Complete Guide On How To Start A Solar Business
Akshay VR. 03 Mar 2022
Rising energy demand is one of the most pressing issues that mankind faces today. With fossil fuels rapidly depleting, renewable energy is on its way to becoming the primary source of energy. Solar power is the most crucial component of the renewable energy sector. The world is moving away from fossil fuels and towards renewable energy sources. This paradigm shift has created a fantastic opportunity for anyone interested in starting a solar business.
Solar business ideas
Solar installation isn’t only about setting up panels. There’s a lot more to it. There’s sales, repair, maintenance, contracting, consultation. A significant amount of money is required if someone decides to become a manufacturer of a solar panel or solar inverter company. Before launching a solar business, many factors must be considered.
Here are some examples of solar businesses that can be started:-
- Solar Installation
- Solar Consultant
- Solar Sales
- Solar Parts
- Solar Manufacturing
- Solar Maintenance
Understanding leading solar technologies
To develop a solar business, one must first become familiar with the most common solar technologies used nowadays. Today’s solar technology allows us to use the sun’s energy in numerous ways, allowing organizations to use both the sun’s light and heat.
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There are three key technologies to concentrate on, according to current trends:
(i)Solar Heating Cooling:-Thermal energy can be generated with this solar technology. This is primarily used for water heating. Cooling can also be accomplished with solar heating cooling technology. The best part is that customers in a range of climates can afford solar heating cooling technologies.
(ii)Solar Photovoltaic:-We can generate electricity directly with this solar technology. Solar panels transform the energy of photons (light particles) into electricity. Produced electricity can then be used, stored, or converted for long-distance transmission. An inverter is used to convert DC electricity to AC electricity. PV panels can be made out of a wide range of materials and methods. This technology is used all over the world.
(iii)Concentrating Solar Power:-It is based on the method of concentrated sunlight. By concentrating sunlight at a single spot and converting it to high-temperature heat using various reflecting materials such as mirrors and lenses. It is used to produce thermal energy, which is then converted into electricity. CSP plants range in the size of hundreds of megawatts (MW).
Based on the budget and other factors required, technology must be determined.
About the Solar Industry
Going in blind into any industry without any business ideas is a grave mistake. An entrepreneur’s primary responsibility is to be a subject matter expert to ensure that they have the utmost clarity. This is why you must understand what your solar business is all about.
Responsibilities of a solar installation business
A solar installation business is someone you call when you need to have solar systems installed. Usually, such installation businesses deal with clients that need renewable energy like solar energy in residential areas.
Since these installations are usually in residential areas, solar panels have to be installed on roofs. So solar panel installers are expected to be licensed to deal with roofing and plumbing. With such massive upfront requirements, an individual is very likely to ask, “what’s in it for me?”
Renewable energy sources has become quite the norm when it comes to development projects across the globe, with residential clients making a fairly big chunk of the consumer base. Why wouldn’t one want to replace electricity usage with a renewable yet reliable solar energy system?
This trend has been rapidly expanding globally thanks to solar manufacturers constantly innovating and reducing the price of solar cells and other solar technologies. The goal for most of these manufacturers is to sell as many panels as possible.
With such a ripe opportunity at hand, it is no wonder that a lot of people are taking advantage of it and starting solar panel installation businesses.
Why you should start a solar panel business
As previously stated, there are a lot of people looking to capitalize on this opportunity. This means that you only have a small window of time to enter the rapidly growing industry. It is only a matter of time before the major players are consolidated.
Luckily since the industry is still expanding, a local solar panel business can easily capture their regional solar market. There is money to be made if you’re able to do the same. If it sounds good so far, then you must be wondering what it takes to start a solar business.
How to Start a Solar Panel Business?
Get ready for the laundry list of things that you’ll need to get started. The solar panel installation industry is not as straightforward as people make it out to be. A solar panel installation company has its own set of nuances. Here’s the list.
Step 1: Ensure that you have enough solar panels
How are you going to install and sell solar panels if you don’t have any yourself? It is expected of a business to have sufficient inventory. Sufficient is the key word here, a lot of businesses tend to overspend on inventory.
A good way to negate this effect is by acquiring inventory based on the number of workers that you have hired. Why would you need thousands of panels when you only have half a dozen people to install them?
Understand the demand in your locality to better estimate the required amount of investment. A solar power company is by no means a low-investment business plan. So, be prepared for the upfront costs to be heavy on the wallet.
Step 2: Get equipment that’s fit for a solar business
Here’s where skimping is not an option, for if you skimp you must deal with the consequences of your equipment failing on you at the worst times imaginable. In the solar panel installation industry, tools are an essential part of the business.
This also includes logistical tools such as trucks/vans and software that will optimize your business operations. As a solar business owner, you are in charge of making sure that your customers get renewable energy at their place without a hitch.
Investing once in reliable equipment usually proves to be quite the lifesaver for many businesses. However, alongside reliable equipment, a business plan must include backups to account for any bit of equipment that does fail.
Step 3: Understand the industry and technology in-depth
Expertise when it comes to Solar Panels is a must-have. How comfortable would you be giving your car away to a mechanic that barely knows how to start the thing? Exactly. For potential customers to choose your solar business over others you need to be an industry expert and understand the industry from the inside out.
Once you’ve mastered the technical side, you’ve won half the battle. Armed with such knowledge you know your costs, condition, and challenges. This puts you ahead of those that don’t exactly specialize in the field.
Step 4: Acquire Skilled Labor
It is highly unlikely for a solar installation business to be run by one individual all by themselves. Installing solar panels is a task that inherently requires multiple workers. Although, you wouldn’t want to hire just about anybody.
You need to hire employees that are skilled but also well-behaved. No amount of skill will compensate for an employee that the customer finds repulsive. Neither will manners compensate for a worker who doesn’t know what they’re doing. Finding balance is key to building a great team.
You need a solar installer that you can fully trust to do your bidding as they are the primary link between you and your customers.
Step 5: Know your clientele
The primary reason for any business failing is usually a lack of understanding of what exactly their clients want. Similarly, it is important for solar companies to understand the target market and needs of their clients to serve them in the best manner possible.
When it comes to solar installers, customers prefer having a hassle-free process that doesn’t disturb them much and is wrapped up in an instant. A solar panel installer must understand that their customers don’t like delays or complications.
Most users of solar power systems do so to reduce energy costs, so they aren’t likely to opt for a solar panel system that costs a lot either. Understanding their needs is fairly simple if you understand your locality well.
Step 6: Get everything of value insured
Starting a solar business is expensive indeed. Though it would be a shame if those expensive assets were to be broken. This is why you need to get your equipment and inventory insured to cover the cost of such unexpected costs.
Arguably getting business insurance is more important as if there were any mishaps while installing panels you would be covered for the damages. Basically, any vital part of your business should be insured to ensure that you don’t have to pay to replace them.
Paying out of your is something that nobody would want to do for a mistake that was completely avoidable. Getting liability insurance is just as important as getting the right license. over, you should also open a business bank account to manage the business expenses separately.
Challenges Faced by a Solar Panel Installation Company
Much like any other business, solar panel contractors will also face their fair share of challenges. They are usually caused because of neglectful mistakes made by a new business. We’ve listed a few of them so that you don’t end up making the very same common mistakes when running your own business.
A lot of solar businesses prioritize things such as panel quality, maximum power delivery, and low price. While those aspects are important, they aren’t the most noticeable to the customer. The aspect that matters the most when it comes to a solar panel business is customer experience.
While you could just give them free ice cream, we recommend that you gain their satisfaction by making your services as clear and linear as possible. Your job is not only to install solar panels but also to ensure that the client is at ease and isn’t bothered much by the process.
Such an order of priorities will not only help you retain the customer for longer. It will also make the customer more likely to refer your company name to other individuals that are looking to get solar power.
The most common reason for a botched solar installation is human error. As previously stated, having the right skilled workforce is imperative for a solar panel installation business to succeed. Remember that a worker’s job is not complete by just having the panels installed.
With solar installations increasingly becoming common you will have to stand out from the competition and build a positive reputation to boost your solar sales.
Poorly made route plans
You’d expect a solar company to be good at installing solar panels but unfortunately, that is not the case due to poorly planned routes. The biggest gripe coming from customers is usually the amount of time it takes to get the job done.
Such delays are very frustrating and can damage the reputation of your own solar panel business. The time lost to bad planning is often overlooked by countless businesses but it does reflect in their overall sales and efficiency stats.
Business owners can never hope to reach their epitome without proper optimization. Thankfully you can avoid almost all route planning issues with the help of Upper.
Step 2: Hone Your Idea
Now that you know what’s involved in starting a solar panel business, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Why? Identify an opportunity
Research solar panel businesses in your area to examine their products and services, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a solar panel firm that does Rapid installation.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as selling excess energy back to the grid.
This could jumpstart your word-of-mouth marketing and attract clients right away.
Operating a solar panel installation business in the top five states mentioned above could be profitable thanks to the high demand.
What? Determine your products or services
In a business world where your competitor often claims to be #1, it is crucial to differentiate and build your own identity. There are three models you can adopt to help the solar panel business stand out as explained below:
Model 1: Offer specialized installation services
Under this model, you will not stock solar panels. However, you will provide specialized solar installation services in partnership with companies that stock and sell solar panels.
Offering specialized installation services is the most cost-effective way to start. Further, this model enables you to gain the installation experience required to help you find your footing.
Model 2: Focus on product sales
Under this model, you will stock and sell solar panels. You will subcontract installation services in collaboration with companies that stock and sell solar panels.
Focusing on product sales is ideal if you want to simplify operations by outsourcing fieldwork from the get-go. That way, you can concentrate on the sales side of your business. Plus, you can develop a full-time team once your startup begins to generate substantial revenue.
Model 3: All-inclusive
Under this model, you will stock and sell solar panels. You’ll also offer installation services through in-house solar photovoltaic installers.
The all-inclusive model will require a significant amount of investment to enable you to purchase inventory and employ a team of reliable fieldworkers. You can also expect to incur high operating expenses, so go for this model only if you have considerable capital.
Apart from selling and installing solar panels, you can also offer auxiliary services such as consultation, repair, and maintenance. While such services may not generate much revenue, they could ensure a stream of steady customers and help build brand loyalty.
How much should you charge for solar panel installation?
The low and high-end of solar panels range from 5,000 to 40,000. These figures represent the cost of panels and don’t include labor and the cost of equipment such as the inverter.
An inverter can account for up to 10% of the cost of the solar panel. As a result, you can expect to generate 450,200 by selling the inverter for an average solar panel installation project.
The labor cost of installing a solar panel system can range from 20 to 40% of the system cost depending on the project and size of your solar system. You can expect to incur labor costs of about 3,600 for a 12,000 solar panel. Overall, a solar installation project generates an average of 16,800 in revenue.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
To build a solid foundation for your solar panel installation startup, you must identify your ideal customer to enable you to customize your marketing appropriately. There’s a growing demand for solar panels in every consumer segment. Your target market should include:
- Independent homeowners
- Homeowners associations
- Retailers – Target is a perfect example. The giant retailer has installed 500 solar panels systems on their store’s rooftop and plans to go 100% solar by 2030.
- Nonprofit organizations and hospitals – A good example is Massachusetts General Hospital Boston. The hospital installed a 476kW solar energy system, enabling the institution to save 95,000 annually.
Step 3: Brainstorm a Business Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
- Short, unique, and catchy names tend to stand out
- Names that are easy to say and spell tend to do better
- Name should be relevant to your product or service offerings
- Ask around — family, friends, colleagues, social media — for suggestions
- Including keywords, such as “solar panels” or “solar installation”, boosts SEO
- Name should allow for expansion, for ex: “SolarTech Installations” over “Commercial Solar Panel Installations”
- Avoid location-based names that might hinder future expansion
- Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to FOCUS on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain FOCUS on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
- Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
- Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
- Product and Services: Describe your offerings in detail.
- Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
- Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
- Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
- Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
- Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
- Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
- Appendix: Include any additional financial or business-related documents.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Step 5: Register Your Business
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to solar panels.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your solar panel business will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
- Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
- General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
- Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
- C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
- S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Form Your LLC
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Weighing Your Options
As you can tell, you have lots to consider when you begin investigating solar power for your business. And so the question remains: Why do businesses choose one form of solar over the other? Actually, they don’t have to choose just one! Companies can implement a variety of these methods to lower their carbon footprint all the while reducing their operating expenses.
Are you a Texas business seeking to work with a Texas power company that uses green energy? Contact Chariot Energy today, and we can walk you through your complete set of options!
And hopefully, next time you get a coffee, you’ll think: This better be sunshine-brewed…