Future Energy Solutions resolves the key issue for commercial lighting

FES_Stacked_hres South-FL-Business-Journal
COVER STORY
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Daniel Gold says his business model ‘is based on failure, not success.’ JOCK FISTICK

No one was buying when Daniel Gold went on sales calls with his father-in-law.

Gold had staked his father-in-law in Future Energy Solutions, an industrial lighting company in Fort Lauderdale. His father-in-law, who’d been in the lighting business for more than 40 years, was then diagnosed with lung cancer.

“I’m going to die,” he told Gold. “If you ever want to get your investment back, you’d better learn the business.”

Gold had run a company in the U.K. that sold ink toner cartridges. How quickly could he learn to install energy-efficient lighting systems in the U.S.?

Gold said he went on hundreds of sales calls with his father-in-law, who was trying to convince business owners that they could save thousands of dollars a year by changing their lights.

“I heard the same thing at every meeting,” Gold recalls. “Everybody knew it existed, everybody knew it worked, everybody wanted it – but nobody would write the check.”

Finding a new business model

Many business models run into an objection at some point in their evolution. For Gold, it was this: Why spend a small fortune swapping out lights when the existing systems work just fine?

Gold’s answer to that question put Future Energy Solutions on an amazing growth trajectory.

Its revenue, which the privately held company does not disclose, has been growing at a clip of about 400 percent a year, according to Gold.

Its operations have been rapidly expanding into a 100,000-square-foot building near Fort Lauderdale Executive Airport. It plans to double its workforce from nearly 40 to as many as 80 this year. It has offices in London and Sydney, and it plans to stake locations in Indiana, Texas, Pennsylvania, Puerto Rico, Mexico and South Africa this year.

Last year, Future Energy Solutions won the Business Journal’s Business of the Year Award for companies with 26 to 100 employees.

This is no longer Gold’s father-in-law’s lighting company.

“It’s a business model that is based on failure, not success,” said Gold, whose father-in-law died in 2011.

Future Energy Solutions retrofits lighting systems for parking garages, warehouses, car dealerships, strip malls, restaurants, schools and places with huge areas to illuminate.

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A successful pilot project

The company recently completed a pilot project at a Just Brakes location in Sanford. Now the Dallas-based automotive service provider is having the company take care of its 134 locations nationwide.

“We’re thrilled with the results, so we’re rolling it out chainwide,” said Jennifer Pruett, the company’s VP of finance.

Future Energy Solutions also has launched a pilot program with Fort Lauderdale-based AutoNation, the nation’s largest car dealer.

“We try to be on the cutting edge of everything,” AutoNation Chief Marketing Officer Marc Cannon said. “We’re always looking for things that are advanced and more efficient and more effective.”

AutoNation has more than 300 franchises in the U.S. Cannon said once the pilot is done, the company may consider expanding to other locations.

The plan for growth

With customers like AutoNation, it’s easy to see how Future Energy Solutions could achieve explosive growth in the years to come.

The company primarily seeks opportunities to replace metal halide lamps with lower-wattage induction lamps.

There is no question this can save businesses thousands to hundreds of thousands of dollars a year in energy costs. It’s just that it can be very expensive to lay out the money to replace old-fangled lighting that still works just fine.

That’s where the “Gold Initiative” comes into play.

Future Energy Solutions replaces a business’s lighting for free. It also services that lighting – replacing any burned out bulbs or blown ballasts – for 15 years.

There is no up-front cost for its service. Its customers do not have to put up a line of credit. The customers don’t actually put up anything.

Turning lights into annuities

So how does Future Energy Solutions get paid? Its customers pay it from the money they save on their reduced energy bills. This savings is calculated precisely using meters installed on site.

Starting out, Future Energy Solutions takes 75 percent of this savings. Over time, though, that percentage declines and the business ends up with the greater share of the savings.

Gold says his customers benefit from an immediate 25 percent reduction in their lighting bills without having to lay out precious cash for the new lighting.

And Future Energy Solutions benefits because its business model essentially turns a light bulb into an annuity with a guaranteed stream of revenue.

Giving the lights away, and taking a percentage of the savings, upends the traditional model that Gold learned from his father-in-law.

Under that model, “you only get one opportunity to make money,” Gold said.

It incentivizes many lighting companies to sell the most expensive systems they can, because there’s really only one sale.

“Once you’ve done an upgrade, it’s over,” Gold said.

Sure, there’s some money to be made in service calls, but it turns out that the new energy-efficient lighting systems are so durable they require very little maintenance, Gold said. Usually, if there’s a problem with the lighting, it occurs shortly after installation. After that, it can last for years.

Fixtures under management

Now, since Future Energy Solutions gets an ongoing revenue stream from each light it installs, Gold describes the size of his business in terms of fixtures under management.

At the end of 2015, the company had 125,000 fixtures under management. It aims to have as many as 300,000 under management by the end of this year, and 1 million under management by the end of 2017.

At that point, the company may be ripe for an IPO, Gold said.

He has plenty of competitors in the lighting business, but says his particular business model is unique. Some of his competitors may say they’ll install lights with no upfront costs, but they usually want their customers to sign credit agreements, Gold said.

“I lay out all the cash,” he said. “I do all the maintenance. There are no mathematics that you’ll be able to come up with in which you could demonstrate that you’ll be better off with any other program. I’ve proven it again and again. I demonstrate it on every contract we sign.”

Overcoming the biggest hurdle

His biggest hurdle is convincing potential customers that his pitch is not “too good to be true.”

“It seemed too good to be true,” Just Brakes’ Pruett said.

Future Energy Solutions would change its lights, and maintain them for 15 years, for free? And Just Brakes would begin saving money on its lighting bills immediately? And the quality of the light would actually be much better than what it had? And it would be a “green solution” that its customers would appreciate?

“We thought: There’s got to be a catch,” she said.

But Pruett said she did not find anyone else in the lighting business offering to change out the company’s lights for free in exchange for a percentage of the savings.

“I’m the finance person, so you can imagine my skepticism,” she said. “But after doing the pilot, it’s all that they say it is. … It’s a great business model.”

Daniel Gold on managing his fast-growing enterprise:

“I’m very fortunate to have some extremely clever people around me.”

“The easy part has been signing contracts. The hard part has been executing.”

“It’s about finding the right execution partners to make sure the installation is done correctly and the management is done correctly.”

“We spent a lot of money building the systems and the processes to operate a business like this.”

“You can easily bite off more than you can chew. If you’re not set up correctly, you will get burned.”

“And even though we’ve been growing tremendously, we work hard at slowing ourselves down to be able to execute correctly.”

“We lay out all the money. Our customers cannot ever spend a single penny with us. We get paid by the money we lay out and the energy savings we generate.”

“Our business is incredibly capital intensive, so we’ve got to stick to what we do and never deviate.”

“No matter how sexy a potential client or contract might be, if it’s not the core business that we do, we won’t do it.”

“I’m going to take boring, white light, replace it with boring, white light, and create cash. If it’s any more complicated than that, it’s not for me.”

CLOSER LOOK: Future Energy Solutions

Headquarters: 5400 N.W. 35th Ave., Fort Lauderdale 33309

Website: www.feslighting.com

Description: An innovative green technology company that designs and installs energy-efficient lighting solutions for the commercial and industrial lighting market worldwide. It targets commercial customers who are currently operating inefficient, high-intensity discharge, high-pressure sodium and fluorescent lighting systems.

Employees: 37

Customers: Businesses with large areas that need lighting, including parking lots, garages and warehouses.

Light fixtures managed: 125,000

Kudos: Named the Business Journal’s 2015 Business of the Year for companies with 26 to 100 employees.

Al Lewis is editor-in-chief for the South Florida Business Journal. Stay on top of the latest business news with our free daily newsletter.