Residential solar panel installations are projected to grow exponentially, thanks to the passing of the Inflation Reduction Act, which extended the 30% tax credit homeowners can claim when installing solar for ten years.
Research conducted by SolarReviews found that solar installers plan to increase their workforce to accommodate the expected demand for solar installations. It’s clear that now is one of the best times to start a solar installation business.
We won’t pretend the road to owning and operating a business is easy, but we’ve outlined some steps for you to at least get started. If you start your business right, you could make millions as a solar installer, especially if you’re partnered with the right lead source.
Key takeaways
- Starting a solar company is not easy, but now is the best time to do it, thanks to new clean energy laws on both the federal and state levels.
- To begin a solar installation business, you need certain certifications and licenses, an LLC, and a great team by your side.
- Building a customer base is key to success, and working with a solar leads company can help you achieve growth more quickly.
What you need to know before getting started
No matter the business, there are a few key things to get in order before launching it. Starting a solar company is no different.
Monetary capital
First things first, can you afford to start a solar business? Starting a solar company will likely cost a minimum of tens of thousands of dollars.
Taking out loans to start a business often makes sense, which can take years to pay back. Work with a bank and a financial advisor to determine if you need to borrow money to start your business and how to get the best loan rate.
Once you have these numbers, build a business plan to see how profitable your business needs to be to pay back the money in healthy increments. Your business plan should include how much you expect to pay on overhead costs like employee salaries, equipment, truck maintenance, and other soft costs like website management.
A business can survive for a bit breaking even, but that will not be sustainable in the long run. Having a business plan can help you keep track of the costs of your business to get you profitable more quickly.
Market and industry research
It seems obvious, but you must research the industry you plan to enter, especially if you haven’t worked in it before. Check if your state has a local Solar Energy Industry Association – they’ll be a great resource to keep you in the loop about what’s happening with solar near you. Attending meetings, watching webinars, and becoming more knowledgeable in the solar industry will go a long way in operating a successful business.
If you are completely new to the industry, as in you’ve never installed a solar panel in your life, signing up for classes through Solar Energy International (SEI) gives you a good head start while providing accreditations to enhance your legitimacy as an installer.
Think about your own work history, too. Having a background in construction or as an electrician can help when starting a solar business. Of course, you can hire these specialties, but having that foundation can help elevate your team and manage projects more efficiently.
It will also help to research the competition in your area! If your area is saturated with solar installers, opening a business might be more of a challenge.
Things to research in your market:
- Local incentives and demand for solar panels
- The number of solar installer businesses already within that location
- Competitor's websites, pricing, and offerings - you can get a quote from competitors to see how they quote projects in your area to make sure you are competitive.
You can use SolarReviews to scope out the competition in your state, take note of their location, and check out things like their website design. Finding ways to set yourself apart from the competition can be as basic as creating a more intuitive website to offering more friendly customer service.
The SolarReviews calculator can also give you a better idea of solar savings and incentives that are available in the area you will operate. Installers can also use this tool to better understand how to size a solar system and the various inputs that can change the cost of a system.
What certifications do you need to start a solar company?
Many businesses need specific certifications or licenses to be deemed legal; in many states, solar is one of them. Licenses are in place to ensure that solar contractors install panels correctly and safely on residential homes.
The licensing requirements for solar installers vary from state to state. Many states require you to have a licensed electrical contractor working for your company, while other states have licensing options that are more specific to the solar industry. In California, for example, you need a C-46 Solar Contractor's license.
On the other hand, certifications aren't usually required by state law. But, having certified workers at your company sets you apart from the competition by giving you credibility and making you more trustworthy to homeowners.
The North American Board of Certified Energy Practitioners (NABCEP) is the most well-known and respected certification program for solar. NABCEP provides courses and continuing education for solar professionals to maintain and enhance their knowledge.
A NAPCEB certification can increase your earning potential by thousands of dollars a year because more homeowners are likely to choose your company over one that is not certified.
How to set up your solar business
To make your business legitimate, you need to establish a limited liability company (LLC). Being an LLC offers a level of protection, shielding it from certain lawsuits, and can enable you to submit taxes in a more business-friendly way versus just freelancing.
Each state has different requirements, but there are a few constants throughout. The first step is determining the name of your business, which needs to be unique from other companies in your state.
Then, you need to work with a Registered Agent to complete the necessary paperwork, like an operating agreement, to obtain the LLC. Once complete, you must apply for a tax ID number with the IRS. Remember that an LLC does need to remain active, so be conscious of timelines and the deadline dates of your state.
Another thing to consider is adding business insurance to cover things like property damage, equipment damage, worker injuries, and other potential liabilities that come with climbing on roofs with heavy equipment.
How to create a business plan
In terms of creating a business plan, starting a solar company is not that different from starting any other business. Your business plan should lay out or establish the following:
- The business itself and who to hire
- How to raise money
- Where to source equipment
- How to price equipment and labor
- How to get your first job
Establishing your business and raising money
First, you need to figure out what kind of company you want to be. There are typically three types of solar companies: ones that install solar panels, ones that sell solar jobs to installers, or one that does both, like Energy Concepts in Fresno.
You can build your company around your own experience. If you're an electrician with experience installing solar panels, consider starting your business as installations only.
Once you decide on your business and what employees you need for success, the next step is securing the money. You can raise money in a few ways, either with a small business loan, a bank loan, or funding from investors, which could even be friends and family.
Sourcing equipment
Once your money is secured, establishing a relationship with solar panel installation equipment suppliers is essential. There are many ways to source solar equipment. You can get it straight from the manufacturer, be a certified installer for one brand like SunPower, or buy materials from distribution companies like BayWa r.e and CED Greentech.
Sometimes, vendors will even allow you to open a line of credit with them, where payments are not due immediately.
Pricing equipment and labor
Pricing the equipment and labor is important to ensure your business generates enough money for you to pay your team and earn a profit. How much you pay for the equipment will be a major factor in your pricing.
But, there are other factors in building out the price of a solar job, including the number of people who work on the job, their salaries, permitting, designing, and things like insurance costs.
Solar installation quotes usually list the price of a system in "cost per watt installed". This allows homeowners to easily compare quotes between companies in the same way you would look at the cost per square foot when shopping for a home. This way, homeowners can easily compare the costs of solar systems before deciding which company to go with.
Tip! How to help homeowners pay for your solar installation. Not many people have the cash to pay for a solar installation in full. As an installer, you need to have financing options available, which can include leasing or loan options. You also need to inform customers of the local incentives available to lower costs. It is also important to remind people to work with their tax advisors to get all the federal tax credits available.
How many people do you need on your team?
Solar installation companies can range in size, and depending on the type of business it is, the number of people on your team will vary.
If you plan to install panels and have a sales team finding jobs, your company would need at least a solar installer and a salesperson to get the business started, and the team can be built from there.
Hire solar installers who are NABCEP-certified or trained through SEI. Both of these organizations provide extensive training courses for solar installers. Keep your eye out for applicants who also hold contracting or electrician licenses.
If you are having trouble finding qualified installers, you can always offer to pay for or sponsor training opportunities to people interested candidates. This is a risk because there is no guarantee that the person will remain with you even if you pay to train them, but it could be an attractive incentive for people willing to learn.
A salesperson or working with a solar sales company is also key for a successful company. They do not necessarily need to have solar experience. Still, they should be able to explain financing options, how solar panels work, the installation process, and how much money homeowners can realistically save by installing solar panels.
Solar lead buying can mean more profits
Once your solar company is established with a dedicated sales team, installers, and equipment stocked, buying solar leads is your next best step.
SolarReviews has some of the best leads in the business. Aside from getting high-quality leads, partnering with SolarReviews gives you access to our installer dashboard. Within that dashboard, you can use our profitability calculator to determine your business' potential gross margin based on the number of leads you've purchased. You can even adjust metrics like average job size, labor, material costs, and the assumed average percentage of successful leads.
"The right solar leads can help you grow your business. SolarReviews provides high-quality leads at consistent volumes making it easy to scale your business with SolarReviews as your partner," said Lachlan Fleet, CEO of SolarReviews.
With a lead conversion rate of about 5%, for every $1 spent on leads, you generate $6 to $10 in gross margin. This means that for every $1,000 spent on leads, you get $6,000 - $10,000 back in gross margin. No matter how high quality, not all leads will turn into a sale. But you can set your business apart by not letting that discourage you.
2023 is the best time to get into the solar business. There is increasing global pressure to switch to renewable energy; the United States government is incentivizing homeowners to go solar, and high energy costs are making the switch to solar even more compelling. So pick a name, get an LLC, and build up your solar brand to be a part of the momentum.
Heide Pfeiffenberge
Marketing & Communications Manager
Ana is the Marketing & Communications Manager at SolarReviews, working within the solar industry since 2020. With a Master's in Climate and Society and professional experience within marketing, she helps communicate the value of solar to homeowners and build out awareness of the SolarReviews brand.