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4 Ways to Make the Financial Case for LED Lighting

You’re responsible for efficiently operating and managing building space; your company’s CFO is responsible for maintaining revenue, controlling costs, and protecting profits. Sometimes it can be hard to see eye to eye when you have different goals.

One of the most overlooked sources of P&L (profit and loss) improvement is sitting in the variable overheads of your business – namely lighting costs. 

Many C-level executives who aren’t involved in the day-to-day management and operation of commercial buildings don’t realize the impact that outdated lighting can have on an organization’s P&L statement. If CFOs need to add money to the bottom line, lighting systems are rarely the first place they look. Instead, they’re looking for ways to increase sales, cut overhead costs, and reduce financial risks.

It’s your job to make the CFO aware of the potential savings that an LED lighting upgrade can offer by explaining how upfront costs translate to major savings over the system’s lifespan. Here are four tips to help you sell the idea of LED lighting.

Tip 1: Point Out LED Benefits

You probably know all about the benefits of LEDs – but it’s important that the CFO understands them, as well as how they translate into creating and preserving value:

1.       Potential lighting energy savings of between 50% and 90% (depending on the existing lighting system)

2.       Reduced labor costs, since lamps only need to be replaced every 60,000 hours (about 6.5 years if lights are on 24/7).

3.       Virtual elimination of purchasing lamps and ballasts, which represents significant savings.

4.       Decreased cooling loads due to less heat emittance as compared to other lighting options, which impacts cooling system runtime and lifespan.

5.       Opportunity to power the lamps through solar panels due to low power usage.

6.       More durability and less chance for damage due to shock, vibration, or extreme temperatures.

7.       Opportunity for LEED points for either retrofits or new construction.

If you happen to know other facilities in your area that have invested in LEDs with successful results – lower utility bills, decreased maintenance costs, reduced cooling expenses, etc. – present those examples as well. It will help convince the CFO if he or she understands how LEDs have saved money at a nearby organization.

Tip 2: Find Out What Matters

Energy-efficiency proposals can be viewed as capital investments to “fix” systems that the CFO doesn’t even think is broken. (After all, your lights still turn on every morning!) Talking specifically about energy efficiency may not be the best route to take when making the case for LEDs.

Instead, find out what your CFO is most concerned about, and explain how saving lighting energy can address those concerns:

·         Improved cash flow.

·         Lower overhead costs compared to organizations and buildings of similar size.

·         Labor savings.

·         Increased facility capital value.

In the end, it all comes down to the ROI.

Tip 3: Go Over Energy Bills

Facilities directors should know their building’s utility cost inside and out – but take time to share the bills with the CFO. Set up a face-to-face meeting to take a long, hard look at the energy bill together. Point out lighting costs and compare them to other costs incurred by the organization. (“Did you know that we spend as much on lighting as we do on health insurance for employees?” “Did you know that, if we could save $200,000 annually on lighting, we could invest in video conferencing systems to reduce travel costs?”)

If possible, don’t talk in percentages – talk in actual numbers. Instead of telling the CFO that he can expect between 50% and 90% lighting energy savings, translate that percentage into a dollar amount to make it more impactful and understandable – and, hence, more relatable.

Tip 4: Ask Pointed Questions

Ask your CFO questions about current investments, and compare them to investing in an LED lighting system:

1.       How many investments has the organization made that offer a payback of less than two years?

2.       How many investments has the organization made that generate savings from Day One?

3.       How many investments has the organization made that impact savings in several different ways?

Then pose these questions:

  • Does the organization want to save more energy than it is right now?
  • Does the organization want to stop replacing traditional lamps after several months?
  • Does the organization want to stop investing in manpower to manage constant lamp maintenance and replacement?
  • Does the organization wish to improve the overall light quality and security of its property?

Once you get the green light to move forward, consider scheduling regular meetings with the CFO to review savings that result of the LED lighting project, and how the investment has impacted the bottom line. When you can point to substantial savings, it may make getting a “yes” from the CFO a little easier when it’s time to make the next energy-efficiency investment.

Jody Cloud is a lighting consultant who is officially certified to offer continuing education credits in LED lighting to members of the American Institute of Architects (AIA), the Building Owners and Managers Association (BOMA), the American Hospital Association (AHA), the Professional Retail Store Maintenance Association (PRSM), and Community Associations Institute (CAI). He is also owner and founder of YES LED Lighting, as well as the author of the bestselling book “Say YES to LED Lighting.” He can be reached at info@yesledlighting.com or at www.jodycloud.com

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