The most important element of a profitable solar company is maximizing what I am referring to as “the sales equation”. In this article, I want to share specifically what the sales equation is, and what questions you can ask to begin to understand how well your company is doing. Sales is the front line of the solar industry. While your business needs the technical expertise to design and install a solar system, those skills alone will not insure your business is successful.
While consulting with a new solar company, figuring out the best way to structure the new company to maximize profits, and speaking with Keith Cronin who sold solar company to SunEdison, I’ve learned that there is one single question key to a successful solar company. If you’re running a small businesses that is run on cash and does not have outside investment, super efficient marketing and sales and an overlap with operations is what will set your business apart.
This may sounds simple, but it’s not. Most small construction companies have net profit margins of around 5%. In the solar or geothermal industries, you should be able to bump this up to at least 10%. Accordingly, your gross margins should be around 20%.
In order to do this, this is the equation you need to maximize.
A profitable solar or geothermal sales engine = high gross margin on project * closes the fastest / marketing dollar spent.
Why this equation?
The equation is showing that the best companies will get the most amount of profit and cash in the fastest amount of time possible. By it’s nature, it includes how you structure the company, your ability to cost jobs correctly, your effectiveness at client relations, and how effective your marketing is.