How Companies Launch an O&M Department (and Why Your Accounting Matters More Than You Think)

There’s a predictable moment in virtually every growing solar company’s trajectory – the day you realize that pulling installers off job sites to handle service calls is costing you more than you thought.

Most solar businesses don’t strategically plan their move into service – they get forced into it. A customer calls about a problem. You send someone to fix it. Then it happens again. And again. Eventually, the math stops working.

In this conversation, Amanda Bybee from Amicus O&M Cooperative walks through the typical path solar companies take from reactive service calls to building a true O&M profit center. But there’s a critical step many companies miss along the way: properly accounting for workmanship warranty work.

Amanda explains why setting up a workmanship warranty liability reserve matters. Without it, you can’t see what your service team actually contributes or whether your O&M department is truly profitable.

If you’re still pulling installers to handle service calls – or ready to invest in a dedicated team – your technicians need solid technical training. “Solar PV and BESS Operations & Maintenance Tech 1 Training” gives your team the skills to handle service calls confidently and efficiently – the foundation of a profitable O&M department.

Transcript below.

Brian:  How does a solar installation business make the transition from not having a service department or doing O&M to getting into that business? 

Amanda: There’s a pretty standard trajectory that we see. When a company opens its doors and starts installing, they start gaining customers. They start installing. They’re trucking along. They’re growing until one day they get a call that something’s broken. So they have to pull a person off of the install crew and send them over to fix the thing. It’s disruptive to the install crew, but it just happens periodically, so that’s okay.

They can function that way for a certain amount of time until they realize that the disruption is costing them too much time and money on the install side, so they dedicate a person to handling those service calls. That’s a pivotal moment. 

In many of these cases, these are calls that they don’t charge money for because they look at that as part of the workmanship warranty agreement. And so this is a person now that they’re paying who is cost, who is pure cost, because they’re not able to charge money for a lot of that work. 

They bear that cost as part of the cost of doing business because you have this workmanship warranty. Then they also start getting calls from systems that they did not install. They realize, oh, you know, this other company may have gone out of business. Now there’s a market in my area of people who need help and who I can charge to go do the same work that I’ve been doing for free for our historic customers. 

That’s the moment that a switch flips. They recognize that now I can not only try to make some money doing this work, but it’s going to help me bear the cost of the workmanship warranty work.

That’s where they start putting more resources and energy into building out a true team. Optimally, they get to the point where they have a full dedicated profit and loss statement for their O&M business, because that’s going to help you see what the actual profit potential is. 

A lot of our companies have followed this trajectory. It’s been a really fun journey to see some of them reach the point where this is a meaningful contributor to their bottom line as a company. It’s a pretty typical trajectory. What I like to say is that where the cooperative can really start to help is that moment in time where you decide to dedicate resources. 

When clients call and need help, they really want to work with a company that has a dedicated team. If you’re still in the point in time where you’re pulling people off install to handle service calls, they won’t have that same confidence that you’ll respond to their needs quickly, because you have to wait until somebody can be liberated from their other day job. This is really where you start to professionalize your services and where the cooperative’s resources can help you then grow from there. 

Coming back to the boring accounting side of things, there’s also a really important step in the maturation of a solar installation company, which hopefully they did this at the outset. But if not, they need to set it up early on, which is that when you offer a workmanship warranty to your customers, you need to set aside money to cover the work that you have to do in the future. It’s commonly called a workmanship warranty liability reserve, and this is what allows you to later on recognize some revenue for those service calls that you otherwise aren’t charging from.  This is kind of a boring accounting concept, but it’s really critical to recognizing the valuable work that your service team is doing and helping you see a true picture of the profitability of this department.