In the last post, we discussed “the sales equation” that every solar company should maximize. As a reminder, here is the equation (Note, for this article the questions are applicable to both solar and geothermal companies):
“The Sales Equation” = High Gross Margin * Project Closes Quickly / Marketing Dollars Spent
There are 3 variables to the equation, two of them have to do with your marketing activities. Specifically, selecting the right customers. You can influence how fast projects close and spending the least marketing dollars by selecting the correct customers. Yes, you heard correctly, all customers are not created equal. Money is not money. High gross margins on a project and marketing dollars spent on a lead have a large overlap. The jobs with the highest margin are likely the ones that are managed the best from an operations perspective. Well run jobs are also the ones that tends to lead to the most referrals, and these are the cheapest leads.
In a future post we will discuss strategies on the best ways to create referral business from a project. For now, back to selecting the right customers. You need to find leads that are the cheapest, and that will close the fastest. These are highly qualified leads.
What does a highly qualified lead look like? These will apply to both solar and geothermal projects. They can take many forms, but it’s likely they’ll meet many of the following criteria:
Fewest Marketing Dollars
- What channel or campaign did the lead come from? How much money did you spend on that source? All else equal, leads from the cheapest source are the best.
- Is the project being purchased with cash or being financed? Financed projects tend to take longer to close.
- Is it new construction or a retrofit? If it’s new construction and there is a construction schedule that must be met the job could close more quickly.
- Is there a pending incentive? Many times at the end of the year or if a particular state incentive is expiring, projects will close faster because people need to get the tax incentives.
Project Profitability: you want to select the most profitable clients
A lot of the profitability of the project has to do with your internal operations but there are certain things you can use to select the best clients.
Some solar projects have lower potential margins then others:
- Does the client need a new roof?
- Does it need structural re-enforcement?
- Does it have full access to sun or do trees need to be trimmed?
- Is it a square roof? Are there other impediments that will slow down the installation?
- Is it new construction or retrofit?
- Do they have an existing forced hot air distribution system?
- Do you need to upgrade anything?
- Is there easy access from the loop field into the basement?
- Can you get a drill rig to the loop field?
- Will you need to pay a landscaper to fix the lawn?