of barriers there. But the point is, we've architected the business, the technology, our go to market approach, how we work with our customers and the like in the best way that we can to enable that.
[00:12:40] Host: Eric Fitz: Just to clarify for folks that the 60 million home problem, you're referring to 60 to 80 million homes in the US, they're using fossil fuels for heating or some other purpose in the home. And the challenge is to retrofit those homes with an electrification solution. That's what you mean by the 60 million home problem.
[00:12:57] Guest: Grant Gunnison: That's right. And not to vilify gas like it's been a great energy source and the like. There are new appliances that are higher performing that solve a customer need. We're trying to help homeowners solve their problem and back into solving the climate challenge. It's really our approach. But the reason why we're building a marketplace is that there are many stakeholders in the ecosystem that operate quite inefficiently. Homeowners need education. The primary way to get that today is to have someone come over to your home. That's a bad experience and it's very expensive. We need to reduce that cost so that we can accelerate. Contractors funnels are way too expensive. They're sending tons of highly specialized, highly trained people out into the field doing non-revenue work. Right. So can we actually take those folks and have them focus on revenue generating activity and actually improve the bottom line of those businesses? I think so. And then there are several other stakeholders that are on the fringes here. There are utilities that care about this. There are OEMs that care about this. Lots of different folks that we all need to take into account in this, because they're part of the complex ecosystem. Our perspective is the best way to solve for several of the challenges here is to build a marketplace. We think it's a solution that lifts all boats. It's a remarkable thing of this today that the outcomes for us are the solutions are less expensive and easier to acquire for homeowners. We get to make some money on that. Contractors get to make more money on that. Utilities get to deliver better access to solutions and get better shaped load growth, and OEMs get to be closer to their customer. And so we're doing a lot of things there. But we think that in order to really scale up the solutions, we need to build a better front door for homeowners. And there are a few other reasons for that, but really focused on trying to build a marketplace.
[00:14:47] Host: Eric Fitz: Got it. So a multi-sided marketplace with homeowners, contractors, utilities and the OEMs are like the four spokes of that that that marketplace.
[00:14:58] Guest: Grant Gunnison: That's right. With two primaries being homeowners and contractors.
[00:15:01] Host: Eric Fitz: Okay. Very cool. And so can you help us, maybe take us through from the homeowner perspective, what's the customer journey, the homeowner journey and how they interact with each piece of this marketplace? And from, hey, I've got a comfort issue in my home to I have it installed system or even beyond. What does that look like?
[00:15:21] Guest: Grant Gunnison: Yeah. So we very uniquely don't have a DTC channel really. And if you go look at our website, it's almost like an embarrassment in branding, and it's intentionally done that way. We really operate through partners. They operate our platform, which isn't really visible today from external parties, but also say home owners will generally come to us through a partner. They're going to get pushed to our app. Those folks are going to spend 15 to 20 minutes digitizing their house, and they're going to book a virtual call with an advisor. That advisor can take them through a bunch of different end uses. Actually. Address I have an expensive set of bills I want to reduce. I have a comfort issue. I might have a broken appliance, or I will lovingly call them like climate warriors. There are some folks that are just like, I need gas out of my house. Maybe not at any cost, but not very price sensitive. Maybe the best way to say that, and we can address all of those. The one thing that we can't address super well today is I have an actively broken appliance. We can't respond and deliver a solution fast enough for that to matter, but we're working on that. I think as soon we'll be able to really address that segment. And but I'll say that front door for folks. They'll chat with someone virtually and they can talk about batteries, heat pumps, weatherization, all sorts of different things. And we will use our design platform to illuminate the opportunities, the different scopes, the costs. And we can do that in real time in our dashboard.
[00:16:47] Host: Eric Fitz: Got it. And so a partner that would be like a utility program. It's a rebate agency of some kind. They're doing the marketing to the consumer. Consumer is instructed to download your mobile app. And then the person that they are, the advisor that they're talking to is that a an employee of yours or is that a partner employee. How does that work? What does that look like?
[00:17:12] Guest: Grant Gunnison: Those are zero employees that are interfacing directly with the homeowner. And they're using our platform to do that. And it helps accelerate their workflows. And like we really are the primary touchpoint for homeowners throughout the journey. There will eventually be a handoff to one of our trade partners, so they go deliver a project, but we're trying to reduce all of the soft costs for the contractor so they are able to show up for the first time at the home, actually be doing functional work and generating revenue, not going out there to poke around or having to fill out rebate forms or purchase equipment, or all of the other things that you have to do to be successful in the field.
[00:17:48] Host: Eric Fitz: Awesome. And now you've got my interest on purchasing equipment, are you? So you're scoping the project and then you're even you're like drop shipping equipment for them at the site. Like, yeah, keep going through the rest of the process. What does it look like now for maybe on the contractor side once you've you've found a viable project for.
[00:18:05] Guest: Grant Gunnison: Yeah. So maybe one important point here to note. And even I was listening to one of the previous episodes someone was talking about. Yeah, we like to do some virtual call ahead of time to get an idea of what's going on and give someone like a rough price. Our bar internally is that we want to get such a high fidelity view of the house in such a high fidelity scope of work that we can actually hand that to someone and the equipment and have them go sight unseen to the property and be successful. So what that means is we built this design platform. We're going to quote something for a homeowner, but that's it's the same set of plans we had to a contractor to be successful in the field. So we're doing a lot of work internally to really improve the quality of design. And then we are we're shipping the equipment, put it on a pallet, it ends up at their warehouse. They throw that in their van or truck and then they'll end up on the job site. And again, our goal is to make them as successful as possible, but strip away all the other cost centers in the workflow.
[00:19:01] Host: Ed Smith: So many questions to start. Okay, so homeowner downloads the app, scans their home, gets you guys that model. Then you guys get on the phone with them, never go to the house. But with that and additional questions, you're gathered enough information to scope a ready to install heat pump job or heat pump or panel replacement upgrade or hot water heater. Whatever.
[00:19:28] Guest: Grant Gunnison: That's right.
[00:19:29] Host: Ed Smith: How is that working so far? Because honestly, like we tried this amply in sort of the first version of amply. And there are so many nuances to a home. What's the reaction from your contractors? What's the reaction from your homeowners? I'm sure you're learning a ton, but tell us about how this is working in practice so far.
[00:19:48] Guest: Grant Gunnison: Yeah, it's almost working better than expected. And that yeah I know. Shocking. So we've done a few things to communicate that to folks and I'll give you a few stats. So we spent time with the Department of Energy earlier last year, we did a comparison study sending a person into the home, doing our process, sending them all the data for the first ever. They wrote us a nice letter saying, hey, you're just as accurate as sending a person into the home from a data quality perspective. In fact, we were more consistent than the person going into the house. Turns out, having a machine process information is much better than having someone type it into a form. From a digitization perspective, really high quality and we can't do everything. There are some exclusions and we do have some walkthroughs and we can get through and talk about some of those. But 90 plus percent of our homes for never having anyone show up to ahead of the project. I personally have been to one home, and it was like the second home we ever assessed when I was living back in Boston, but we've done hundreds of projects at this point, and none of our team goes out to any of these homes. The second thing is then we did just like you guys got our software certified to calculate manual JS, and that's a good guiding principle to define the problem to solve and then design a system accordingly then. So we got two validation certification perspectives on just the technology front. But to your point, there's lots of nuance inside of the home.
[00:21:06] Guest: Grant Gunnison: And we solve some of that in process. But maybe the way to implicitly say this just from an economics perspective is the cost of change orders, right? And saying, how often are we wrong? Or what needs to change in order to actually be successful in the field. Our cost of change orders is less than 2% of revenue. So really around the fringes, are we changing things out? It's almost never swapping a skew. It's hey, we had to pull someone off the truck to add to the job, or we had to punch through a wall that we didn't expect. But rarely are we actually having days we have to walk off a jobsite. I have to reboot to respect something. It's just really around the fringes. So just let's say we're being quite successful in that. And then maybe the last thing I'll say, just from a contractor's perspective, they love it. Some of our contractors send us their leads to sell and then send them back the work, because they don't want to drive out to the house. Once it gets to be 45 minutes to an hour away from the office. They're like, man, that's two hours of drive time to maybe make a sale. If zero can actually just sell it and send me back to work, I can just focus on driving revenue and we can almost be like an external sales team for them. So it can go both ways, which is not something we anticipated, at least at the beginning, but something that's a really nice implicit validation from our partners.
[00:22:26] Host: Ed Smith: Yeah. All right. Since you went there, my the second question that my head exploded with was contractor economics. So why do they love it? What is their margin profile look like on a typical job versus a zero job?
[00:22:41] Guest: Grant Gunnison: This is something that's super important to me. We want to protect our margin as much as possible. Ultimately, we make money when they install projects right as a marketplace. So the economics have to be quite good for them. The way that it works is we're purchasing the equipment and shipping it to them, so they're not making margin on the equipment. Generally speaking, their margin on labor is 50 plus percent. So if a fully burdened tech costs $90 an hour between their time insurance, gas vans, tools, the whole thing, we're generally paying 180 to $200 an hour. And so what that does is. That makes a really good day for a two person crew out in the field, and it improves their utilization. Right. And so the thing that we do best for these guys is keep them busy year round. And those marginal dollars go straight to their bottom line basically because they'd have to keep those guys paid regardless. They're going to make less dollars per day, but overall they're going to be more profitable. Is the short of it.
[00:23:39] Host: Ed Smith: They're going to make less so their margin percentage could go up, but their margin dollars could go down.
[00:23:46] Guest: Grant Gunnison: The difference is that they're not spending that 25% on acquisition anymore. So while they could make $5,000 per crew per day and it gross aggregate margin dollars, they might now make $3,000, but it nets out that they're ahead basically.
[00:24:02] Host: Ed Smith: Okay, because you're taking out the cost of acquisition. I want to push on this one because this is actually like a topic.
[00:24:07] Guest: Grant Gunnison: And maybe one other point here too. We're also taking out other soft costs. We're purchasing the equipment for them. We're also doing rebate processing. They don't have any working capital costs.
[00:24:16] Host: Eric Fitz: So inventory.
[00:24:17] Guest: Grant Gunnison: We're actually.
[00:24:18] Host: Eric Fitz: Removing.
[00:24:18] Guest: Grant Gunnison: A huge number of costs for them from the system. So you have to go through a detailed set of analyzes there. But we're picking out margin dollars across the board to make them more successful. Which is why in that's out in their favor.
[00:24:31] Host: Ed Smith: Because this is an inversion. Right. Like we've actually had I don't even know, multiple episodes where mispricing of labor is rampant in contracting. It's one of the easiest things to mispricing. And equipment is where you make your money. And he pumps are particularly attractive because the equipment to labor ratio is very good. You're making money on boxes, right? So you're like flipping this and you're basically you're pricing the labor for them. You're making sure that labor is priced attractively, but you're taking out the equipment, but you're also taking out a whole bunch of soft costs. So it's like very much a in my head. I'm like, I think this could work, but it's like an exact flip from conventional wisdom of when someone finally gets their arms around their price book. Their pricing is the opposite of way you're pricing it. They're making their money on the opposite of way of where they would make their money with zero. Am I thinking about that, right?
[00:25:22] Guest: Grant Gunnison: Yep, 100%. Absolutely.
[00:25:24] Host: Ed Smith: And fascinating.
[00:25:25] Guest: Grant Gunnison: What's the risk profile? Right.
[00:25:27] Host: Ed Smith: Yeah.
[00:25:27] Guest: Grant Gunnison: So we had to dial in. How long does it actually take to get in certain things done? If we miss price, that doesn't really matter. What amount of money we're paying per hour is. Then all of a sudden they're underwater. And so we basically communicate to our folks, look, we're going to take that risk on if all of a sudden you have to do a bunch more in one of these jobs and we designed it or something like that, we're going to eat that. We're going to protect you. And so that's super important for us. We had to go through a lot of learning there, right. We were close in the beginning, but we got hosed on a handful of jobs. And occasionally it does happen. We miss things. Okay, great. Fantastic. We're going to still protect our guys because at the end of the day, that's how we make money is helping them be successful in the field. And so we can't all of a sudden go, oh, wait, no, you're going to do a bunch of free work for us. That's never going to happen, right? I only ever want to shove dollars in their pocket.
[00:26:15] Guest: Grant Gunnison: We're never going to try to take money out of their pockets. And we're, like, very unique in that way. I laugh about this often, but when I was running my family's business, my email was just streaming constantly with people trying to sell me leads and CRMs and ERPs. And I don't know all these different things. No one ever walked into my door, said, hey, can I just put money in your pocket? When we, like, go to engage contractors who want to bring in our network. They're almost like, wait, this is too good to be true? What's the catch here? It's actually, look, there really isn't a catch. We just want to help you be more successful and help you make more money. And we're going to strip away a lot of the things that you're really frustrated with along the way. And we eat that complexity internally. So it's painful for us, but we're trying to make it easy for that and trying to build software to remove the pain for us internally.
[00:27:00] Host: Eric Fitz: One follow on question to like how you're scoping the projects and managing some of this risk. So like in the Denver area, you could have projects that are pretty far away from someone's like service territory. So maybe it's like a 90 minute two hour drive. Are you providing guidance? Hey, with this project, you should send actually two crews out to guarantee that you're going to finish in one day and you're not going to have to go back out and be driving for four hours and like, finishing up one hour of work on site. If you manage that kind of risk as well.
[00:27:33] Guest: Grant Gunnison: We pay for hotels, but yeah, Lake City, Colorado, I think there are 400 structures in the city. It's one of the highest elevation cities in the country. There's almost nothing there 2.5 hours away from anything. And so yeah, we will price that into the projects. Homeowners will pay for those types of things. And the amazing thing, Eric, is it still comes without a premium because of the way we run our business and the margin profile. We're usually at a discount. And also the more inaccessible help is, the more rural you get, the smaller volumes contractors are getting, which means they're getting worse pricing on equipment, and we end up being even more competitive in those markets. And so homeowners are getting even better deals, which is amazing.
[00:28:11] Host: Eric Fitz: I love this for two different reasons. One, from the homeowner perspective, particularly in rural areas where often they're underserved. There may be one local person who's doing great work, but it's tough for them to keep up with it. Even though small communities demand you're able to get a contractor who may wouldn't be willing to drive for two hours. Now, they're willing to do that because you have taken on the risk. You have identified the challenges. You've scoped the projects. So then these communities are getting served by more services than they typically would receive. That's awesome. And then on the contractor side, one thing that Ed and I have talked a lot about and try to figure out, thinking about this really big, this 60 million home problem. How do you scale up this industry faster? And a lot of that comes from getting new starts, new HVAC professionals, entrepreneurs creating their businesses and getting out there and being productive. And so often it's a technician at an existing company. They've had a few years of experience, and they're ready to go out on their own. But not only do they have to apply their really great skills of installing commissioning systems, suddenly they have to figure out accounting and marketing and all these other details. And it seems like you're providing a pathway where someone who just loves doing installs and is really good at it, they can focus on that and they can partner with you and everybody's winning. Is that? Does that sound about right?
[00:29:39] Guest: Grant Gunnison: Yep. And we'll pay them great money to do it. And I do think also I looked at this from a separate perspective as well, saying do we have enough people. Could we? I think a lot of the market is actually saying, great. Can we actually upskill the current folks to preference heat pumps and let's just increase supply, reduce availability of furnaces. And also that homeowners are the only choice they have is to buy a heat pump. That would be great. The challenge there is that actually contractors have a pretty big disincentive to do that. It's so difficult and expensive and the wrong part of the funnel. To quote a heat pump today, which honestly is, I think the problem you guys are really focused on and is great. We need that such that the economics don't make sense for them to preference heat pumps over furnaces. It takes about five seconds to design a furnace solution. Size of furnace versus could take three hours to size a heat pump system. And if you're not guaranteed to get that job, do you want to go spend $500 of time and effort trying to give someone a quote for that versus almost spending nothing doing that? And so my perspective is that unless we can take that $500 and move it almost to zero, it's going to be very difficult to build supply to actually preference these technologies. So we've taken a totally different approach and said, hey, great, we're not going to ask the contractor to design it at all. Let's get really good at doing that and then just hand them the work to go deliver, and their primary skill is to go deliver it in the field. That's what they've been trained to do. They're excellent at it. We don't want to be good at that, but we want to make sure we can set them up for success when they get there.
[00:31:09] Host: Eric Fitz: And tying back to a space that you started from, of working as a general contractor or like the housing market, we've had this paradigm really forever where you have like architects doing the design side, and then there's handing off that work to someone who's doing the implementation. And as long as there's good communication there, that handoff from design to install can be fantastic. And there's a good working model there. Again with good communication, good feedback loops. So why not why not apply that to residential HVAC and other services that you're offering. Makes sense.
[00:31:46] Guest: Grant Gunnison: So there's one critical difference though, and that generally speaking general contractors are a premium service, especially in residential spaces, right. They typically charge about 20%. It's a cost plus model and that, in my opinion, wouldn't really work in this space. People generally, there's a lot of price elasticity in the residential space as opposed to commercial, but not so much that we could actually just add 20% to these projects and really grow volumes quickly. We actually need to reduce costs in that. And all of a sudden you look at that and go, oh, how are you going to do that? Because there isn't really a paradigm for that, right? And that's really where the technology comes in. I think we I really identified how expensive the front end of the funnel was and found a solution to dramatically reduce that. And that's how I think we can be successful there. But it completely flips the paradigm of solving for the homeowner. There's almost no technology company today focused on selling to the homeowner. Almost all of those folks are selling to contractors. And that completely changes the problem statement. The software you need to build and the business you're going to build underneath that, frankly, it is a little crazy. We're really pioneering a different path, and there's substantially different risks in that. Consumer demand fluctuates on a pretty regular basis. That can really cause some challenges, but we've mitigated, I think, a bunch of these things in ways that can really help our business grow and have some stability without having to deal with some pretty clear and large risks.
[00:33:16] Host: Ed Smith: All right. As you're saying, all of this, the analog that keeps coming to mind is Uber. And it's like a cliche, like I'm the Uber of but you guys feel like Uber. But tackling a trickier problem than Uber tackled. But does your point for a bunch of your contractors say it's almost too good to be true? If I play this out just a little bit in advance, there's two ways contractors really differentiate, like quality of install and quality of design. It's the design typically that the homeowner experience is and that feels different, that feels better. And that could lead to like higher margins if you take the design piece out. If we play this out five years down the road. Is there a risk to contractors are commoditized by you guys? Like they're just installed? Yes. You can differentiate in quality of install. But homeowners typically somebody came on our podcast I forget who was. It's such a great line. Who is the worst person to judge the quality of a heat pump installation? It's the homeowner the day after. Like if there's cold air coming out of it in the summer or warm air in the winter, they're like five stars. They were great. They showed up on time. So literally, that's a hard piece to see. Anyway, long way of saying, is there a risk you're commoditized contractors?
[00:34:23] Guest: Grant Gunnison: I really don't think we even have the ability to do that because we need really high quality installers. Yes, we're going to put them through a QA process, and we have a fairly heavy handed QA process. They need to prove out every job the system is performing correctly and so on and so forth, and the homeowners happy and the like. But we're not going to be experts in solving this equipment with really high quality meaning with our own hands. Of course, we know how to validate that. But again, like we're just focused on reducing all the cost centers. We're not trying to reduce the value of what's going on in the field. We need that value to be successful. And so we're going to try to remove all the costs to help that person get set up for success. But at the end of the day, if we need to find people that can be really high quality installers in the field, and I don't really see how we could commoditized them because that is not a commodity, right? High quality installation is not a commodity in the market, and there's actually relatively low supply on that end. And so we're happy to pay a premium for that. But it's hard to be found is a scarce resource. And truly I don't think that's going away, frankly. And so anyways, I just think that we're trying to take a slightly different view there. I can understand that perspective for sure, but I actually don't think we have the ability to monetize those folks.
[00:35:40] Host: Ed Smith: Great. Very compelling answer on not commoditized what is not a commodity. And I fully agree with that. How are you finding contractors? How can they find you? What's the experience like to get on board with zero?
[00:35:54] Guest: Grant Gunnison: We're finding them at great peril. We work really hard to do that. And we have a sales funnel just like anything. But effectively it starts with going and doing a bunch of research. We'll go to the OEMs, we'll go to a bunch of lists of people who've collated those things. We'll look at all their stats online and whatnot. We build a cut sheet of folks we want to reach out to try to get them on the phone. Contractors are busy, so sometimes that can be hard. We'll go knock on doors. We have someone on staff that will go meet these folks in person. They'll do right along as you go vet work and the like. They will talk to previous customers. We do have a bit of a substantial process there, so it can take some time to onboard folks. But the riskiest point for us is the first install we have a contractor do with us right from both sides. They're learning a new process. We don't exactly know how they're going to perform in the field, but the quality bar we need to deliver to the homeowner doesn't waver and we have a really high bar there. Our NPS scores are incredible because of how much time we spend making sure that process is consistently very high quality. So we spent a lot of time with those folks making sure that we're going to deliver well. And part of that is also promising that we're going to deliver what they need. They don't want to show up in the field and go, damn it. This isn't going to work today. I got to walk off the job that goofs up, schedules. It goofs up so many things. And so we spent a lot of time trying to be very intentional there.
[00:37:14] Host: Eric Fitz: Can you spend just a moment going a little bit further? You have to understand quality. Are you. Do you have a commissioning checklist with very specific requirements that have to be met? What does that look like?
[00:37:23] Guest: Grant Gunnison: Oh yeah. Big time. We have photo checklists. We have commissioning data for heat pumps. Specifically. People are putting probes in all sorts of places. I don't know how many items are on that, but it's probably 3040 photos. We'll do a live video call as well with folks day of install special on the first like 5 to 10 jobs and set expectations on not just performance of the system, but also cleanliness and the like. And so it's really robust. And to just add a little bit of color on commissioning. It's really important to us that we know all of the stats. So how much these systems are being charged. We are actually requiring they put probes in all the units and we're really checking all the quality of brazing and and the like. So it's sometimes feels a little too much to be honest. But maybe we'll back off that at some point. I'd rather be dialed more towards requiring very high quality than having callbacks and challenges.
[00:38:19] Host: Eric Fitz: Man, I feel like we could have a whole other episode. This has been so much fun. I have one more question just to circle back on the design side. Design is so important. You can have the textbook install, but if you've got the design wrong, you can. You're never going to fix the project right? You got to start over and redo the design. So talk to us more about your design process, what that looks like, why it's really differentiated from what a typical contractor might be doing on their own. What does that look like?
[00:38:48] Guest: Grant Gunnison: So our platform today has been focused primarily on defining the problem. So that's digitizing the home that is doing a manual J. So we know now what we need to go accomplish. Right. And what the performance characteristics need to be in order to deliver that. We are also working on automating a bunch of the specifications of the equipment layout and so on and so forth that you'd actually get to a high quality design with that is not active in our platform today. So we have four folks on staff, those advisors, plus they're backed by a designer. We have a designer as a PhD, as an example. That's like really dialing up quality on that front. Because to your point, every piece of equipment has different performance characteristics. We're also designing in four different climates. So you have to consider lots of different things altitude, humidity levels. We've added complexity to our process. There's no, like, easy heuristics to go. Oh, Jane's house was pretty similar to this. I'm just going to do the same thing. That almost never is the case for us. And so we really have to trust the information that we have about the home and the specs on the equipment to really dial in a high quality design.
[00:39:58] Guest: Grant Gunnison: And then of course, we have guidelines internally right there, pretty well lined with manual s. In order to do that, we have a few other things that we want to incorporate into that to make sure that we're delivering a high quality experience for homeowners, but again, go to great peril to make sure that's done very well. And our goal internally is to eat that complexity and then build software, make it easier. And we'll continue to do that over time. So some designs take quite a bit of time. We've done some really complex homes. Bigger they get, the harder it is. I think my favorite example of this recently was we did a design for home in Aspen, 8500ft elevation. The design specs for that home it gets down to -15 degrees there. You need a lot of heat pump to get that done. And there's a multi split system. So it's two outdoor units and ten indoor units. The electrical complexity the design complexity of the layout just a lot there. But very happy homeowner at the same time. So worth it. But it can be painful sometimes for sure.
[00:40:58] Host: Ed Smith: Cool. So I'm curious to wrap up with this question. Eric and I are always amazed at how high the highs are, and how low the lows are of running a business, and often how close those highs and lows can be to each other. It's like, what's got you excited about the future for zero and what's keeping you up at night?
[00:41:17] Guest: Grant Gunnison: Sure, maybe what's keeping me up at night? We're growing quickly and that can feel physically and emotionally painful. We're growing very rapidly. Like up until last quarter, it's been triple digit percentages quarter over quarter. We did that for four quarters in a row. So adding headcount, internal processes, managing folks, keeping quality bars high. And then the economics of that or marketplace. We have working capital needs that are growing very rapidly, burning through one credit line after the next. So there's a lot of like business maturity items that we're going through in order to deliver this stuff and do it fast, which are fun problems, but also sometimes can be very hard problems to solve. So some of that ramifications of being successful are a lot of hard work in a lot of ways. So that's keeping us up at night. But I think the flip side of that also is we spent a lot of time the first 18 months or two years of building this business. We were not really serving that many homeowners. And that's actually the fun part. Helping people actually solve the problem in their home is the joy of this business. And when you're just toiling away at building software, sometimes you can really lose sight of what you're going after and the joy of that. And so the high for us at the moment is that we are growing quickly. We are getting to work with a lot of folks, and there's some new, exciting opportunities opening for us as our platform is continuing to develop new capabilities. It's opening more partnership opportunities for us. It's helping us expand in more states and a lot of ways helping us go faster. So the cool thing for us is we're having more fun than ever. Right. It comes with some challenges on the backside of that, but there's never been a more exciting time for us. So it's really great. It really.
[00:42:52] Host: Ed Smith: Is. That's awesome.
[00:42:53] Host: Eric Fitz: Grant. This has been so much fun. Like I already said, I think we could do a whole other episode to go another level deeper. I think we're certainly going to make a note to ourselves to follow up with you, maybe another six months to we'll do another episode and see how things are going. It's been just a blast to chat with you. We love to end the podcast with really a question around what advice or resources places that you can recommend people check out that would be helpful. If they're an HVAC entrepreneur, they're a technician. They're a comfort advisor just to up their game. Any recommendations?
[00:43:26] Guest: Grant Gunnison: Yeah, I would say the large organizations BPI, RCA as an example have phenomenal trainings. We have not done training work yet. I think that's in our future to add some content and what their. But those folks are doing a great job. Maybe on the flip side of that, I would also offer, if you want to learn how we work and why not, there are forms on our website, you can come chat with us. Happy to pick up the phone and talk about what it would look like to work with us, and how we can help you and or your business.
[00:43:51] Host: Ed Smith: Awesome, great. Thank you so much for joining the Heat Pump podcast.
[00:43:53] Guest: Grant Gunnison: Thanks, guys.
[00:43:54] Host: Eric Fitz: Yeah. Thanks, grants. That was really fun. Thanks for listening to the Heat Pump podcast. It is a production of Amply Energy. And just a reminder that the opinions voice were those of our guests or us, depending on who was talking. If you like what you've heard and haven't subscribed, please subscribe on your favorite podcast platform. We'd love to hear from you, so feel free to reach out! You can reach us once again at hello@amply.energy. Thanks a lot!