The Battle to Reduce Solar’s “Soft Costs” is Starting and How it Can Increase Your Solar Company’s Profits

The solar industry is going through massive change. Module and balance and systems prices are dropping quickly, there has been an influx of new products, financing is becoming commoditized and the solar supply chain is shifting rapidly.

The results of these trends are two-fold: 1) bringing down the hard installation costs and 2) removing the financial bottlenecks in the system. Lower costs and easier financing equals more projects and faster industry growth. However, with the room to squeeze hard costs getting tougher, companies are now looking at other ways to decrease their costs in order to increase profits. One of the areas has been streamlining incentives and permitting paperwork.

Many reports have detailed ways the solar industry is drowning in huge amounts of paperwork.

The battle to reduce soft costs is being fought on many fronts. First, local governments, in Vermont for example, are working on creating more streamlined incentives and interconnection processes. The DOE has also launched a project to decrease solar’s soft costs.  Several companies are looking to address this issue with software. OnGrid Solar, Clean Power Finance, Eagle Eye and SolarNEXUS all seem to be addressing the issue from many angles.

I reached out to SolarNEXUS to get their thoughts on how companies can reduce soft costs to increase their profitability. Read past the break to read the full story and watch the interview.  Join HeatSpring’s facebook community to stay up to date with future updates.

I spoke with Brian Farhi, VP of Sales and Marketing for SolarNEXUS for 22 minutes.

Here’s what we talked about. 

1:30 – The story of the business. Why did they create the software and why focus on solar and not all small contracting businesses.

3:10 – What sort of reduction in time spent on paperwork are you seeing from contractors? How exactly are contractors saving time? How does this increase their profitability?

5:50 – What policies does SolarNEXUS support from local and state governments?

6:40 – The state of Vermont has tried to standardize their permitting process. What are your thoughts on this type of policy? Isn’t your business model based on taking advantage of a non-standardized paperwork process, do you see this as a threat to your business model?

8:10 – You mention time-saving is a huge issue. What are the top 5 things that solar contractors waste their time on most?

10:30 – Can you give me a specific example of a before and after snapshot of a contractor who is wasting a lot of time? How does it save them time to go from excel and paperwork to software?

13:30 – Why is creating accurate costing is the most important aspect for creating a profitable solar company?

15:35 – You’re starting with the solar pv industry, but these issues that you’re dealing with are for all small contractors. Do you see your company branching into other technologies?

17:55 – What are you personally excited about? Where do you see the industry going in the next 3 to 5 years?

20:30 – Ways to get in touch with Brian Farhi of SolarNEXUS.

How can you apply these lessons to your solar business?

What did this interview teach me about running a solar company?  Remember, using “a system” or “software” and thinking this will solve your problems will probably not work. Why? Trying to put an extremely inefficient system onto software will only compound the problem. First you need to understand your systems, eliminate unnecessary uses of time, then streamline the remaining tasks.

1 – Do an audit of your own company. Your goal should be to figure out how exactly the paper is flowing and how long it’s taking. You want to get an idea of how much money you’re spending on paperwork. Once you can identify how much it’s costing you it will be easier to justify spending money to fix the problem because you will know how much it will increase profits.

2 – Focus on the areas where you feel you waste the most time or are the largest headaches. Brian said most companies waste a lot of time in the following areas: lead management, ordering, incentive paperwork. Thus, I’d focus on these areas.

3 – Once you have an idea of where the information is flowing and how much time is spent on each, brainstorm ways to reduce or eliminate the time and information flow. Come up with a few ideas and test them. Start with areas that consume the most amount of time. Why? Because fixing them will increase your profits the most.

4 – Implement a few ideas. Only change one thing at a time, so you can measure and track the difference. Give your company a limit to how long the test will happen for before you make the decision. This could be in the number of jobs you’ll use it, or the amount of time.

5 – Implement the best ideas. Determine the best ideas by comparing them to your original scenario. Pick the most profitable system.