Solar thermal, solar hot water, solar hot air, solar heating, solar cooling
Answer 3 Questions to Make your Small Business a Solar Sales Machine
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.
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A Couple DIY Solar Thermal Ideas For You
I didn’t go to engineering school, but I love engineering and prototyping. I love thinking about systems, how to maximize output (or whatever your goal is) depending on the constraints whether it be space, time, or money. From concept, to design, actually building it, and then making adjustments for the following versions based on what you learned.
For the past 2 months I’ve been living on my friends farm in Maine. When our oil furnace died, so too did our hot water. We needed to quickly figure out how to create hot water. Our design parameters?
It needed to work, most of the time
It needed to be super cheaper, meaning it cost less then $500 to make and nothing to run
And we needed to be able to build it quickly as we had dishes pilling up and were sick of boiling water.
We came up with utilizing the wood stoves free heat during the winter and harvesting BTUs from the sun in the summer.
During the winter
The whole space is heated with wood, so we drilled through the back of the stove and put a heatexchanger in the stove. The thermocyphins with the 30 gallon storage tank which is teed into the cold line coming from the street. It works amazing, during the winter when the stove is running we have plenty of hot water. Note, these type of systems are 100% “illegal” and you shouldn’t install them on any clients house. However, up here in Maine, everyone has them and they work just fine. You just need to make sure you have blow-off valves in the proper places in case it gets too hot.
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HS TV Ep 4: Renewable Energy Politics. A Conversation with Stephen Lacey
Politics is hugely important to the renewable energy industry. Above all else, our industry needs stable policy. Being a small businesses, it’s hard to keep up on the very industry-specific policies, even though these policies are very important for your businesses. This is where we see audio content and interviews to be very powerful and useful to the HeatSpring community and politics is a great way to use HeatSpring TV.
Everyone has questions about politics and wants to keep up to date, so I reached to Stephen Lacey, a report for Climate Progress who loves in Washington DC and is very connected to the the politics and policies of renewable energy.
I wanted to get his opinion on a few things.
The additude and political climate around Solyndra and Evergreen
The hugest push lately is jobs. The solar industry is creating thousands of jobs, how is this contrasting with point 1.
Small guys vs large guys. How can small contractors can go up again solar companies that have $500 million in cash.
Being in DC, where he thinks federal policies are going and what he’s excited about.
After concluding our conversation (you can watch or listen to the full interview below with annotated time stamps) here are the points that have really stuck with me.
The conclusions on the future of renewable energy.
The worst-case scenario doesn’t seem bad anymore. Our industry has enough momentum that a full scale government scalback will not happen. It will be bumping but we’ll probably be able to ride out.
The incremental improvements, especially in the solar PV businesses, are adding up to huge cost savings that is further driving growth.
There’s a lack of support on that we can count on from the federal government and this will mean that the role of state and regional governments will continue to be high. What does this mean for you? You can have an impact on your industry developing by being involved in local and state government.
The day-to-day news might sound bad but the outlook is continuing to look amazing. Solar is the fastest growing industry in the US, it has a huge benefit to the domestic economy as $.73 of each dollar spent on solar stays in the US, the industry is a net exporter, costs are coming down extremely quickly and it’s creating tens of thousands of jobs.
There is still a lot of push back with some federal politicians challenging whether green jobs actually exist of not. We need to start collecting stories of small businesses creating jobs with politicians so they understand.
Here’s is the video interview. Note, the video on my side, the left side, stops around 3 minutes due to internet difficulties. However, the audio stays good the whole time which is why I decided to post it. If you’d like to download the episode as an MP3 and listen at another time, you can download it on iTunes at HeatSpring TV.
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The Entrepreneur vs General Contractor. Who Will Win the Clean Energy Race?
There’s an interesting split in the residential and light commercial clean energy space lately. As consumer demand is surging and some “old” solar pv players are moving to bigger projects (Nexamp no longer does residential and is installing 4.5 MW in Western, MA, Borrego sold their residential business, etc) there is room opening up for smaller, new companies.
I’ve personally noticed a major divide between the types of organizations expanding into the industry to meet the demand. There tends to be two major camps. First, the entrepreneur. The entrepreneur sees the huge industry growth and is starting a new company to take advantage the growth. The entrepreneur will tend to focus on a specific technology; solar pv, solar thermal, geothermal or energy efficiency. The second is the general contractor or construction professional who plans to expand his current business into a new technology. He does this for a few reasons. He has existing customers asking him about these new technology and he already knows 80% of what he needs to know to install these systems.
Each of these groups looks at the industry in a different way. Each has its pros and cons.
The Entrepreneur or “Pure Play”
I call it a pure play as the whole business is typically hinged solely on the sales of projects in a specific technology.
The pure play company tends to see “understanding business”. That is, the connection and optimization of marketing, sales, engineering, and installation activities as a skill in it’s own right, and they believe the reason they’ll success with the new company.
The General Contractor
The general contractor tends to already own an existing business focused on the building industry. This tends to be general contracting or a as a sub-contractor; roofer, plumber, electrician, etc. The general contractor tends to want to continue their existing business while taking their existing trade knowledge into a new field. The general contractor is already well versed in all of the aspects needed to complete a project; design, installation, project management and customer manager and this is why they feel they will be successful in a new industry.
What are the pros and cons of each?
I don’t personally feel either is better suited to take advantage of the opportunity in the huge growth of renewable energy, though I do think they will find themselves in different places in the market and supply chain, simply because of how each group values marketing, sales, and the installation side of the business.
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