There are two main reasons why you should start a solar business in 2020. The first is that we are currently confronted with a worldwide climate crisis and, as such, we must all pitch in for a more sustainable future for our planet and our children. The second is that, in the United States, the solar sector has never been more welcoming than it is today. The pros and cons of solar energy tip heavily in favor of the pros.
With more and more people turning to renewable energy for their homes and businesses, starting a solar business is a relatively sound investment that is guaranteed to have a promising future, if done right. In what follows, we’ve put together the basic information you need to learn how to start a solar company and how to develop it further once you’ve set it up.
Why Start a Solar Business?
The solar energy industry in the United States has experienced nothing short of a boom following 2006 and it does not look like things will slow down any time soon. In fact, quite the opposite is the case. But let’s talk some numbers and see why starting a solar business is one of the best investments at present. To begin with, the Solar Investment Tax Credit (ITC) has helped a great deal with industry stability and growth. It basically showed private investors that the government is committed to renewable energy and to supporting solar businesses long-term.
As a result, the American solar industry has grown by a whopping average of 60% every year, for ten years straight, from 2006 to 2016. As of 2018, over 240,000 Americans were employed by solar businesses, while the year 2017 saw an impressive $17 billion contribution to the U.S. economy from solar energy alone. Falling market prices, the rise in consumer social responsibility, as well as an extension of the ITC have led market researchers to predict that the national PV panel market size will grow to about $23 billion by 2025.
What Do Solar Businesses Do?
Before you find out how to start a solar company, you might want to gain a better understanding of what goes on during an average day at work. Your typical day might start with a new installation. This means that you or one of your crews will have to head out to the location (which has to be previously inspected by an engineer) to install or continue installing solar panels. Other teams might be wrapping up additional locations, so they might be looking at installing battery systems or connecting the solar system to the electricity grid. While this is happening, your PR people are contacting, discussing, and engaging with potential customers. (Looking to find out how long solar panels last? Click here.)
Offering a free initial survey and model of long-term cost savings will bring you an edge when starting a solar business. You or a designated operations manager will likely be solely responsible with finding and securing appropriate federal and state grants, while evaluators will most often be out in the field, calculating solar energy potentials for various locations. In addition, you’ll be tasked with providing maintenance (and, if stipulated, repairs for already installed systems). Obviously, there will be payroll procedures that you’ll have to abide by and you’ll have to stay on top of your crews’ schedules and installation timeframes.
Is Starting a Solar Company Right for You?
If there was ever a right time to starting a solar company, it’s yesterday or right now, at the latest. There’s no secret formula to help you find out how to start a solar company. Much of the work is quite similar to other businesses. You’ll need a good initial feed, you’ll want to hire knowledgeable, reliable professionals to help you grow. Afterwards, you just have to find the customers (or help them find you) and offer them the best possible service. The greatest ace up your sleeve is that the industry in buying, selling, and leasing solar equipment is simply bound to grow immensely in the next 5 years and there’s a high chance that you’ll also grow with it.
It definitely helps to have previous managing experience. Even SMEs can be tough to handle to begin with. As a relatively small team of less than 20 people to begin with, the culture you establish will pretty much give the rhythm of the entire group. They’ll look towards you for guidance and leadership. Possibly the greatest skill you can have is the one that also made Google what it is today: hone your ability to find and hire people that are smarter than you.
How to Start a Solar Business in 3 Steps
Now that you have more information about solar businesses, you’re ready to carefully consider whether starting one is the right course of action for you. If so, then you might want to take into account the following steps as you plan your investment.
Step 1: Plans and Paperwork
Any business must be based on a solid plan in order to succeed, and solar businesses are no exception. As such, the first step to starting a solar business is to come up with a good plan. When you research other business plans online, you’ll find a number of things that your project should deal with regardless of the sector you intend to operate in. These include the initial cost to start the company, the target market the company products and/or services are addresses to, and the amount of time it will take for you to recover your investment and turn a profit.
Next, you must establish a legal business, preferably in the form of an LLC (limited liability company), which can protect your personal property in case your business is sued. Several federal and state taxes might apply, depending on where you intend to operate, so make sure you register for them before you offer any services to your customers.
Finally, you’ll need a business bank account to help you keep your finances organized and add an additional layer of professionalism when dealing with clients. Consider keeping your own accounting or assigning this task to a professional accountant, as records of your expenses and income are paramount to understanding whether or not your business is successful.
Step 2: Certification and Insurance
Some (though not all) states require you to obtain a license, permit, or both in order to install solar PV panels and solar energy systems. Starting a solar business is therefore also a matter of acquiring the right documents to be able to operate within legal boundaries. To avoid large fines and even the risk of closing down your business, research the specific requirements for solar businesses in your state and ensure that your company has the right license or permit before you install any systems.
Since the solar sector is relatively new, starting a solar company does not necessarily mean you have to get certified. Certification (as a PV installer, for instance) is, at this time, voluntary, but it is a great way to stand out from the competition and ensure your potential clients that your professional ability has been judged and found adequate. You can get certified by the North American Board of Certified Energy Practitioners following an application process (some courses and experience required) and an examination.
So long as you are working alone, business insurance is not mandatory, but it is highly recommended because it can protect both your company and your clients. Once you hire employees, depending on the state you’re in, you might be legally required to provide workers compensation insurance.
Step 3: Branding and Advertising
Though you might initially perceive it as less important than the services you provide, your company’s brand is actually fundamental to its success. Your brand expresses (or should express) everything you stand for as a company and, more often than not, it is what your clients have access to when they first come in contact with your business. Whether or not they like what they see can determine whether they choose to trust you with the solar power system for their homes or businesses.
This is why creating a powerful brand is one of the first things you should do when starting a solar company. Next, it becomes equally important to generate an online presence for your company through both a website and social media. Online, you’ll have the opportunity to say more about who you are, what the story of your solar business is, and why someone should choose your services over those of the competition.
To get customers to come back and recommend your services to others, your first priority should be to offer quality installation and maintenance for solar PV panels. Each time you complete a job on time and on your assigned budget, your reputation will benefit from your progress. To obtain more visibility, you can offer to install solar power systems at high-traffic locations for reduced fees, donate an installation to a local school or park, but also inquire about the conditions your business must fulfill to be considered for municipal projects.
Once you’re done all those things, you’re ready to begin work, perhaps by installing products like the Tesla Solar Roof!
Should You Have a Team or Work Alone?
Once you’ve learned more about how to start a solar company, you might want to consider whether you’ll be working alone or in a team. To a large extent, this depends on the experience you have with solar panel installation and maintenance. If you are a skilled electrician with knowledge of solar energy, then you might be able to operate the business on your own. Otherwise, it’s a good idea to consider the formation of a team that can assess properties and handle PV installations for you.
Even if you do decide you’re ready to work alone, however, starting a solar business can be an intimidating and stressful task. Eventually, you might want to hire a personal assistant to manage your schedule and you might want to assign your financial records to a personal accountant. If you’re just doing small jobs though, like installing solar camping panels, you may wish to work alone.
Essential Legal Considerations for a Solar Business
Just like many organizations currently operating in the services industry, your business will need certain licenses and permits. These vary from one state to another, so it’s best first be acquainted with the legal paperwork by means of the U.S. Small Business Administration website. Everything you need to know about licensing requirements for starting a solar business in your area should be there. As a solar business, you will need a service agreement wherein you basically stipulate the details of installation, client expectations, as well as the price of your service(s) and product(s).
If you want to be extra careful to begin with, lease an office space rather than purchasing one and talk to your landlord about getting a certificate of occupancy (CO). It is generally their responsibility to do so, but a valid and up-to-date CO is mandatory. You don’t lease without it and you don’t sign a contract that does not stipulate the landlord’s obligation to have and maintain a valid CO at all times. Last, but certainly not least, you need to establish the legal structure of your business – LLC is the most appropriate one to begin with, as it limits your personal liability. Later on, you can consider an S corp, a B corp, or a close corporation.
How Much Can You Earn with a Solar Business?
It is important to start your solar business with the thought that this industry is growing. If you want a sizeable share of the market, you have to go out there, meet people, and get it yourself. Having said this, the price of your typical installation can vary quite a bit, anywhere from around $20,000 to $60,000 and even more depending on things such as battery walls, size, and remoteness. Lease options can, therefore, vary from $30 to $250 on a monthly basis. The reason why it’s important to get out there is because your profit is proportional to the amount of installations you do every year.
For an installation that’s paid up front, your profit can range from $4,000-$4,500 to an upwards of $10,000 after expenses. Your largest costs will be, by far, purchasing the photovoltaic panels. If you want to obtain better margins, your best option is to buy more panels. However, in order to do this effectively, you also need a steady stream of clients – and other businesses are the best ones to sign. Furthermore, don’t be afraid to collaborate with other solar businesses in your area. You can act as a subcontractor for them or the other way around, depending on your needs.
Ultimately, if starting a solar business is on your agenda, you should gather the necessary data, make your business plan, outline a strategy, and talk to some local investors. The market is growing and expanding, the government is offering major subsidies, and mid-to-long-term predictions are nothing short of stellar. (Looking for more great solar articles? Check out these solar dancing toys!)