I've been primarily focused on small to medium commercial accounts but recently got approached by a large hospital system with 12 locations across Northern California. Their monthly utility costs are around $180K combined. This would be by far my biggest client and I'm not sure how to price it appropriately. Do you scale up the percentage-based model or switch to fixed fees for accounts this size? The complexity is definitely higher - multiple rate schedules, demand response programs, solar net metering at several locations. Any advice from folks who work with enterprise-level clients?
Pricing strategies for larger commercial accounts?
Iris, congratulations on landing that opportunity! Large healthcare systems can be incredibly rewarding clients. For accounts that size, I typically move away from straight percentage models and use a hybrid approach. Usually a base fee that covers the fundamental audit work plus percentage-based fees on savings above certain thresholds. For a $180K monthly account, I might propose something like $15K base fee plus 20% of first $50K in annual savings and 15% of savings above that. The base fee ensures you're compensated for the complexity even if savings are modest, and the percentage component aligns incentives for finding big wins.
Randy's hybrid model makes a lot of sense. I'd also suggest thinking about ongoing monitoring fees for accounts that large. With 12 locations and that much complexity, there's real value in quarterly reviews to catch new errors and rate changes. I have a similar healthcare client (not quite as big) and we found $23K in additional savings in year two just from catching a demand response program change that their facilities team missed. Consider proposing an annual monitoring agreement at maybe 25-30% of your initial audit fee. Recurring revenue is gold for business stability.
One thing to watch out for with large hospital systems - their accounts payable processes can be brutal. I've got a client that takes 90-120 days to pay despite having a 30-day contract terms. Make sure you build that cash flow delay into your planning. Also, they often want very detailed documentation and reporting that goes beyond what smaller clients need. Factor in the extra time for creating comprehensive reports with executive summaries, detailed breakdowns by location, and supporting documentation. The good news is they're usually excellent references once you prove yourself.
This is all really helpful. Chris, good point about payment terms - I hadn't thought about how their size might affect cash flow timing. Randy, I like the hybrid pricing model. For the ongoing monitoring piece, Gil mentioned, would you typically include that in the initial proposal or present it as an add-on after completing the main audit? I'm thinking it might be easier to sell if they see the value from the initial work first.
Iris, I've had success both ways but generally prefer including ongoing monitoring as an optional add-on in the initial proposal. Position it as "Phase 2" after the comprehensive audit. This gives you flexibility - if they're budget-constrained initially, they can start with just the audit. But having it in writing from the beginning plants the seed and makes it easier to transition to ongoing work. Plus, once they see the value from your initial findings, the monitoring piece becomes an easier sell. Just make sure to clearly explain the value proposition - ongoing rate monitoring, bill validation, and catching new efficiency opportunities.