How to Avoid Costly Mistakes When Selling Solar: An Interview with Andy Black from On Grid Solar

Anyone who is anyone in the solar industry has heard of and probably knows who Andy Black of On Grid Solar is. Andy created, as far as I know it, the first solar sales tool in 2005 which continues to be the most robust tool on the market. As part of our series to learn about the best products, services, and software that you can use to make your solar company more profitable, I had a nice conversation with Any to learn more about his sales tool and his perspective on some of the big sales mistakes that new and growing solar companies continue to make in the solar industry.

This is a long interview and its packed with good stuff, but here’s a little guide so you can get the most of the interview.

1. The first part is about the development of the On Grid solar sales tool and the benefits of using software
2. The second section is devoted to Andy’s thoughts on the challenges of selling solar, financing projects in the USA, and advice for contractors on marketing and what how to avoid costly mistake in the sales process.
3. At the end, there is a section on more resources that you can find on On Grid solar and a product demo video of the On Grid tool
4. Lastly, there is a solar sales training sign up form. If you’re interested in taking on On Grid Solar Sales Certification training that will prepare you for NABCEP Technical Sales exam and provide a 50% discount of the On Grid Sales software.

Q- What is your story and history? How did OnGrid get started? How long did it take to go from an idea to a prototype to selling it?

A- Initial Inspiration? The inspiration moment for me was pretty simple. I developed the tool for myself while I was a residential and small-scale commercial sales person for five years. The reason I developed it was simple; there was nothing out there that I could find, and I needed to figure out how to size and estimate sizings. Then I noticed that customers were doing solar not only for backup power but also because it was good economics. Then I started to build in the economic analysis tool. It grew and grew from there until it was a fairly comprehensive set of calculations.

Even before my sales career, I was writing articles on financing of solar systems. (Remember this was back in the late 1990s.) I wrote about how to find money and where one could go to find money. Once I was selling systems, money was pretty easy. Customers could find home equity lines of credit, so then I started turning to economic analysis of solar. With this theme, I started to write articles, publish papers and speak at conferences. That path led to a series of speaking opportunities that ultimately led people to start asking me for the spreadsheet I used to make the calculations. For a while, I told them it was private and that they couldn’t use it. After a while , when enough people asked me for it, I thought that maybe there was a business here and made it public and started selling access to it. When I started teaching at the local utility about solar, that provided me with a lot of attention.

Q- When was the first tool put out there?

A- In 2005.

Q- How many iterations has there been?

A- I originally wrote it over time from 2001 to 2005. It has gone through four versions of the tool since 2005.

Q- What are your thoughts on making the tool a web-application versus software that is local to a computer?

A- We are thinking about creating a web tool. We realize that it has many benefits but also significant drawbacks.

One of the draw backs is that it cannot be used unless you’re connected to the Internet. However, we are interested in exploring ways where we can make it available to be used as an offline tool but also have an online tool as well. This way, it will have the benefits of both worlds–we know that we’ll need this to serve our customers. Particularly, the larger customers really need the benefits of a web application for many sales people in many areas.

There are some major advantages and dis-advantages.

For example, speed of operation. The latency of a web-application is very annoying to some, and our tool has no latency. A spreadsheet is instant.

We actually just did a survey.  A number of users would not use a web tool, even if we had it, because they are concerned with security and privacy issues with the data being online.

Also, a number of users would use an online tool for backing the data up and sharing it across platforms, but they do not want to lose the offline capability. It allows them to work wherever they want, create proposals with a portable printer, and not be dependant on the Internet or servers being up.

Q- What’s the major benefit of using someone else’s tool versus developing your own?

A- The benefit of contractors having their own software is they have complete control. They can create anything they are willing to put time and money into. They can also have 100% privacy and editing of customer proposals.

The downside is they need to invest in the development of it. They need to learn about solar, how it’s sized, and the output for a specific region and type of roof; then they need to learn about electric rate structure and figure out what a system will really save for a customer. Then, they need to learn about the incentive programs to understand the bottom line cost basis and all the intricacies of each different incentive. After all this, they need to take that knowledge and turn it into a tool that works.

Then they need to maintain it. Electric rates for some utilities change every month. Others change every year or every couple months. Incentives and the tax codes also change.

There are a lot of subtleties to it, and frankly, it takes a lot of time to get it right.

The argument is the same for other software–a company could build its own accounting software, CRM software or email browser. Buying software is often cheaper than developing it yourself, because it’s more robust and allows you to focus on what you do best, which is sell and install solar systems.

There is a huge upside to developing your own software, in that you learn all the intricacies of these components, and that knowledge can be very inspiring to customers. If you really understand rate structure and incentives well, they will trust you more.

Q- Whats the most challenging part of selling solar for companies?

A- The biggest part recently has been financing. The largest hurdle is helping customers get a hold on the money to buy the panels. It’s reasonably easy to show a customer that it makes sense to invest in solar and convince them. Once you’ve convinced them and they’re interested in solar, if they don’t have the cash or equity in their home, how do you find the money? That is where some of the new lease products are coming out to help customers get solar who don’t have cash.

Another huge challenge is finding quality leads, either by yourself or by buying them. There are many sources selling leads, but I’m not sure how good those actual leads are. I’ve heard many negative things and only a few positive things about leads that are available for people to purchase. That is a huge challenge for companies–figuring out how to decrease their cost of customer acquisition to below $1,000 (not including paying the salesperson a commission).

Q- Have you noticed the same issues with commercial or is this just residential?

A- I don’t know that much about the commercial market to be able to speak about it. I’ve handled commercial leads when they come in, but I have never created them myself. I’ve created many residential leads through various activities.

Q- Is your tool then mainly used for residential, or can it be used for commercial as well?

A- It can be used for any size of systems, and it is very commonly used for commercial. I’ve been told it is the only tool out there that truly and genuinely addresses the commercial market and that there is no other tool out there that handles all of the elements of the commercial market like our tool does. We deal with demand charges, time-of-use rate schedules, and all of the large-scale incentives. It is something that our competitors do not touch because they focus on other things.

We have lost a few larger companies to using a web-based tools because the sales managers need to be able to see what their residential salespeople are up to. But even still, the commercial sales representatives at those companies have returned to OnGrid because it’s the only tool that addresses what they need to communicate to their customers.

Q- Getting back to last question about challenges towards selling… you’ve mentioned it’s financing and marketing right now. Have you noticed that the challenges have changed over time? Are these challenges different in different regions?

A- Certainly. The west coast has more traditional markets. The east coast has some interesting new programs, for example, utility financing. PSE&G’s loan program, and other utilities in New Jersey, will help you finance your system in exchange for Solar Renewable Energy Certificates, or SRECs. This solves two problems. It helps the customer get cash and a guaranteed minimum price for their SRECs, and it helps the utility get a good return on their lent cash because their financing terms internally are very attractive.

Financing for the Property Assessed Clean Energy program, or PACE, unfortunately is not really moving forward at this time.

Q- Have you noticed local banks entering the solar industry? In Germany, local banks will finance systems. Is it possible and is it happening more frequently lately, or is this the reason PPA (solar power purchase agreement) firms exist?

A- In Germany, you know what the feed in tariff is going to be and there are hundreds of thousands of solar customers. Everyone knows what solar can do–its risks, limitations and the possible cash to receive. There is virtually no doubt about what your system can produce, as it will produce the money you receive for it. It is a much less risky proposition. This allows the banks to loan easily because neither the technology nor economics are risky.

In the US, except for a very small number of utilities and in Ontario, there are really few places where you have any type of guarantee about the results. It’s only because of the government that anyone is paying for the output and that you have any sort of guarantee. Everything else is dependent on electric rates staying stable or going up. In reality, PG&E’s electric rates have been going down in the past year and will continue to do so based on their new proposed rates. There are also no guarantees with SREC prices. There are not many places on the economics side you can get any sort of guarantee; therefore, risk is high and you cannot go to local banks. Also, there hasn’t been enough penetration here for the bankers to have seen it a dozen times and be able to know the risks, understand it, and trust the financials. So, this has been holding us back for some time.

While there are a number of banks out there saying that they are the “solar bank,” they are ultimately just using a line of credit that is based on the property’s value, not the on the solar system.

Q- What’s your advice for a new company that wants to sell solar? What do you see are the top mistakes new companies make and how do you think they can avoid them?

A- The largest risk I see a lot of companies make is they try to take on projects that are far larger than they know how to handle. Essentially, whatever scale they are at, they will get an opportunity to do a project that is ten times larger than what they are normally doing. You may have a company that is doing residential work between 5kw and 10kw, and then they receive an opportunity to do a 100kw system. They jump on it thinking that it will be a gold mine. In my mind, I think that’s absolutely the wrong move to make because there are any number of things that can go wrong with the larger project, and unfortunately you have all your eggs in one basket at that point. In fact, you’re invested so much that you’ve abandoned everything else that you’re doing. You’ve abandoned your marketing and your existing customers. Unfortunately what happened to a friend, a recent customer, is that he was doing a 50kw project and the customer didn’t pay. He’s basically out of business unless he can figure out how to get paid. That happens–this is contracting.

When you get so far out on a limb because you’ve jumped at such a large project, you might have misunderstood the project. You may have undersized, under-priced, or designed something that will not fit on the roof and can’t be built for the price you think. The structure may need retrofitting or the project could get caught up in permitting or architecture, and you have all your eggs in that basket. This is all just construction. Financially, you may not get paid or you may be late in completing the project, which can screw up your customer’s filing for tax credits, grants, or depreciation. There are any number of things that you can go south, and any number of them will have serious consequences that become magnified as the project becomes larger. Why not ramp up more reasonably? If the largest project you’ve ever done is 10kw, the next biggest project should be 15kw or 20kw.

I put it to many customers this way; they say they have a chance to do a 500kw job, and I say “Okay. If this is one of your first jobs at that scale, you may lose $1 per watt. Do you want to loose $1 watt on 50kw or 500kw? You’re probably going to lose money on your first project in a new size range. The chances of getting it exactly right are close to zero, so you need to minimize risk, but to do that you may over-bid and lose the project. Don’t try and scale up too quickly or jump in too large without getting your feet wet.”

Another mistake new companies make is grossly misunderstanding the cost of completing a project. There are a number of things that can become expensive very quickly and a number of hidden costs. People don’t keep control of their costs and overspending on their marketing because they think that huge margins are going to fall into their laps. They need to have tighter discipline on what they’re spending and make sure to get value at every step.

Q- Are you referring to marketing expense or project related costs?

A- Everything. Their marketing budget, their costs of completing a project, and also the selling, general and administrative costs. Having a huge overhead will kill a solar company.

Q- You’ve mentioned a lot of marketing mistakes and mistakes related to projects that have already been signed. Have you noticed any specific mistakes companies make during the sales visit?

A- There is one huge item when selling solar.

The salespeople won’t fall pray to this, but the contractors and engineers need to recognize that solar is an option for people, not a requirement. In other words, if they’re an electrician and their estimator gets called out to a job to estimate and provide a bid for wiring a new addition to a home, the property owner is going to get electricity to that building. They’re just trying to figure out who is going to give them the best bid in terms of price and quality. They have already made up their mind, so there is no choice in the matter. The vendors’ reps are just providing bids, and there is no salesmanship involved, really. Yes, you want to convince them to use your company versus the competitor, but you don’t need to convince them to buy the product you’re selling. With solar, you not only need to convince them to use your company, but you need to convince them to go solar in the first place. This makes a huge difference between most types of contracting and solar. New solar contractors need to take this into account. You need to put a hunger into customers’ minds in order to sell solar.

Additional Resources

VIDEO: On Grid Product Tool Demo

Additional On Grid Papers, Publications and Resources

On Grid Solar Sales Training + NABCEP PV Technical Certification Prep + 50% Discount off 1 Year Subscription

If you’re interested in attending a training hosted by Andy Black that will teach you solar economics, solar sales best practices, the best ways to use the On Grid Solar sales tool, as well as prepare you for the NABCEP PV technical certification exam, please RSVP below. The date of the training is TBD.
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