While most start-ups set modest goals for their first year in business, NuGreen Solutions is on course for a lofty target – a whopping $10 million in revenue.
The Melbourne-based business only launched in November 2011 but already has 65 clients, including all of Victoria’s major universities, Grand Hyatt, Chadstone Shopping Centre, Caltex and Metro. A further 80 prospective clients are expected to sign up in the near future.
NuGreen provides energy cost savings to energy intensive businesses through consultancy and the installation of green technology such as LED lighting, solar power and HVAC systems – which combine heating, ventilation and air conditioning.
Founded by a team of six entrepreneurs, NuGreen faced initial struggles for cash, requiring the founders to pitch in extra investment.
But through a process of pilot projects, effective client targeting and market differentiation, NuGreen is on track for its $10 million debut year.
Above: Geoff Gourley.
Geoff Gourley, one of the founders, tells StartupSmart about the business’ stunning opening salvo and passes on his gems of advice to other budding entrepreneurs:
How did you all end up coming together and working on this business?
We all came together through relationships, friends of friends, of people who were interested in this area and had relevant experience.
I’ve got property, start-up and green retrofitting experience. One partner owns an electrical contractor company, others have been involved in energy efficiency consulting and maintenance and so on.
In November last year we decided it was time for a new entity to really ramp up in the energy efficiency space so we all agreed to put in capital – the funding comes to a couple of million dollars.
We saw that there was a way for businesses to operate more efficiently and that they were moving towards that; carbon price or not.
Did it take a lot of persuasion to come on board?
Paul McMurtrie (co-founder) was the main ringleader to get everyone together. It didn’t take much persuasion as I’ve been on the periphery of this space and thought it was a great idea at a perfect time.
Some of the others took a little more convincing to part with the cash, but they see it as a great value-add for businesses in the energy space.
Above: Paul McMurtie.
So would you say the introduction of the carbon tax has been the main driver of growth for you guys?
Not really – it’s more about how businesses deal with rising energy costs year on year, even if there was no carbon tax. Even if you repeal carbon pricing, businesses are still conscious about saving money.
This business isn’t based on government subsidy or the carbon tax in any way – it’s all about sound business principles of cutting operational costs.
There are a few different energy efficiency firms out there now. What point of difference do you have?
We act as an end-to-end consultancy, from electricity delivery, water, waste, all the government regulations, rebates and so on. Other companies may do solar or lighting but a lot of them don’t understand rebates or other aspects.
We project manage the whole thing from start to finish in a holistic way to find the right solution. We deliver a product that isn’t linked to just one type of product. We aren’t just trying to flog solar panels, for example.
Often, businesses will have a contractor who comes in to install something and once they finish, they wipe their hands of it and move on. We offer 10-year maintenance, along with the whole consultancy process.
We also have advanced modelling to show energy efficiency savings; whereas other businesses tie themselves into saying they guarantee a 20% saving, say, over a certain period of time and take the risk to deliver that.
We don’t make that kind of guarantee, but we can show that there will be savings over a five-year period. We are conservative and then we over-deliver.
Above: Campbell Walker.
So how on Earth can a start-up make $10 million in its first year? I imagine you’ve leveraged past clients like crazy?
We’ve all been in business for up to 20 years each and built up good client bases in that time. We took a decision to look up the top 500 clients worth approaching and target them.
Story continues on page 2. Please click below.
So you’ve had a client hit list?
That’s right. These were businesses with large industrial areas, offices, health and education organisations and so on.
We went through the list to see if they ticked the box of somewhere that could be interested in energy cost savings. Once we decided that, we looked at whether we knew anyone there.
After that, we approach them with a fully though-out concept for their business. We explained fully what we could do for them specifically, rather than just try to sell them all the same thing.
For example, for some businesses, a charge from fluorescent lights to LEDs can save them 50% of the cost. In some of the more advanced cases, then we look at solar and other technology. We went to these clients with a thought-out, factual approach.
We went after sectors such as car parking, which isn’t very sexy, but it uses a lot of energy on lighting. Universities are another important area for us.
We took six months developing the service offering and creating pilots so that clients could see what we are capable of.
You hit barriers straight away with clients who say they don’t have the money or say that they want to see the work you’ve done for other businesses. Of course, as a new start-up, you don’t have that, so it’s hard.
What we did was create pilot projects for free or at cost and then take other potential clients to see them. We did free stage one audits and modelling on the savings that could be made, to show the potential.
We did one university, one car park, one warehouse and three of the towers in the Crown complex in Melbourne. We put in LEDC lights that were worth about $3 million in Crown.
Above: Paul Schlaphoff.
All that costs money, of course. You’ve had to pitch in extra yourselves, haven’t you?
Any start-up needs a cashflow behind it and we’ve had to watch the pennies very carefully. We are constantly reviewing the business model and we’ve spent on advertising that goes directly to the decision-makers in these businesses.
We run on lean start-up principles. We don’t have a five-star eco office and don’t have excess staff. You really try to get bang for your buck.
We set up a structure so there would be two tranches of investment, where the partners pitch in more cash. You need cash in the bank to launch a project but you then need more cash to go forward from that.
It’s all about time. The more cash you have, the more time you have to get clients. Once you get clients, you’ve bought yourself time. It just keeps going.
What’s been the biggest challenge?
The gestation period needed by businesses. We thought we’d show the concept, they’d agree and we’d proceed, but it has proved a longer process than we expected.
In some cases, it can take six months, when we thought it would be around three months. Because the business is so new, you have to convince the decision-makers that the technology all works.
We did speak to a lot of independent consultants who got on board as advocates for us. When a client goes to a third party for a peer review, it’s persuasive for them when that person talks highly of us.
We also focused on our supply chain – we sought the best technical solutions, which we used to influence clients. When you’re in a room with a potential client and three different people from three different areas are all positive about you, it’s really helpful.
With the pilot projects, we’d set up pilots where we knew what the answer would be. We’d say, ‘We’ll put up 10 of our lights in the corner of your warehouse and you let us know what your workers prefer.’
We knew they’d prefer lights that were on sensors, were more like daylight and used half the energy.
Above: Sam Furphy.
What are your targets for the business?
Well, we’ve crunched the numbers and think we are on for $10 million in our first year. We could’ve been more conservative but it’s good to set goals, like JFK saying that he wanted a man on the moon. There’s nothing wrong with big goals.
You need to understand what drives your clients and for us the hot button is to save money on energy costs. We needed to be quick to market and respond to those drivers.
One option for the future for us is to expand into each state or we could be bought out by a much bigger player. For me, I’m in this for the long term.
Our biggest threat is increased competition and cheaper imported products from China. They don’t stack up to ours in terms of quality or warranty, but people can be attracted to the cheaper short-term cost.
If energy costs suddenly dropped, that could be a threat to us too. But I can’t really see that happening.