Across the board support for decreasing solar’s soft costs is the result of how well organized the industry is becoming. State governments, the DOE, and private software companies are all working to help.
Note: Download A Free Chapter from Keith’s Book Solar Success Principles, or take his “Best Practices in Solar Sales and Marketing”, or apply for the “Solar Executive MBA” course that Keith is teaching.
Cost reduction and the commoditization of project financing are two keys to building profitable companies and an industry. However, when the costs fall, financial barriers are eliminated, and policy bottlenecks are lifted, the company that has the advantage will be the one that is uber-efficient on the operations side. Companies with marketing and sales engines will have the upper hand. We can already see the early adopters of this strategy in the growth of strongly branded residential and commercial companies: Sungenvity, SolarCity, and SunRun, just to name a few.
There is one lesson for small and medium-sized solar companies going head to head with these huge solar companies: To compete in the residential or commercial solar space, you need to become extremely efficient with your operations. Both with you marketing and sales and more specifically, your overlap with operations.
For this reason, I spoke with Keith Cronin from Sun Hedge. Keith is based on Hawaii and built and sold his solar integration company to SunEdison. Now Keith consults with solar integrators and works as a consultant to companies who are looking to develop large solar projects in Hawaii.
We had a great discussion that lasted almost 45 minutes, here’s what we talked about.
1:20 – You built and sold a solar company to SunEdison. How do you design a “sellable” solar company? If you want to build a solar company to tell it, how do you do it?
Keith’s short answer.
- A – Sales and operations need to be working closely together and should be accountable at the net profit margin, in areas where they can control.
- B – Create long term relationship with clients. Referrals will drive the business.
- C – Offer other services. (Editor’s note: see the entrepreneur vs general contractor)
4:10 – Even if you’re not looking to sell your solar company, is it useful to think of your company this way? What sort of things was SunEdison really focused on that made it valuable for them purchase your company?
7:30 – Can you discuss more open book management, and the overlap of sales and operations in a solar company? When you consult with solar companies what do you tend to find is the most common problem and what recommendations do you usually make to try and make the company more profitable?
(Keith’s short answer)
- A – The problem is sales people are based on commission of revenue and not net profit.
- B – There tends to not be as much accountability on commissioning and operations efficiency as their their should be. The last thing a company needs is more sales if the systems they have are not working well.
- C – Them versus us with sales and operations folks.
- D – For a company to be legendary, there needs to be overlaps between sales and operations. They need to expect the other’s needs and this will take the pressure off owners and operations manager can stop refereeing. Key lesson: focus on net profit and share a piece of the action.
- E – Focus on people who are doing well and reward them. Most companies ignore the performers and focus on figuring out how to increase the results of people who aren’t doing well.
- F – The retail business is very technical. It needs good communications between departments.
11:20 – Have you consulted with companies that make this switch? Have you seen companies make the switch to focusing on net profit versus revenue and increasing the overlaps between sales and operations or is there a lot of resistance to change?
14:10 – Speaking about the education of people based on net profit, do you think there is a fear from small business owners on educating people about their specific numbers?
17:00 – Based on comments of trades and business people and focusing on the numbers, do you think trades people or business people have an advantage in this space? How do you see the battle turning out? Where is the best place in the industry?
21:10 – One of the things you touch upon was the idea of removing bottleneck in a business. Can you share some of the stories you’ve seen? Also, can you share where you must commonly find bottlenecks and how to solve them?
27:00 – What’s the difference between what solar business consulting and general business consulting?
29:20 – Are the blind leading the blind in the solar industry?
30:45 – Maybe we need to wake up companies by showing them how good the upside could be in terms of profit. Do you think it’s possible for a small company to get to 20% net margin before tax?
30:30 – What do you think is a good benchmark for gross and net margins for solar EPC companies?
36:40 – To you, what are the specific characteristics of a legendary solar company?
40:00 – Keith’s contact information. For more information on Keith, you can find his information at Sun Hedge.